Industry 4.0 refers to connecting machines used in industrial production and supply chains to the internet and each other. This allows collecting data and automating some processes. Connected devices, also referred to as Industrial Internet of Things (IIoT) are installed in many places, from farms to factories and used for activities from water treatment to transport logistics. The shift towards using connected devices in manufacturing is often referred to as the Fourth Industrial Revolution (4IR), because better data transmission and processing have enabled existing technology to be rolled out more widely.

Connected machines allow operators to monitor, control and model industrial processes to increase efficiency and lower cost, as well as providing a degree of autonomy. This allows precise real time adjustments or long-term changes, such as installing new machines or programming different schedules. This can be achieved through a digital copy or Cyber Physical System, which visualises the entire factory digitally.
Machines can also signal early when they are about to break, allow planning time for repairs and can even order their own replacement parts automatically. This eliminates a big manufacturing cost.

Factory workers can benefit from the introduction of technology by handing over strenuous tasks such as heavy lifting to robots, or using equipment which will warn them of impending danger or risk. Data collection also allows operators to predict future demands, such as where new machines or parts need to be added to assembly lines.

Apart from making manufacturing “smarter”, more efficient and productive, IIoT also raises concerns. One of those is automation, replacing certain jobs or even making them unnecessary. Another concern is the collection of data, namely that the monitoring of production might be extended to the workers.

As the technology becomes more prevalent, key infrastructure such as power, water treatment and food production facilities will be connected. And, as with all connected technology, security is increasingly an issue. More efficient and customised supply chains, will also have less room for error, such as inventory in spare parts, which increases their fragility when things go wrong. This is especially problematic, as successful attacks threaten important trade secrets and key infrastructure. Intellectual property which would have been hard to copy, might now be stored on systems closely connected to IoT devices. Across sectors this will demand organisations to take on huge responsibilities for technology they have little experience in dealing with. Policymakers need to ensure the economy and critical infrastructure are protected. As companies might view security primarily in terms of cost, extra incentives might be required for them to make adequate provisions.

Privacy is also a major concern connected to Industry 4.0 as wearable devices record location data and collaborative robots monitor human errors. There are ethical concerns about the privacy and ownership of data collected from factories including machines and humans. Ethically, companies have a responsibility to store, analyse and use data responsibly. However even then, rights to privacy and control over personal data need to be maintained.

Policymakers have a further reason to care about the industrial internet of things: the competitiveness of national economies, especially where they rely on manufacturing, depends strongly on companies adopting it widely. Big incumbent firms are able to invest and collect large amounts of data, both from their production and customers. This will give them a head start, if not a dominant position. Policymakers who want to ensure that different sized companies can be part of Industry 4.0 should consider supporting an environment for startups. Important factors are the initial research creating new ideas or the availability of capital, networks linking founders to established corporates or regulation that balances consumer protection with business support.

The above is amplified by the fact that leading companies are most likely to attract the best talent. As skilled programmers, data scientists and other experts are in high demand, large and innovative employers can cement their advantage, making it harder for new entrants. On the other hand, new manufacturing methods and the emphasis on code, can also help startups to relatively quickly develop prototypes in this field. Policymakers need to ensure that people have both the technical and social skills to support this industry.

• 5 Key Challenges for the Industrial Internet of Things (IIoT)
  A more extensive article on the challenges for Industry 4.0. It covers what devices should be able to do and the issue of different industry standards.
  David Bisson, Tripwire, 2015
• Keeping manual workers at the centre of Industry 4.0
  This post explores the implications for workers and companies with specific examples and provides useful figures.
  Jade Fell, The Institution of Engineering and Technology, 2017
• Brochure: Digitising European Industry
  This brochure by the European Commission has a good overview of different initiatives across the continent. It is part of the Commission's wider initiative to digitalise European Industry.
  Digital Single Market, European Commission, 2016