From phone-accessible doorbell cameras to smart fridges, many examples of Industry 4.0 technology have enhanced our daily connectivity at home. Yet, procurement and supply chain operations stand to gain the most significant benefits, acquiring the tools necessary to meet consumers’ growing demand for faster service, coined the ‘Amazon Effect’ in 2019.
Naturally, this is drawing considerable interest from business owners. In a recent Deloitte survey of over 2,000 organisations, 86% stated they were doing ‘everything they can’ to embrace Industry 4.0 and prepare a workforce ready for the new era.
We’ll explore Industry 4.0, the innovative technology behind smart factories and how these developments will influence procurement roles and businesses.
What is Industry 4.0?
Purdue Global defines Industry 3.0 as the period from the 1960s to the 2000s, during which industrial computing and automation were first introduced. Building on this, the current era of Industry 4.0 refers to modern technological advancements including AI, advanced data processing and cloud computing.
Originally termed the Fourth Industrial Revolution, the concept of Industry 4.0 was popularised in 2016 by Klaus Schwab, founder of the World Economic Forum (WEF). Schwab saw this technology as a means to connect billions to digital networks, enhance efficiency and rectify environmental damage from previous industrial eras. Deloitte’s survey reflected Schwab’s optimism, with 87% of participants believing Industry 4.0 could lead to greater social and economic equality and stability.
What technology are smart factories using in Industry 4.0?
By analysing their current implementations in innovative smart factories, IBM identifies the key technologies that define Industry 4.0 as follows:
1. Artificial intelligence and machine learning
AI can quickly process the vast procurement and supply chain data generated on factory floors and within business units. IBM notes that this data enhances productivity by enabling predictive maintenance based on historical machine breakdowns and averting future issues.
2. Cloud computing
In 2024, Forbes defined cloud computing as “a key component enabling the operational economy,” due to its role in connecting networks of people, devices, machines and systems. However, they also caution that this increased connectivity introduces new cybersecurity and data privacy vulnerabilities.
3. Cybersecurity
In 2021, 47% of businesses worldwide experienced cybersecurity attacks, leading to production interruptions and downtime. In the era of Industry 4.0’s increased connectivity, IBM asserts that “more efficient manufacturing processes also expose new entry points for malicious attacks and malware.” Consequently, cybersecurity and business operations are becoming more closely interlinked.
4. Internet of Things
TechTarget defines the Internet of Things (IoT) as a connected network of physical devices that share data and communicate with the cloud. For instance, Digi explains that IoT can collect data from factory machines, including temperature and voltage, to identify anomalies which are quickly analysed by edge computing.
5. Edge computing
Edge computing refers to analysis occurring as data is generated, enhancing real-time production and minimising security risks. As IBM highlighted, transmitting data to the cloud can be too slow when an immediate safety response is required. Edge computing facilitates instant reactions, such as halting a machine when an error is detected.
6. Digital twin
A digital twin mirrors a physical object by simulating its behaviour in digital form. IBM explains that this enables the analysis of performance issues and the identification of potential improvements. These adjustments can be tested initially on the digital twin, allowing for informed decisions to be made before incurring costs.
What does Industry 4.0 mean for procurement professionals?
As modern technology advances, workers in specialisms such as manufacturing, engineering and FMCG will similarly see their roles evolve. Here are some key emerging trends accelerated by Industry 4.0.
1. Opportunities to grow and develop emerging skills
As pinpointed by Machine Metrics, Industry 4.0 technology necessitates specialist knowledge for effective usage. They recommend that acquiring skills in AI, augmented reality and IoT will aid procurement professionals in remaining competitive in the modern job market, aligning with LinkedIn’s top in-demand skills for 2025.
2. Increased accuracy
Recent data from McKinsey shows an 85% increase in forecasting accuracy through the use of Industry 4.0 technologies such as data analytics, AI and machine learning. CIPS advises that by embracing AI, procurement teams can gain an advantage in reliably identifying cost savings or new opportunities.
3. Safer work environments
As JD Supra discussed, machine learning algorithms can predict hazards before they occur by analysing “vast amounts of historical data, including accident reports, near-miss incidents and environmental factors.” Following these recommendations, data from the National Institutes of Health shows that smart factories are adopting ever-more efficient hazard reduction processes to protect the health of their staff.
What does Industry 4.0 mean for procurement employers?
According to Deloitte, a significant majority of executives in public (74%) and private (67%) sectors believe businesses will have the most influence on how Industry 4.0 continues to shape society. However, this brings several key considerations.
1. Prioritising cybersecurity
While the IoT enhances data analysis and collaboration, each access point poses a security risk if mismanaged. The National Institute of Standards and Technology (NIST) warns that these new vulnerabilities make security a priority for employers. To safely utilise smart factories for procurement operations, they advise businesses to conduct annual risk assessments and upskill teams in cybersecurity awareness.
2. Investments, savings and sustainability
Implementing new technology requires upfront costs and time; however, it also offers considerable long-term savings. Manufacturing Today states, “Energy management systems in smart factories can monitor and optimise energy usage, reducing waste and lowering costs.” Industrial businesses reportedly account for over 40% of global energy consumption, demonstrating the far-reaching benefits of this reduction for sustainability-conscious staff and employers.
3. Training and development
As technology advances, employees need ongoing training to effectively understand and utilise it. Deloitte discovered that only a quarter of executives were confident that their workforce had the required skills for Industry 4.0, highlighting a significant talent gap. Distinct’s annual survey data indicates that UK procurement professionals prioritise career development in 2025, making this training a vital tool for attraction and retention strategies.
Work with Distinct
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