PSI Blog

Industry 4.0 in the Steel Industry: Old Wine in New Wineskins?

22/08/2018 - Industry 4.0, Production

Old wine in new skins? © ChiccoDodiFC - Fotolia.com
Old wine in new skins? © ChiccoDodiFC - Fotolia.com

The term Industry 4.0 is not new. Hardly a political speech with economic relevance or a research proposal in the field of production can get along without this hyped term today. However, this popularity has an after-taste: for a long time, especially in the steel industry, it was impossible to make any sense of this supposed buzzword and so Industry 4.0 was quickly banished to the marketing niche. Good for research funds, they said, but otherwise there is not much new behind it. The steel industry has long been highly automated and Industry 4.0 is therefore only old wine in new wineskins. But is that really the case? 

As the term "Industry 4.0" itself cannot be precisely defined, there is no clear and certainly no simple answer to this question either. It is necessary to take different perspectives to get hold of this phantom.

What is Industry 4.0?

It is obviously easier to describe what Industry 4.0 is not than to make a positive determination. Industry 4.0 is not a technology. Nor is it a product or service.

Industry 4.0 is much more a philosophy, an attitude, perhaps a framework for action.

There is also no such thing as "the" Industry 4.0. Rather, in the process industry and even more so in the steel industry, it is difficult to recognize or adopt many of the paradigms and innovations from the respected research institutions as such. Conversely, a latent fear of contact between the relevant academic sector and the steel industry can also be seen due to their process-specific particularities. 

Industry 4.0 in Metal Industry © vege - Fotolia.com
Industry 4.0 in Metal Industry © vege - Fotolia.com

Consequently, popular concepts quickly degenerate into utopias, such as a workpiece equipped with intelligent chips, which move independently from one system to the next. At least until these chips survive a hot rolling process, for example.

Or flexible production systems that can adapt their function to production requirements – it may still work in the areas of welding, bending, cutting, etc. In steel production, however, this requires a great deal of imagination. 

And yet, all of these examples form the basis of the Smart Factory concept and thus define the content of the available literature and lectures. From this perspective, the skepticism of steel producers regarding Industry 4.0 is understandable.

Taking action toward
Industry 4.0

The past three years have therefore been marked by self-discovery and emancipation. For a long time, knowledge and concepts from the field of discrete manufacturing were required. Many conferences and symposia were held - in the rarest cases their contributions were relevant for the steel producers. Innovative market participants therefore became active themselves. Some producers introduced the position of CDO (Chief Digital Officer) to develop the topic.

Other companies placed digitization prominently into their corporate strategy. Also suppliers tried to go their own ways to get hold of the topic Industry 4.0 through company acquisitions or strategic alliances. 

Books and lectures from other industries only help to a limited extent, pioneering spirit is needed.

Our customer ArcelorMittal Burns Harbor, for example, is banking on Industry 4.0 by introducing a new Manufacturing Execution System (MES) to increase the efficiency of its processes and improve customer service. Developed by PSImetals, the new MES solution replaces outdated software and will make production management processes more efficient and nimble for Burns Harbor’s light flat-rolled operations: ArcelorMittal embraces Industry 4.0 with new MES.

Find out how a partnership with PSI Metals is changing how we do business at ArcelorMittal Burns Harbor.

As you can see, the industry is aware of its strengths and has recognized that it must take action itself to harness the opportunities offered by Industry 4.0.

Why Industry 4.0?

Today, examples from other industries such as Uber or AirBnb are often mentioned when it comes to Industry 4.0. The paradigm is: "The winner takes it all!" But here, too, we need to clarify what the steel industry can learn from these examples.

Drastically seen, the question will not be why Industry 4.0, but when Industry 4.0: If you do not act now, it may be the direct competitor or one that you do not even associate with the steel business today.

All these new companies, which generate enormous sales with comparatively few employees, have managed to break up existing value chains and simply take over lucrative parts. Traditional suppliers are degraded to pure producers or disappear completely. The service business and direct customer contact are taken over by the newcomers. Such statements are frightening and at least force us to deal with the issue.

Steel Industry to Become a Start-up Scene?

As already mentioned, Industry 4.0 is not a product. However, this simple-sounding statement has immense consequences. 

A product can be analyzed, compared, explained and finally purchased. While a product and its acquisition certainly require activity, it also allows a high degree of passivity. You can wait and see what others have experienced with it; you can have it demonstrated to you by the provider and in the end you can also get advice on how to acquire it. Since Industry 4.0 is not a product, all these "conveniences" are eliminated.

It is also not enough to analyze case studies such as Uber or Airbnb, because the abstraction of taxis or hotels towards the steel industry is not that simple.

Copy and paste is not an option. And this is where the wheat is currently separated from the chaff. While even the pioneers in the steel industry know that Industry 4.0 is not falling from the sky or will soon be on the shelf, others are still waiting for instructions to introduce Industry 4.0 tomorrow like any other product in their own factory.

Industry 4.0 means change © PSI AG
Industry 4.0 means change © PSI AG

Industry 4.0 means change. What is needed is a "digital workforce" that, in addition to dealing with new technologies, is also capable of identifying opportunities for improving processes or realizing new business opportunities with new technologies.

Here we are talking about labs - an approach pursued at PSI Metals - in which new things can be tried out, even with permission to fail. It is important to keep in mind that a well-coordinated organization that is successful in the market cannot reinvent itself overnight in order to redefine the market. 

Taking all these statements together and applying them to one's own organization and then linking them to new disruptive technologies, it is clear that much can be done in the steel industry. However, the focus is on "can." Producers are required to actively deal with the subject matter in order to optimize their processes on the basis of the Industry 4.0 philosophy or even to derive new business models from it.

The Winner Takes It All vs. The Path Is The Goal

At the beginning, Industry 4.0 was positioned as a philosophy. Finally, this blog posting should also end in a philosophical way. From today’s perspective it is a speculation whether the “scaremongers” will actually be right and whether disruption will ultimately ensure that one or only a few global market leaders remain.

However, competitive pressure and experience from other industries suggest with high probability that it is not enough to wait for the new Industry 4.0 product, but that producers themselves must set off to make the best possible use of the technologies available on the market, as in “pre-revolutionary” times.

What is new is that the new technologies make it possible to develop completely new forms of value creation. And this can certainly be regarded as a revolution, even if it takes place in more evolutionary periods.

But time will be the deciding factor. All efforts relating to Industry 4.0 are aimed at ensuring that customer needs can be met even faster in the future.

The faster reaction to unforeseen generates the decisive competitive advantage within the value chain. And time is running out for all market participants. Even if it’s not a sprint, it’s a race. And as in every race, there will be winners and losers in the end.

Raffael Binder, Director Marketing PSI Metals GmbH

After taking over the marketing department of PSI Metals in 2015 Raffael Binder immediately positioned the company within the frame of Industry 4.0. So it is no wonder that in our blog he covers such topics as digitalization, KPIs and Artificial Intelligence (AI). Raffael’s interests range from science (fiction) and history to sports and all facets of communication.

+43 732 670 670-61
rbinder@psi.de