It is an area where Germany has a head start on the United States.
“Industry 4.0,” the term for digitizing and networking industrial production, is a specialty where German industry has made great strides. Europe’s biggest economy still has a strong industrial base and massive manufacturers, many of which are modernizing their production processes.
The introduction of digital efficiencies into factories has the potential to become a fourth industrial revolution. At the very least, it will radically change the way industrial production is done.
Digital systems already can enable the sharing of data between machines, and can closely calibrate the timing of production to optimum energy use or incoming orders. Software controls can also send a just-in-time signal to a warehouse thousands of kilometers away to order a spare part.
According to a survey by PwC of 235 industrial companies in Germany, firms in Europe’s largest economy estimate that digitalization improves their efficiency by 3.3 percent a year on average. Digitalization can reduce costs by 2.6 percent a year, they said.
Germany is at the forefront of this wave of digital factory retrofitting. The big reason is the country’s healthy industrial base, which includes not only big companies but also small- to mid-sized businesses that are actively introducing computer networking into their production processes.
At Siemens, the new chief executive, Joe Kaeser, has made Industry 4.0 a top priority. At the beginning of this month he initiated a new “Digital Factory,” or DF, division. It will allow the company to offer “integrated hardware, software and technology-based services in order to support manufacturing companies,” according to Siemens’ company website.
“This strengthens our leading role,” Mr. Kaeser said.
The new division, which is expected to have a turnover of €9 billion ($11.5 billion), will combine factory automation and product-lifecycle management, or PLM, software.
Siemens has strengths in both industrial production software and hardware, making it well placed to link the two to ride the Industry 4.0 wave. The Munich-based company’s industrial division alone employs 8,000 software engineers, five times as many as it did 10 years ago.
That is one reason why Mr. Kaeser is not particularly threatened by international competitors, whether industrial rivals such as General Electric, or software specialists.
“We have long been where the others want to be: in the power plants, the factories, the trains, the traffic management systems, the hospitals,” Mr. Kaeser said.