SAP Digital Supply Chain

SAP’s
Strategy
for Industry
4.0
January 2020
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Table of Contents

3 Executive Summary
5 The Market
6 Market Dynamics
6 What Is Industry 4.0?
7 Approach For Industry 4.0
9 Industry 4.0 Customer Examples
11 Intelligent Manufacturing
Of The Future
12 Future Of Production
13 Evolution Of Production Software Stack
15 Our Solutions For Industry 4.0
18 Themes As Drivers For Industry 4.0
19 Intelligent Product
20 Intelligent Asset
20 Intelligent Factory
22 Empowered People
23 Overview Of SAP Solutions
25 E
 nabling Foundation
For Industry 4.0
26 Architecture
27 Security
27 Open Standards
28 The Ecosystem
29 Players
30 Open Industry 4.0 Alliance

Disclaimer: This document, or any related document, and SAP’s strategy and possible future devel-
opments, products, or platforms, directions, and functionality are all subject to change and may be
changed by SAP at any time for any reason without notice. This document is not a commitment,
promise, or legal obligation to deliver any material, code, or functionality. It is provided without a
warranty of any kind, either express or implied, including but not limited to the implied warranties
of merchantability, fitness for a particular purpose, or noninfringement. SAP assumes no responsi-
bility for errors or omissions in this document. All forward-looking statements are subject to vari-
ous risks and uncertainties that could cause actual results to differ materially from expectations.
Readers are cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates, and they should not be relied upon in making purchasing decisions.

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Executive Summary
Manufacturing companies are challenged to The way humans work in production will change,
increase productivity while producing individualized with workers getting tailored information and deci-
products with high quality in an environment of sion support with smart devices. The production
constantly changing and varying customer software stack will see a shift from transactional
demand. Many companies recognize Industry production execution to data-driven business
4.0 as strategic priority to turn these challenges process execution and optimization. All sensors,
into opportunities. devices, machines, and so on will be connected.

Industry 4.0, or the Industrial Internet of Things Data infrastructures enable an enormous amount
(IIoT), is about industrial transformation using of operational data to be ingested, processed, and
new digital technology that makes it possible to analyzed. Application modules using container
gather and analyze data across machines and technology will be distributed between cloud and
business systems, enabling faster, more flexible, edge. Edge computing enables execution of cloud-
and more efficient processes to produce higher- managed application modules at the production
quality individualized goods at lower cost. Tech- site to ensure reliability and low latency of business-
nology innovations like the IoT, edge and cloud critical functions. Integration will be much higher
computing, Big Data lakes, artificial intelligence, as, for example, automated guided vehicles interact
sensors, autonomous systems, and cobots are with production lines and warehousing systems.
drivers for the change. Creating value from
Industry 4.0 requires an industry-specific With this level of connectedness, it is key that the
approach as business goals and challenges architecture principles guiding the solutions are
vary by industry – and even by company. secure, interoperable, portable, open, modular,
affordable, and extensible. SAP is an active user
Industry 4.0 will radically change production and a major contributor to various industry stan-
across discrete and process industries. Produc- dards and related open source projects.
tion equipment will become highly autonomous.

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SAP can help you make Industry 4.0 your power of intelligent manufacturing in factories
everyday reality. With SAP solutions and tech- and plants with end-to-end business processes
nology, you can bring data-driven customer execution across the supply chain. And we bring
devotion and operational flexibility to the entire all Industry 4.0 players together, orchestrating
business. You can build intelligent, individualized the ecosystem including machine and equipment
products by connecting each customer’s voice makers, technology and application providers, and
to everything from product planning to delivery. standards-setting organizations as well as system
You can create the kind of production process integrators.
that adapts dynamically to different demands,
setups, and workflows, while using intelligence SAP’s approach to Industry 4.0 combines three
and networks to integrate every machine, part- business priorities to one leading strategy:
ner, and employee. Plus, you can connect the • Focus on customers, so their input and
entire company – bringing together logistics, preferences are the source of all you do
sales, and service – so every step is orchestrated, • Reinvent production, using intelligent assets
and you avoid the gaps or delays that keep you and processes that dynamically adapt to
from delivering the best-possible experience. changing priorities and deliver customization
at scale
SAP provides unique solutions for Industry 4.0. • Connect the entire company, orchestrating,
For many organizations, Industry 4.0 is a manu- sales, service, and logistics with production
facturing-, factory- or distribution-center-focused to transform how you work
effort. And while that is a part of the SAP story, it’s
not the whole story. We believe organizations can With SAP solutions and technology, you put
truly achieve the benefits and impact of Industry Industry 4.0 to work company-wide – right now
4.0 by embracing it holistically across their entire and going forward – so you can stay connected
organization. SAP has the broad solution portfolio to your customers, integrated with your partners,
to unlock the value of Industry 4.0, combining the and far ahead of your competition.

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 THE
MARKET

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MARKET DYNAMICS More specifically, Industry 4.0 refers to the intel-
Until recently, supply chains were mainly mea- ligent networking of machines and processes
sured by efficiency metrics. Today, new trends for industry with the help of information and com-
are emerging that present complex challenges munication technology. The digitalization of the
and put supply chain and manufacturing at the industrial production environment in factories,
center not only of business success but also of plants, and warehouses is driven by technology
a company’s differentiation strategy. Companies innovations that appeared in the aftermath of
in manufacturing industries face numerous chal- the Internet and cloud revolution: IoT-connecting
lenges. They need to produce smarter products devices; machine-to-machine communication;
while maintaining high quality in volatile markets. distributed computing; new edge and cloud tech-
Customers demand individualized products nologies, such as containers, microservices, and
down to lot size 1. Lifecycles of products get event-driven architecture; times series and Big
shorter and shorter. Faster time to market is Data lakes; machine learning and artificial intelli-
key for staying competitive. Business models gence; new mobile user experiences, such as
change from selling products to delivering solu- augmented or virtual reality to enable digital
tions. Many companies recognize Industry 4.0 workers; autonomous systems and vehicles;
as a strategic priority to turn these challenges and cobots and robots.
into opportunities.
Most large corporations and many midmarket
WHAT IS INDUSTRY 4.0? companies have piloted use cases to assess
Industry 4.0, or the Industrial Internet of Things the business value of Industry 4.0. In a recent
(IIoT) is about industrial transformation using McKinsey global survey among discrete manufac-
new digital technology that makes it possible to turing customers, 68% of respondents recognize
gather and analyze data across machines and the strategic priority.1 While 41% are still piloting,
business systems, enabling faster, more flexible, 29% have started to deploy at scale with signifi-
and more efficient processes to produce higher- cant purchase decisions being visible in the
quality individualized goods at reduced cost. This market. Companies successfully deploying
transformation will improve resource productivity Industry 4.0 at scale focus on business value
and efficiency, drive agility and responsiveness, not technology, mobilize and train their work-
speed to market, and enable customization to force on new technologies, and move toward
meet customer needs. an integrated IT infrastructure and automation
technology stack. And they manage the company
by data-driven processes rather than transac-
tional processes.

1. “Industry 4.0: Capturing Value at Scale in Discrete Manufacturing,” McKinsey & Company, July 2019.

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APPROACH FOR INDUSTRY 4.0 In process manufacturing, lot size becomes
Creating value from Industry 4.0 requires an batch size while variants per factory translates
industry specific approach as business goals into the number of different formulas or recipes
and challenges vary by industry and even by per plant.
company. There is no one-size-fits-all Industry • For order-based specialty production,
4.0 approach. multiproduct facility utilization becomes most
important. New technologies allow tailoring
Three distinctive clusters can be identified for of products to individual needs, but require
discrete manufacturing based on the average efficient use of production equipment.
lot size and the number of variants per factory: • In mass-production, batch-oriented industries,
• Engineer-to-order production models found in such as fine chemicals, paper, metals, construc-
industries like shipbuilding, high-end machinery, tion materials, food, or pharma, high throughput
and aerospace, executing on small or individual objectives are increasingly combined with compli-
production orders, strive for high efficiency in ance, regulation, and traceability requirements.
manufacturing down to lot size 1. • For commodities, such as petrochemicals,
• Mass-customized production, typically in auto- bulk chemicals, and ore in mining, asset
motive, agriculture equipment, and industrial efficiency of continuous flow production on
components, aims at maintaining high-sequence a global level drives further optimization.
throughput and consistent quality despite
increased product variances. Figure 1 shows examples of Industry 4.0 scenarios
• In high-volume production, such as consumer that have emerged to deliver short-term business
electronics, commercial equipment, or semi- value across discrete and process industries.
conductor chips, full automation (lights-out
production) drives further productivity increase
while changing product mixes require higher
flexibility or production line adaptation.

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Figure 1: Industry 4.0 Scenario Examples Across Industry Clusters

Discrete manufacturing Process manufacturing

Engineer to order Mass customized High volume Specialties Mass production Commodities

Production model Order based Sequence based Demand based Order based Batch based Continuous flow

Productivity Efficiency at lot size Throughput and Flexibility at full Multi-product Throughput with Global asset
imperative one quality at mass automation facility utilization compliance efficiency
customization

Business trends • Increasing • Consumerization • Shorter product • Deglobalization • Supply chain • Growth in
demand volatility and lifecycles • Tailored formulas agility emerging
• Ability to personalization • Increasing labor (medicine, • Decarbonization markets
compete locally • Supply chain cost (in low-cost biotech) and • Regionalization
in global market agility locations) sustainability • Circular
• Service business • Circular • Compliance and economy
models economy regulation
• Integrated
systems

Industry 4.0 • Digital twin • Flexible and • Lights-out • Digital • Data-driven • Digital plant and
scenarios (digital product adaptive factory (full enablement of throughput simulation
and process) production automation) operators and optimization • Digital field
• Digital worker (automatic • Tracking and field services • Traceability and services
(paperless) guided vehicles, traceability • In-process regulatory • Predictive
• Data-driven routing, • Automated quality control compliance maintenance
optimization scheduling) quality • Connected
(quality, • Extension of assurance logistics
automation) automation and
cobots
• Inline quality
control

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INDUSTRY 4.0 CUSTOMER EXAMPLES hundreds of engineering changes as well as
Discover how three clusters of discrete strict requirements for product quality and
manufacturing companies have addressed production process reliability. They have experi-
their business problems with the help of SAP enced faster time to market as a result of the
solutions. tight integration between engineering and
manufacturing.
Customers running engineer-to-order production
models see benefit from the tight integration In the case of mass-customized production,
between engineering and manufacturing. where every product is unique, product-specific
• A metalworking customer increased their information needs to be integrated automatically
manufacturing performance by digitalizing the from the shop floor to customer-facing roles.
manufacturing process. With engineering now • Caterpillar Inc., one of the world’s largest
fully integrated to manufacturing, current infor- construction equipment manufacturer, wants
mation on latest engineering changes is sent to to give their customers the same real-time
the shop floor. Automated optimization of setup response they get in a store. They see this as
times for operations is supported, and each a key value-add for their customers and a
component that is being manufactured can differentiator for them. To accomplish this, the
be easily identified by mobile devices. Benefits company has moved their entire manufacturing
include the elimination of bottlenecks by tar- operations to what they call “retail speed.” Now,
geted control of manufacturing as well as the manufacturing provides the current status of
reduction of lead times and planning effort. the shop floor in real time in a centralized
• In the aerospace and defense industry, custom- system, delivering one version of the truth
ers with long-term manufacturing projects have and enabling proactive business decisions at
strategic, tactical, and operational level.

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High-volume production manufacturers focus • Other examples can be found in the automotive
on the efficiency and seamless operation of their industry where an OEM as well as a supplier
plant. have started transforming from fixed assembly
• These include manufacturers of electrical lines to modular assembly processes. They
and electronic components like Harman connected assembly stations with automated
International Industries Inc., ebm-papst, and guided vehicles, bringing new levels of flexibility
Endress+Hauser Conducta GmbH+Co. KG. to an already highly automated process. This
These companies have combined automated has resulted in increased throughput, improved
manufacturing and manual assembly into one uptime, and lower capital expenditure on shop
digital process, enabling digitally networked floor equipment while still supporting increased
manufacturing and leading to harmonized global product diversity.
production processes. They closely integrated
customer interactions with manufacturing oper- Process manufacturing customers are also
ations and have centralized and standardized benefiting from running a digital plant.
master data. They have simplified user inter- • BASF SE is managing plant equipment
faces on the shop floor using digital instructions, and collaborating with suppliers using the
which allows them to go paperless, and have SAP Asset Intelligence Network, which provides
implemented active process interlocking and increased visibility through a one-stop shop for
control. Manufacturing equipment is set up asset-related information from all suppliers.
automatically with parameters taken from the • Koehler Paper Group produces more than
production order; material and tool setup is 500,000 tons of specialty paper and board
verified; and traceability information is collected annually for the global market. They are using
automatically, increasing process stability. This insights gained from billions of records of
has resulted in increased flexibility, more robust unstructured data collected from their paper
processes, higher uptime, and reduction of capi- production processes, within the SAP HANA®
tal employed. platform to increase accuracy in quality
management and, as a result, improve product
quality.

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 INTELLIGENT
MANUFACTURING
OF THE FUTURE

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FUTURE OF PRODUCTION work processes and – in combination with com-
Just like today, production facilities of the future puter vision – notify employees of any errors or
will look different depending on the industry, safety hazards. Wearables will help protect the
production process, localization, and cost of labor. workforce by detecting critical situations, such
Regardless, Industry 4.0 will radically change pro- as fatigue or accident risk, and automatically
duction across discrete and process industries. call for help when there’s an accident. More
It will enable manufacturers to increase produc- comprehensive wearable solutions, like worker
tivity and asset efficiency while delivering a larger exoskeletons, can support and enhance work-
number of customized as well as personalized force performance. Consequently, the required
product variants or batches with higher quality. skill set of the manufacturing workforce will
evolve, requiring manufacturers to undertake
This development will be enabled by a change significant cultural change.
in production equipment. Across production
facilities, logistics will be digitalized and executed Production IT will become ever more important to
by increasingly smarter and autonomous robots drive further automation and higher productivity
and vehicles. Production machinery will become through digital orchestration of the production
highly autonomous, with robots performing processes. In factories, 3D production simulations
increasingly complex tasks. In very large facilities, will be key to support flexible, modular systems,
remote surveillance of equipment and processes, and logistics will be enhanced by work pieces
with drones, for example, will become the norm. communicating even more extensively with pro-
In discrete manufacturing, the factory will become duction machinery. Across production facilities,
a flexible hybrid system of robots and humans, edge computing will be critical to ensure reliability
additive and subtractive manufacturing, compos- of crucial execution functions and efficient pro-
ites and metals, digital and analog processes, cessing of data. We will see further adoption of
and so on. Classic assembly lines will be replaced analytics platforms that work easily with disparate
by flexible manufacturing islands, with modular or unstructured data sets generated by IIoT to
production assets like flexible robots and fixtures, drive advanced analytics scenarios such as pre-
storage vehicles, or flexible production processes dictive maintenance to optimize asset utilization.
like 3D printing. Machine vision can be used to
automatically detect quality issues, classify With increasing digitalization and use of IIoT
inventory, and control processes. come new threats. To prevent hackers shutting
down factories or misusing critical assets, a
The way humans work in production will also cybersecurity infrastructure meeting the highest
change. Smart glasses (or similar devices) and standards will become increasingly important,
augmented reality will be increasingly relevant, potentially employing blockchain technology with
for example, in complex assembly or hazardous its tamperproof ledger to secure IIoT scenarios.
work environments, to guide employees through

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 EVOLUTION OF PRODUCTION SOFTWARE As a result of technology trends and buying
STACK decisions, the traditional ISA-95 production stack
With manufacturing companies rolling out Indus- is evolving into a digital manufacturing platform
try 4.0 technologies, the traditional production (see Figure 2) with the following four key drivers:
software stack – standardized through ISA-95 • All sensors, devices, machines, and other equip-
with a manufacturing operations management ment in factories, plants, and warehouses will
layer at the factory level connected to both enter- be connected. This includes not only traditional
prise systems such as ERP and shop-floor control controllers but also a variety of gateways, Inter-
systems (PLCs and SCADA, for example) – will net protocol connectivity, mobile (5G) industrial
see a seismic shift from transactional production networks, and short-range and wide-area
execution to data-driven business process execu- technologies.
tion and optimization.

Figure 2: Evolution of the ISA-95 Stack to the Digital Production Platform

Supply chain planning Supply chain planning

Customer experience Business network

Logistics execution

Corporate level CRM ERP ERP

Maintenance execution
reh ata
se
wa od. d
ou

Distributed applications
Pr

Manufacturing,
e
ud

ak

and intelligence
Clo

logistics, quality,
Hu

Manufacturing execution Industrial data lakes at

Factory level
ta

systems/operations
ma

edge and cloud

asset management,
da

management Horizontal integration

ns

health and safety

al
ge

on all levels
Ed

tri
s

us
an i
tor

Ind
His

Line level PLC PLC

ay

Gateway
tew
Ga

Sensors | Devices | Machines | Equipment Sensors | Devices | Machines | Equipment

Connected systems
everywhere

From traditional ISA-95 stack ... ... to a modern digital production platform

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• Data-driven optimization requires adequate data Edge computing enables execution of cloud-
infrastructures to ingest, process, store, analyze, managed application modules at the production
and distribute the enormous amounts of opera- site to ensure reliability and low latency of
tional data. Both edge and cloud solutions will business-critical functions.
coexist in addition to traditional historian solu- • While traditional production stacks integrate
tions. Note, however, in most cases, the operator on the planning level (for example, production
retains the access and distribution rights for orders, transport orders, or maintenance
data (data sovereignty and governance). orders), modern manufacturing platforms
• Intelligent algorithms and applications work- will integrate not only vertically, but also
ing on industrial data will be executed close to horizontally between different domains.
the data, depending on latency, relevance, and Examples include interaction of automated
time horizon. Many solutions will be distributed guided vehicles with production lines and
between edge and cloud, for example, to learn warehousing systems or inline process
in the cloud and execute algorithms at the edge. control to influence production scheduling.

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 OUR SOLUTIONS
FOR INDUSTRY 4.0

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Manufacturing companies are challenged to The common thread for Industry 4.0 is the digital
reduce cost, increase productivity, and improve twin. The base capabilities include capturing a
quality and asset utilization, while delivering high digital representation of a specific asset or system
service levels to fulfill constantly changing and characteristics: as designed, as manufactured,
varying customer demand. Automating processes, and as operated. Just doing this adds tremendous
digitalizing operations, and leveraging detailed value because operating manuals, diagrams,
information from the shop floor operations allow service instructions and records, performance
companies to continuously improve and deliver records, and failure modes can by maintained
the expected business outcomes. Companies with and updated in near-real time across the network,
such a digital backbone are able to start transfor- eliminating manual effort and errors. Building on
mational Industry 4.0 projects to expand their this data, companies can develop capabilities
business and even develop new business models. that enable them to predict future states based
Such projects have an impact beyond the factory upon historical data, change the behavior or
boundaries and affect adjacent lines of business. performance by adjusting variables, and simulate
Transforming a company from producing stan- possible outcomes by adjusting several variables
dard products to smaller lot sizes or to lot size 1 to determine the best result before instructing
requires not only changes in the factory but in the physical system.
product design, sales, planning, logistics, pur-
chasing, and delivery.

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NEW PRODUCTS BECOME PERSONALIZED,
CONNECTED, AND INTELLIGENT Empowered
A tangible example: smart clothes such as person- people
alized sport shoes. These shoes are produced and
shipped exactly to the desires of the consumer. When the CNC machining center is delivered to
the customer (in this case, a manufacturer), the
Desires machining center already knows its capabilities,
delivered the information it needs to share, and its status.
With this information, the machine is plugged in
to the network of the manufacturer. The SAP®
They connect to applications that help the Digital Manufacturing Cloud solution knows the
consumer track sport performance. machine’s capabilities and can start dispatching
production orders to it for the upcoming shop-
Intelligent floor tasks. The machine became an intelligent
product asset in the smart factory.

And these intelligent shoes provide information Intelligent

to the manufacturer’s design department to asset
identify improvement points for designing and
developing the next generation of sport shoes.
Smart
A similar story can be told for intelligent and factory
connected machines, such as a computer
numerical control (CNC) machining center. It connects to SAP Asset Intelligence Network
During the production of the CNC machining to share health and other indicators with the
center, the supervisor, technician, and worker producer, who uses this information to keep the
are supported by IT systems that empower them machine up and running. And the producer can
for their daily routines and (unforeseen) events. also use this information to improve the next
generation of CNC machining centers.

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THEMES AS DRIVERS FOR INDUSTRY 4.0 are dynamically maintained. Intelligent factories
SAP believes that Industry 4.0 is driven by four use data and intelligence to run as autonomously
themes providing distinct value to the business as possible and deliver customized products at
(see Figure 3). Intelligent products are built and scale. Empowered people are equipped with all
configured to meet exactly what customers need. the tools and information they need to do their
Intelligent assets are linked to all processes and best work.

Figure 3: Industry 4.0 Themes and Use Case Examples

Intelligent product Intelligent asset

• Handing over information from • OEM-agnostic equipment onboarding

engineering to manufacturing and connecting to business processes
• Understanding the business and business networks
impact of engineering changes • Prescriptive maintenance and condition
monitoring leveraging the digital twin​

Empowered people Intelligent factory

• Ad hoc decision support to manage • Agile manufacturing to deliver

unforeseen events close to real time individualized products (lot size 1)
• Worker protection – days without • Transparent production and logistic
incident operations with automated production
supply and execution (including work
in process) ​
• Intelligent, data-driven quality control

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Intelligent Product Change impact. Understanding the business
Intelligent products are more complex than clas- impact of engineering or sales order configura-
sic ones, and most often they are individualized. tion changes is a very tedious process today.
Handling these products in the different lines of Getting the engineering changes from the design
business and leveraging the advanced capabili- department or (envisioned) from the sales order
ties of these products require special IT configuration, the SAP S/4HANA Manufacturing
capabilities. solution intelligently identifies impacted objects
within the system (manufacturing BOM, routing,
Typical Industry 4.0 use case examples for production orders, purchase orders, inventory, or
fully integrated manufacturing engineering others) and gives advice on where to incorporate
processes cover: these changes.

Handover. Handing over information from engi- If, for example, the engineering department is
neering to manufacturing usually takes a long replacing a special component “A1” with compo-
time and includes a high number of manual and nent “A2,” the system not only identifies the
error-prone steps. Often, there is no standard manufacturing-related master data and orders,
process for phasing late engineering changes it also indicates if there is a dedicated purchase
into manufacturing. SAP is addressing this pain order for “A1.” In this case, the responsible pur-
point with the SAP S/4HANA® Manufacturing chaser can be informed early to avoid replenishing
solution for production engineering and operations, inventory that is no longer needed.
providing capabilities to keep the engineering and
manufacturing information in sync. SAP intends to support changes from engineer-
ing as well as sales orders, even if they come in
If components are exchanged, added, or deleted very late. This capability can be a differentiating
by the product engineer, the system will identify factor for companies that are driving for high
and visualize in 3D the components that need customer centricity or for reducing time for
to be changed on the manufacturing BOM and new-product introductions. The challenge is
routing. SAP intends to provide functionality that when changes are affecting already-started pro-
highlights changes in production manufacturing duction orders and determining if these changes
information such as welding or tolerances and must be propagated down to the machine layer.
hands these over to manufacturing master data
and orders.

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Intelligent Asset and event analysis from ERP data. To enhance
In many companies today, the actual asset health the analysis, machine learning algorithms are
is unknown, and data is collected and handled in applied to time-series data coming from sensors
several silos. This leads to significant amount of on IoT-enabled assets. This is taken further by
avoidable downtime and inefficiency. Often, the modeling a high-fidelity digital twin of the asset
maintenance activities are not well aligned with and using mathematical models such as struc-
manufacturing, leading to unused capacities or tural dynamics, thermodynamics, and fluid
missed opportunities for high-priority orders. dynamics to simulate behavior.

Typical Industry 4.0 use case examples for INTELLIGENT FACTORY

leveraging assets intelligently are: A smart factory is agile and adaptable and will
support different production scenarios. It is also
OEM-agnostic equipment onboarding, elastic, able to deal with varying production vol-
connecting to business processes and business umes and to easily support new manufacturing
networks. Onboarding equipment is usually a technologies, such as additive manufacturing. The
time- and effort-intensive task. SAP intends to intelligent factory uses manufacturing operations
support onboarding of assets as “plug and play.” management with predictive and prescriptive
This includes creating the digital twin of the asset, capabilities, real-time data, feedback loops with
establishing connectivity, and enabling data inges- engineering and ERP, and network capabilities
tion and use of these assets in production processes for design collaboration.
and in business networks. SAP’s focus is on green-
field as well as brownfield scenarios – easy Typical Industry 4.0 use case examples:
onboarding of new and older assets. Agile manufacturing to deliver individualized
products (lot size 1). Consumers today expect
Prescriptive maintenance and condition products that are tailored to their needs and
monitoring leveraging the digital twin. Asset wishes. Significant changes are required to
maintenance is a significant cost factor for many manage highly configurable, complex products
companies. Especially in asset-intensive indus- from engineering to manufacturing, including
tries, the goal is to increase operational asset warehousing and delivery, with same performance
performance and reduce cost. Moving from and cost of mass production. SAP has a product
reactive to data-driven asset management helps portfolio with the width and depth to support this
manufacturers reach this objective. For example, end-to-end scenario -starting with the sales
maintenance jobs will be driven directly by the process, followed by material and capacity
asset, connected through IoT technology and planning in SAP S/4HANA, integrated with the
facilitated by predictive algorithms to preempt SAP Manufacturing solution, all connected to
failure. With asset central foundation, SAP pro- machines and operators to make sure the prod-
vides one common data repository that’s used uct is produced as ordered. All data is collected,
by SAP Asset Intelligent Network and SAP helping ensure that the full product history is
solutions for digital manufacturing as well as available when needed. Only with end-to-end
engineering and logistic solutions. The SAP integrated systems can manufacturers achieve
Predictive Asset Insights solution delivers textual “desires delivered” at low cost.

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 Transparent production and logistic operations Triggers for staging, transport request for WIP,
with automated production supply and execu- and putaway are automatically performed by
tion. Including work in process (WIP) (see Figure machines, sensors, or manually by the worker.
4). To help ensure smooth production material Automated production supply and dynamic,
staging, transport between operations (WIP) and flexible WIP transport across workstations,
put away of finished products are key for higher including warehouse staging, pickup, and put
throughput with minimum inventory and space. away, is the goal of the SAP solution portfolio.

Figure 4: Production and Logistics Scenario

Component warehouse

Material is picked Finished

and staged to the product is
production line stored in
warehouse

Production line: work in process

Machines triggers Machine consumes

request for material material

(Semi)finished warehouse

Warehouse management: material flow Manufacturing execution: production flow

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Intelligent, data-driven quality control. To working environment will change. The degree of
achieve high-quality, products manufacturers automation increases, and operators and supervi-
use structured methods like Six Sigma, 8D, sors must handle more complex tasks. Unforeseen
and FMEA. Based on this, products are being situations are a challenge, requiring ad hoc deci-
inspected at various stages in the process chain. sions in near-real time.
SAP solutions like SAP S/4HANA, SAP Digital
Manufacturing Cloud, and SAP Manufacturing If components are not available in the expected
Suite provide the quality management capabili- quality, the production sequence must be changed
ties needed to define and execute inspections without impacting the most-critical customer
and to analyze various quality KPIs. orders. The same is true for an unplanned machine
breakdown. With SAP Digital Manufacturing Cloud,
When it comes to root cause analysis, it is important the supervisor is always informed about the current
to have information on surrounding parameters that situation on the shop floor and can react in case of
might have influenced product quality, such as tem- any unpredictable changes. SAP intends to use AI
perature, vibration, or humidity. Sensor data must to help the operator and supervisor make decisions
be put in context with business information to faster, taking options into consideration. Access to
identify quality-relevant patterns. SAP intends corporate business data, combined with live data
to integrate AI methods into the value chain and from sensors, assets, and products such as usage
production process to continuously learn and data, can help operators reduce delays and
improve. Patterns learned through predictive response times, and to detect problem sources
quality capabilities delivered with the SAP Digital more quickly.
Manufacturing Cloud solution are continuously
checked during production, and nonconfor- Workforce protection, days without incident.
mances are identified early. Protecting your workforce is paramount. By
combining IoT-enabled monitoring, geo-fencing,
Empowered People real-time analytics, and integration technology
Although the degree of automation will increase offered by SAP, an intelligent environment,
further, people in the plant will continue to play health, and safety system can help prevent inci-
an important role. Operators will fulfill tasks that dents by alerting and guiding workers in real time
cannot be automated – more complex tasks that to avoid unsafe areas and tasks in the workplace.
are often related to decision-making. IT solutions Wearable devices can help to inform the worker
need to provide more support to people with in any kind of situation. The augmented view
tailored information or recommendations. becomes a new user experience for providing
environmental information to the worker. Super-
Typical Industry 4.0 use case examples with visors can get real-time awareness of the location
people empowered by intelligent IT systems and health of employees as well as insight into
are: the environmental conditions around them. They
can react in case an employee needs help or
Ad-hoc decision support to manage unforeseen guidance.
events close to real time. With Industry 4.0, the

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 OVERVIEW OF SAP SOLUTIONS • Focus on customers, so their input and
SAP has the broad solution portfolio to unlock preferences are the source of all you do
the value of Industry 4.0, combining the power of • Reinvent production, using intelligent assets
intelligent manufacturing in factories and plants and processes that dynamically adapt to
with end-to-end business process execution changing priorities and deliver customization
across the supply chain. at scale
• Connect the entire company, orchestrating,
SAP’s Industry 4.0 approach combines three sales, service, and logistics with production
business priorities to one leading strategy: to transform how you work

Figure 5 depicts current SAP solutions that

support the Industry 4.0 themes.

Figure 5: Selected SAP Products and Partner Technology Supporting Industry 4.0 Themes

Industry 4.0

Intelligent product Intelligent factory Intelligent asset Empowered people

SAP Intelligent Product Design SAP Manufacturing Suite and Capabilities for asset EHS management capabilities
SAP Digital Manufacturing performance management, with SAP S/4HANA
SAP S/4HANA Manufacturing
Cloud asset operations, and asset
for production engineering SAP 3D Visual Enterprise
maintenance with SAP
and operations Extended warehouse
solutions SAP Work Manager mobile app
management capabilities with
SAP S/4HANA SAP Asset Intelligence
Network
Quality management
capabilities with SAP S/4HANA
SAP S/4HANA Manufacturing
for production engineering and
operations

SAP Leonardo Internet of Things

SAP Cloud Platform Foundation Partner technology
SAP Edge Services

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Technically, the solution portfolio consists of Meeting customer demands requires resilient
SAP S/4HANA as the business backbone, inte- and flexible production capabilities. Manufacturers
grated with SAP Cloud Platform, with cloud and expect high availability, low latency, and secure
on-premise applications that extend the core with operations, requirements that are addressed by
innovative Industry 4.0 scenarios and connectivity the SAP portfolio of on-premise and cloud solu-
to devices in the factory. Going forward, the port- tions. For safeguarding mission-critical business
folio will be further complemented with additional processes operated in the cloud, SAP will offer
intelligent edge components that allow resilient distributed edge capabilities. The edge includes
production with mission-critical capabilities in the dedicated hardware and software components
factory. deployed on the production site and orchestrated
centrally from the cloud. Figure 6 shows the
To address the Industry 4.0 themes and use target solution blueprint.
cases, SAP is building a comprehensive solution
portfolio that integrates business processes
horizontally and vertically.

Figure 6: Target Solution Blueprint for Industry 4.0

5
Business Supply chain Logistics business Asset intelligence Partner apps
… …
networks networks network network Open APIs

4
SAP S/4HANA® Transportation,
Enterprise and Product lifecycle Integrated  (quality management, Intelligent asset 
logistics, and
Partner apps
production planning,
supply chain management business planning
service, and sales)
management 
warehouse
Open APIs

3
Industry 4.0 Inventory Manufacturing
Quality operations
Maintenance Environment, Partner apps
operations operations operations operations health, and safety Open APIs

Firewall
Secure Cloud Edge Communication

3 Industry 4.0
operations Inventory operations Manufacturing operations Quality operations Maintenance operations Environment, health, and safety Partner apps Open APIs

Manufacturing and process engineering

2 Industry 4.0
monitoring Edge – highly available, local, and occasionally connected execution; low latency; policy service; business object synchronization; and software lifecycle

Factory/plant
1 Sensing and
control
IoT device connectivity Partner connectivity PLC SCADA

0
Machines, devices, sensors, tools, shelfs, kanban
Physical things boxes, workers, forklifts, tags, automated guided
vehicles, and so on

To complement SAP’s Industry 4.0 business augmented with customer-specific capabilities.

process capabilities, SAP provides an architecture This helps tailor processes to individual or differ-
to support interoperability, integration, and exten- entiating customer needs.
sion. Where needed, standard solutions can be

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 ENABLING
FOUNDATION
FOR INDUSTRY 4.0

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SAP solutions supporting Industry 4.0 follow factory floor or warehouse, with connectivity
common principles regarding architecture, to PLCs, sensors, and automation systems.
security, and standards. The main architecture SAP understands that companies need to
principles are security, interoperability, portability, integrate SAP applications with data residing in
openness, modularity, affordability, and existing data lakes. An example from Industry
extensibility. 4.0 would be to access time-series data in specific
hyperscaler services for reading asset information
ARCHITECTURE to be incorporated in maintenance processes.
Cloud, Big Data, and the IoT have become key With the SAP Leonardo IoT solution, this time-
enablers of digital transformation. The technology series data can be contextualized with Industry
related to embedding sensors in machines with 4.0 business process data such as asset or work
connectivity to transmit data has advanced tre- order and easily consumed by SAP applications.
mendously. Furthermore, the cost of sensors and
power consumption has dropped, while connectivity SAP will continue to deliver applications and ser-
has become ubiquitous. The result is that every vices based on SAP Cloud Platform, specifically
“thing” – from industrial equipment to plant opera- the Cloud Foundry environment, making use of
tions and to every imaginable consumer product – modern cloud programming models. An important
is now connected and sharing data. SAP Cloud aspect of cloud applications is microservice archi-
Platform is an open platform designed to help you tecture and containerization, which is a shift away
innovate, integrate, and extend applications with from a typical monolithic application design with
agility, flexibility, and choice. SAP solutions that inherent scaling limits toward massively scalable
support Industry 4.0 are built on SAP Cloud components, allowing for variety of workloads and
Platform, and you can use integration technology consistent availability. Container orchestration
to connect cloud applications with other SAP and systems, specifically Kubernetes, will be used to
third-party cloud and on-premise applications. deliver the microservices and development in the
Thanks to our multi-cloud foundation, you can area to extend and choose location of execution.
leverage the latest cloud-native technologies and
benefit from major hyperscaler infrastructures. With respect to application lifecycle management,
Big Data, SAP Leonardo technologies such as all aspects, including orchestration, for both cloud
IoT and machine learning enable the efficient and edge components will be cloud-based. While
ingesting, storage, processing, and analysis of SAP cloud and edge solutions supporting Industry
large volumes of device and business data. 4.0 will manage their own components centrally,
customers will manage and control updates to their
An architecture for Industry 4.0 must be able to cloud and edge components to ensure updates are
support dynamic, data-driven production optimi- not disrupting their business operations. Kuber-
zation. SAP provides an edge solution for Industry netes provides horizontal scaling for infrastructure
4.0, extending a subset of cloud capabilities to the and application development; enables high avail-
edge, close to the source of data. Typically, edge ability and a common platform from cloud to edge;
processing means processing near or on the and facilitates low-latency application access on
the edge.

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© 2020 SAP SE or an SAP affiliate company. All rights reserved.

Related to openness, it is important to allow for Apply proven security technologies, tools, and
extensibility throughout the entire architecture, best practices used in traditional IT landscapes.
both cloud and edge. An extensible architecture In many cases, they can be implemented directly:
will enable SAP customers and partners to cus- by using digital certificates or equivalent, by
tomize and adapt the available software offerings restricting what IoT devices can do and which
and realize greater business value. Extensibility ones they can communicate with, and by adding
cover a wide range of areas, including, but not protection and monitoring mechanisms. Data
limited to, field level extensibility, user interface authorization and identity management are key
extensions, extending standard APIs, and cus- items necessary to help ensure proper security,
tom, often domain-specific, machine learning since in many cases the underlying processes
models. contain proprietary information and are part of
mission-critical systems.
SECURITY
The promise, benefits, and value of the IoT have OPEN STANDARDS
been documented extensively, but with it also In a fragmented market, the promise of stan-
comes a whole host of concerns about IoT secu- dards in smart manufacturing is very important.
rity. It is not surprising that many of the privacy The transformation of existing machines and
and security failures in IoT are in the consumer assets into the age of networked production is
space. The industrial operator can place demands difficult. Open standards are the key to Industry
on vendors and make educated choices how to 4.0 success. They enable lower integration costs,
apply security best practices. Our decades of faster adoption, and scale and are the only way
experience in IT and enterprise security have seamless interoperability between multiple ven-
resulted in best practices that can be applied to dors can be enabled. While technical lower-level
IoT landscapes. standards are broadly adopted in a factory today,
the higher-level standards that describe seman-
Depending on where your connected devices are tics, data models, data management principles,
deployed, environmental factors and physical part classification rules, and so on have yet to be
constraints also need to be considered. Given the implemented by most providers.
connectivity of equipment to cloud systems, it is
imperative that all communication and access is SAP is an active user, and a major contributor
properly secured using end-to-end encryption. to various industry standards and related open
Modern security practices follow a risk-based source projects. Our portfolio of solutions for
approach that considers both the ease of an Industry 4.0 supports a wide variety of open
attack and the impact should one happen – standards ranging from technical standards such
giving a strong indicator of how much security as Cloud Foundry, Kubernetes, MQTT, and OPC
you’ll need. UA up to product classification standards such
as eCl@ss and Asset Administration Shell, which
supports the digital exchange of product and ser-
vice descriptions based on standardized data
formats.

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© 2020 SAP SE or an SAP affiliate company. All rights reserved.

 THE
ECOSYSTEM

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© 2020 SAP SE or an SAP affiliate company. All rights reserved.

PLAYERS strong cooperation between ecosystem players.
The ecosystem supplying owners and operators Nobody can do it alone, due to current market
of factories, plants, and warehouses historically fragmentation, complexity of the shop floor, and
has been highly fragmented, with multiple play- expectations of digitalization. Figure 7 shows the
ers playing multiple roles at multiple levels within multiple dimensions of players in SAP’s ecosys-
the factory. Advancing Industry 4.0 requires tem for Industry 4.0.

Figure 7: Industry 4.0 Ecosystem Players

Government
or politics

Data platform System

providers integrators

Machines and
equipment Industry
makers consortiums

Industrial and
cybersecurity Ecosystem for Standards

Industry 4.0
organizations
providers

Industrial Application
connectivity providers
providers

Control
systems Startups
providers

Content
aggregators

For Industry 4.0, SAP orchestrates a strong While covering all dimensions of the above-
ecosystem with partners of complementary mentioned Industry 4.0 ecosystem, SAP will
strengths in the 12 dimension shown in Figure 7. be focusing on:
Together with our partners, we deliver Industry 4.0 • Partnering with hyperscalers to support
relevant solutions to the owners and operators of customers’ desires to reap the benefits pro-
manufacturing sites, plants, and factories. vided by Big Data, data lakes, and affordable,
Providers of complementary solutions and cloud-based infrastructure as a service
services participate in, and benefit from, the • Promoting the use of standards, such as OPC
SAP PartnerEdge® program. UA, and standardization efforts, such as eCl@ss
• Executing innovative approaches with OEMs of
factory equipment. Companies in this space are
among the members of the Open Industry 4.0
Alliance.

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OPEN INDUSTRY 4.0 ALLIANCE The aim of the alliance is to create a “yellow
SAP has helped incubate the Open Industry 4.0 pages” of the members’ offerings, products,
Alliance. The purpose of the alliance is to create and professional services that are compliant with
customer value in factories, plants, and ware- Open Industry 4.0 in order to provide companies
houses by driving agreed-on compatibility and with a broad range of interoperable components
interoperability within the IT/OT infrastructure. that differentiate in their feature and functionality
This will enable owners and operators of factories rather than on proprietary interfaces. With this,
and plants to ultimately pay less for connectivity it is intended to cover up to 80% of the shop floor
and integration, allowing them to spend more on of our customers and ease connectivity and inte-
Industry 4.0 related value. gration on the OT and IT levels in the Industrial
IoT solution stack.
The alliance creates guidelines for interoperability
of IIoT or Industry 4.0 solution components based This initiative was started in the German-speaking
on existing standards, using best practices where region, with a plan to expand to Europe, followed
standards are missing. Members of the alliance by North America, and then worldwide. With more
provide Industry 4.0 or IIoT-relevant modular solu- than 40 members today – and open to new mem-
tion and professional service offerings that are bers, the Open Industry 4.0 Alliance will continue
compliant with the guidelines of interoperability. to grow.

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