Smart industry is an omnipresent concept in contemporary business, encountered for example in specific forms like smart manufacturing (also known as Industry 4.0) and smart logistics. In general, smart industry refers to performing industrial processes by leveraging modern information technology and boosting overall process performance to achieve your business goals faster and more efficiently.
Smart industry is sometimes referred to as “intelligent industry,” which may lead some to erroneously interpret it narrowly as the application of artificial intelligence (AI) in industrial settings. AI is an important technology these days and has significant applications in industry, but smart industry is much, much more than this.
The foundation of smart industry lies in using digital technology to connect operational business elements into an integrated industry business system that effectively and efficiently reacts (and possibly even proacts) to its environment. To arrive at a truly smart business fabric, there are two aspects that need to be carefully considered: horizontal and vertical integration.
Horizontal integration helps you create more coherent and reactive business processes, enabling a real-time coupling between various steps in the process, such as sales, procurement, inbound logistics, production, outbound logistics and after-sales service. This primarily pertains to the scope of your organization, but also extends to your entire business chain or business network. After all, your procurement function is connected to your provider’s sales function.
Adequate digital connections help streamline the overall processes, enabling faster chain-level responses, leading to the possible conversion of a supply chain into a demand chain. All of these play a business-critical role in serving your customers’ exact needs – both product-wise and time-wise – while making your operations more efficient. For example, by safely reducing intermediate stock to ensure minimal impact on the existing production line.
On the other hand, a vertical integration in your organization is all about connecting the high-level, customer-facing functions (as outlined in the processes discussed above) to the internal operations of the back-end functions. In smart industry, these internal operations typically have a physical aspect. Consider this: physical goods are produced in smart manufacturing, while in smart logistics, physical goods are transported. Hence, vertical integration is about connecting the intangible world of enterprise information systems to the physical world of the systems that control your shop floor, whether in a manufacturing hall or a logistics distribution center. This is often referred to as the IT-OT connection — the link between information technology and operations technology. However, for several reasons, this link is quite challenging to realize in its best form.