The Smart Factory – 6 Key Principles You Should Achieve

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Omron Cobot used in smart cnc machines

Omron Cobot application in a Smart CNC Factory


The Smart Factory

Today, technology is quickly changing manufacturing from an industry of mass-produced goods to customised products. The ultimate business goal—and pillar of 21st century competitiveness—is for manufacturers are to make the right product, deliver it to the right customer for the right price. Ideally, the product will also offer greater utility or customer appeal at a higher level of sophistication.

The Industry 4.0 vision adds intelligent manufacturing systems to the fundamental processes of fabrication and assembly. In this vision, “Digital Transformation” represents a fully connected manufacturing environment. All equipment in this environment is online, intelligent, and capable of making decisions with varying degrees of autonomy.

Earlier articles present ideas, tools, and approaches to Industry 4.0 that ASEAN member countries and other nations are beginning to take. What’s the point? Where do the resources, tools, and ideas come together? And for what purpose? This article highlights one of the critical pillars of Industry 4.0 –  the smart factory.

“We have to prove that digital manufacturing is inclusive. Then, the true narrative will emerge: Welcome, robots. You’ll help us. But humans are still our future.”  –Joe Kaeser

Digital Manufacturing

The smart factory idea is central to Industry 4.0., many people even use the terms interchangeably. Unfortunately, there’s little consensus among analysts and manufacturers as to what a smart factory is. Descriptions compiled from industry studies and reports define smart factories by:

  • Significant improvement in the development of manufacturing businesses and their position in the supply chain.
  • Completely connected and flexible systems, which rely on the constant data flow from connected production and operations systems.
  • Beyond typical automation in a production facility, especially in terms of executing discrete tasks or processes.

These rather fulsome descriptions help but only a little. In a very general way, smart factories are the focus of resources, processes, and practices. In an Industry 4.0 environment, smart factories are where manufacturers generate value (more about that later).

Characteristics of a Smart Factory

Because there’s no accepted definition of a smart factory, it’s difficult to ascribe “typical” characteristics to it. Instead, it’s easier to get a clear picture of what a smart factory is by describing what it can do. This smart factory indicator approach provides these capabilities:

  • Monitors, collects, coordinates, controls, and integrates data by using IT communications and data management technology.
  • Produces and distributes manufactured goods more quickly in response to market demand.
  • Uses intelligent agents and other cyber-physical systems to operate more efficiently.
  • Uses automated agents to optimise complex production decisions typically relegated to humans.
  • Uses digital connectivity to collaborate with suppliers, customers, partners, and departments within the facility.
  • Can be connected to a global network of similar production systems and the digital supply chain.
  • Evolves to meet the changing business goals of the organisation.
  • Adapts to and learns from new and changing conditions in real-time or nearly real-time.

Cyber-physical systems (CPS) play a critical role in this constant churning of technology and process change. They add new capabilities to physical systems by merging computing and communication capabilities with physical processes. The power of CPS lies in their ability to provide new capabilities that enable increasingly complex manufacturing processes.

What Makes a Smart Factory “Smart?”

That lack of consensus in what a smart factory is extends to what makes it smart. However, those who hope for a consensus might find that one is on the way. Recent studies that assign smart factories with specific design and production capabilities are making their way to the manufacturing trade press and consultancy white papers.

6 Key Design Principles of A Industrial 4.0 Smart Factory

‘Industry 4.0: The Fourth Industrial Revolution’, a study by the I-Scoop consultancy, describes the smart factory indirectly by suggesting functional requirements that each smart factory should include or use. These requirements, which emphasise what is possible today with existing technology, are based on six basic factory design principles.

Modularity — This design capability enables system components to be assembled, disassembled, and recombined quickly and easily. On the production floor, this translates into being able to add, relocate, or rearrange components in the production line with minimal time and effort. A highly modular smart factory design enables the rapid integration of smart assets, which can be supplied by multiple vendors. 

Interoperability — A smart factory design that emphasises interoperability ensures that technical information can be shared within [or between] system components.  Such business information can then be shared between manufacturing enterprises, suppliers, and customers. 

Decentralisation — Bringing decentralised and autonomous decision making to machines and cyber-physical systems is a core goal of Industry 4.0. The focus is on autonomous system elements, such as modules, material handling systems, and products located anywhere on the production floor. The general goal is to enable CPS to make decisions without regulation by centralised control (man or machine).

Here are two possible standards of autonomy in smart factories:

  • Enable CPS to make production process decisions autonomously in real-time, if the outcome does not violate high-level business goals.
  • Let embedded computers help autonomous cyber-physical systems interact with their production environment via sensors and actuators.

Real-time capability – Based on the modularity the smart factory should be configured / self-configured to respond to the change -both internal and external – on time. This fast response is based on the capability of collecting and analysing up-to-date data. With the capability, manufacturers will gain the insights of root-cause and predict potential risk of unplanned shutdown, as well as schedule the production line shift based on the ever changing customer demand.


Virtualisation — This process combines physical manufacturing systems, their digital equivalents, and process data to create a virtual factory environment. In this virtual environment, it’s possible to:

  • Monitor, control, and simulate physical systems and processes.
  • Send data to update the virtual model in real-time.
  • Make design changes to the factory by creating digital prototypes.
  • Train the workforce to perform manual tasks.
  • Diagnose and predict faults.
  • Guide employees in maintenance tasks. 

Service orientation — This design principle shifts the focus from selling products to selling products and services. Smart factories with a service orientation strategy will design and produce products, create related services, and sell them together. This approach encourages the innovative improvement of core processes and if necessary, the outsourcing or elimination of other processes.

  • Responsiveness — This essential capability reacts to changes in the status of internal production systems, customer tastes, or other changes in the market. Responsive smart factory designs:
  • Use real-time data monitoring and analytics methods to identify process, equipment, or market changes.
  • Include enough modularity to expedite system recovery or changes to production processes or equipment.
  • Include real-time responses to internal changes, monitoring, and control.

Written by Colin Koh, Senior Business Development Manager, Industry 4.0 Consultant. This Industry 4.0 Article Series is aimed to enlightened readers about everything they need to know about Industry 4.0 and its application about technologies and benefits to companies and consumers.

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