How smart sensors are driving Industry 4.0 forward

12 minute read 9 May 2020
By Daniel Zaugg

Partner, Sector Leader Real Estate, Construction & Building Material | EY Switzerland

Focuses on auditing and advising international clients.

12 minute read 9 May 2020

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  • Sensors as drivers of Industry 4.0

Sensors are making a huge impact in networked production. Besides delivering production data, they’ve been defining entire business models for some time.

The keyword “Industry 4.0” describes a business revolution, but it isn’t always clear exactly what that means. The secret of this production megatrend: without sensors, the new networked way of managing companies would not even be possible. Smart sensors exchange data and even use their own algorithms. In doing so, they don’t just make production substantially more efficient, they’re changing many companies’ business models from the ground up.

Sensors have long been on the radar beyond the field of engineering. Besides transforming production processes, they also create new maintenance services. Job profiles are evolving as new and complex questions emerge amid a wealth of data and  networked systems. In marketing, the data that is collected can be used to create even more accurate customer profiles – and more personalized communications opportunities.

Which country is using new opportunities best?

EY compared key industrial locations and examined the three German-speaking markets in detail. The US and increasingly also China are considered global pacesetters when it comes to exploiting the potential of Industry 4.0, closely followed by Japan and South Korea. Switzerland is also among the global frontrunners, especially in terms of digital technologies that drive production efficiency. Germany and Austria perform just above the average for the European Union in implementing Industry 4.0.

Man vs. machine?


percent of German companies surveyed are replacing human labor with new forms of technology.

Growth potential in this area is huge: according to a 2018 study published in LogForum,specializing in scientific logistics, only 11 percent of the 350 companies surveyed in Germany that use smart manufacturing also use sensors. Also noteworthy is the fact that just 19 percent use new Industry 4.0 technologies to replace human labor. For the remaining study participants, they’re used to enhance existing interaction between man and technology. 

  • Smart Sensors and Industry 4.0 – a definition

    Smart sensors consist of three elements that convert input from the physical environment into analyzable data: sensor, microprocessor, and communications unit.

    While the values measured by more traditional sensors are interpreted entirely by humans, smart sensors are frequently connected with each other via networks and use algorithms to analyze data. They are enhanced with soft sensors that do not directly measure but instead use software modules to process secondary collected data.

    Smart sensors are an immensely important component of Industry 4.0. Together with special software and additional technical actuators, they are what enables the responsive and agile production that characterizes Industry 4.0.

Potential across sectors

The transformation by Industry 4.0 is multifaceted. It reduces costs, changes business models, and demands new employee profiles. Some sectors benefit more than others –all in all, however, there are significant opportunities for all industries. Companies can now seek answers to questions that weren’t informed by sufficient data in the past.

1. Smart sensors reduce costs

When considering the cost savings made possible by new measurement technologies, a few things are notable. Companies that appropriately train employees and adapt production processes can improve their just-in-time processes by using sensors. Efficient use of sensors also reduces maintenance time and prevents waste because rejects are decreased. In some industries, sensors also enable more accurate unit cost and unit revenue calculations, opening up new prospects in cost management.

2. Smart sensors transform the company

Smart sensor measurements shorten response times and allow for smaller batches, enabling customer requests to be met faster. The entire market is currently shifting; the trend is moving away from pure production assistance for existing processes and toward developing new services and industrial products. Sensors have become a decisive success factor for innovation and developing new business areas.

3. Smart sensors shape new employee profiles

As part of Industry 4.0, many jobs are being upgraded as new correlations are recognized and processes adapted accordingly. The result is a range of new job descriptions for employees. In the future they will work as industrial data scientists in robot coordination, supply chain coordinators, or simulation experts and service engineers for the new tools.

The data from smart sensors raises many new questions. Employees who analyze it  and communicate the results can become bridge builders with in company.

In doing so, they act as company interpreters, making sense of the collected data, interpreting it, and communicating it effectively.

Silo thinking needs to decrease further in the operations organization to enable new networks to be established. Furthermore, broad knowledge in computer and data management will become even more important for many production tasks than it is already.

Smart sensors offer special opportunities for some industries

In a detailed analysis, EY examined how smart sensors affect profits in nine industries. The analysis revealed that even with a low degree of implementation, companies in all branches of industry benefited from the introduction of sensors. In the most sophisticated scenario with the highest sensor saturation, profit margins (EBITDA) are set to increase between 11 and 34 percent by 2030.

Some companies, however, will benefit more than others. For the automotive industry and information and communications technologies (ICT), experts see special potential for long-term increase in profit margins.

Challenge: who owns the data?

All of these opportunities also raise some complex questions that will need to be worked out in detail. Above all is the question of who owns the data that is collected. Sensor manufacturers and analysis providers could generate valuable industry knowledge, but companies are reluctant to publish internal data. On the other hand, private users are often more generous, for example when they allow their smartphone sensors to be used to estimate traffic times. It seems doubtful that companies would agree to public use of their data.

What is clearer is which business areas will be most influenced by the use of smart sensors. Along with production, the after-sales sector will see the biggest shifts. In the future, tasks like maintenance will no longer be scheduled at certain time intervals but instead determined by sensors based on current conditions.

It is also clear that innovation in this area needs to be a collaborative effort. An example of this is the 5G mobile telephone standard that is able to transmit larger quantities of data more quickly and more reliably than ever before. It is the basis for the secure use of mobile sensors and also for internal company wireless networks. To promote the introduction of 5G, both business and government need to work together. Not only is a coherent legal framework needed, but new structures and ways of thinking at companies are needed, as well as cooperation between the two spheres. The revolution of Industry 4.0 is a joint effort.

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Smart sensors are a significant force driving the transformation to Industry 4.0. They influence not only production, but also maintenance with modified service intervals; human resources with new job requirements; and marketing with new and detailed knowledge of customers’ individual use cases. The central challenge, however, is to clarify who actually owns the data collected by the sensors.

About this article

By Daniel Zaugg

Partner, Sector Leader Real Estate, Construction & Building Material | EY Switzerland

Focuses on auditing and advising international clients.