Few people appreciate what takes place between the moment they hit the “purchase” button on their smartphone or computer and the moment the item they ordered lands in their hands, ready to star in their latest unboxing video. But what happens behind the scenes is a truly mind boggling array of activity, often involving multiple companies from a wide variety of sectors and on a global scale.  Efficient oversight and control of such an operation in real-time requires tools to properly manage supply chains. Currently an $18 billion industry, the supply chain management market is expected to grow to $37.4 billion by the end of 2027 as consumer demand grows. Israel’s thriving tech sector is itself home to more than 150 startups that are involved in various aspects of the industry, employing cutting-edge technology to help ensure that goods are delivered swiftly and efficiently. 

In order to better get to know the innovative solutions offered by the local ecosystem, Start-Up Nation Central partnered with DSV to create an interactive landscape detailing some of the top up-and-coming innovative companies in the field. The map, published in early May, breaks the local industry into seven sub-sectors, each responsible for a different link in the chain.

Links in the Chain

Gone are the bustling, noisy, exhaust-filled warehouses of the past. Nowadays warehouses, such as those operated by Fabric or Caja Robotics, are silent and nearly sterile, operated predominantly by robots that scurry from one place to another powered by quiet electric motors according to advanced algorithms that track the precise location of every item of inventory and deliver them to where they are needed in the most efficient way possible. Even the work of human pickers is determined by advanced Warehouse Management Systems, resulting in seamless cooperation between people and machines, a dramatic development known as cobotics. In addition to accelerating the warehousing process, the automated systems also maintain strict stock-taking, drastically reducing human error and increasing supply chain transparency.

Packaging is the part of the supply chain that provides coordinated systems for preparing goods for safe and efficient transportation. The companies in this category take their mission to the next level, using cutting-edge technologies. Environmentally-friendly packaging solutions by TIPA and W-Cycle offer biodegradable boxes and pulp-packing products, while impacX integrates sensors into caps and lids to monitor product use and send alerts when refills are needed.

Fleet Management solutions allow organizations to coordinate entire fleets of vehicles, with the aim of improving efficiency, reducing costs, and providing regulatory compliance. The companies in this category take the newest and most advanced features from the mobility world and adapt them to the needs of high-volume transporters. From an app for locating available trucks (GeTruck), to a platform that optimizes complex transportation operations (Moovex), to intelligent vehicle tracking (Tactile Mobility), to AI-based vehicle maintenance and fuel management solutions (AutoFleet, JiFleet), these Israeli startups are revolutionizing the bulk transportation of goods.

In order to keep track of the immense volume of goods that are being shipped around the world, modern supply chains demand sophisticated monitoring and tracking solutions. The Israeli startups featured in the Monitoring and Forecasting section of the map do everything from providing low-power, wide-area monitoring technology (hoopo), to harvesting energy from radio waves to power BlueTooth tags for IoT devices (Wiliot), to active and accurate ship and container-level tracking (Loginno). All the data that is generated throughout the various parts of the supply chain allows the industry to become far more capable of identifying breaks in the chain and in some cases—like when it comes to Mechanical Diagnostics company Augury—even predict malfunctions and alert operators in time to overcome them. 

Other overarching key areas of the smart logistics industry include Digital Processing, which increases operational effectiveness by leveraging emerging digital supply chain business models, and Cyber Security, which ensures that the entire industry remains safe from malicious players seeking to disrupt the chain for illicit profit or other nefarious reasons.

The last step of the supply chain is referred to as Last Mile Delivery. Whether the goods reach the buyer via handheld courier, delivery van, or by drone, the companies in this category seek to make an impact where it counts the most. Offering solutions such as delivery operation management (Bringg), route optimization (OptiWays), neighborhood-level distribution centers (Bond Post Purchase), AI-powered concierge chatbots (PACKAGE.AI), and automated dispatch, these Israeli companies seek to leave customers with a favorable impression, ensuring that the products arrive at their destination promptly and with minimum cause for returns.

Israeli innovation driving radical change

As we witnessed at the start of the COVID-19 pandemic and again more recently with the blockage of the Suez Canal, supply chains are fragile and any disruption in one place causes a domino effect that is felt around the world. Adopting innovative technology to improve supply chain efficiency is a benefit to the entire world. In addition to lowering costs, increasing transparency (and thereby trust), providing better responses to malfunctions, and forecasting future shortages, employing smart logistics is also a boon to the environment. The manufacturing and cargo transportation industries are the biggest producers of harmful emissions and therefore anything that can help them become more efficient is a net gain for the entire planet. 

The world is waking up to these benefits—and so are investors. Over recent months, there have been multiple Israeli success stories in the field, from U.S. retail giant Walmart, which has initiated pilot programs with Fabric and Flytrex, to Approve, which was acquired by Tipalti for $40 million, to stor.ai that completed a $21 million funding round, to BionicHive, which earned recognition from none other than Elon Musk.

As the world gears up for radical change in supply chain logistics with the massive increase of eCommerce and the adoption of agile solutions by traditional sellers, innovation will be a key factor and driving force for change. Israeli startups, many of whose products rely on big data and deep tech, are paving the way to the future and becoming precious links in the global supply chain.

Ofir Bronhaim is Head of Innovation, Israel for DSV – Global Transport and Logistics, which provides and manages supply chain solutions for thousands of companies, helping them ensure a steady supply of goods to production lines, outlets, stores, and consumers all over the world.

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As part of Start-Up Nation Central’s Industry 4.0 Global Leaders Summit, I had the pleasure of speaking with HE Omar Sultan Al Olama, Minister of State for Artificial Intelligence of the United Arab Emirates, to discuss his country’s unique vision and strategy around a multitude of AI applications.

Appointed to his position in October 2017 by the Vice President and Prime Minister of the UAE and Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, Mr. Al Olama is the first (and so far the only) minister of AI in the world. I was very interested in his unique perspective on developing a country-wide AI strategy.  

Question: As the first and only Minister of Artificial Intelligence in the world, it must be a complex task to coordinate all the activities around such a core technology in the country. You have recently unveiled a long-term AI strategy. Could you please describe your strategy and how it will help the UAE achieve its goals?

Answer: Let’s go back to the early 20^th century and the late 19^th century, with the advent of electricity, automobiles, telecommunications, etc. Back then, we would not have considered having a minister of electricity, while today all countries have ministers of energy, who mostly deal with electricity. Nowadays, AI has become a necessary office, and we view this Ministry as critical to ensure that we develop these technologies and deploy them in the right manner. Now, we see different people and different intellectual leaders talking about the importance of AI, but unfortunately there isn’t enough incentive globally to actually establish a Ministry for this. And it is important to have such a Ministry because the government is going to be affected by AI.

In fact, we see things happening across academia and across the private sector that trickle down to government and change the way governments do business, so it’s really just a matter of time until they realize their need in a Ministry. And we do believe that citizens’ expectations change because of the way the private sector does certain things. The private sector today uses AI to give you more tailored services, and is more proactive, thus we believe the government needs to go through this transformation as well.

When we think about the way the government works, there’s the economic vertical, there’s a social vertical, a security vertical, and all of them are going to be touched by AI in one way, shape or form. Some effects are going to be negative and some positive. It is imperative for us, the government, to not just look at technologies as something that’s nice to have, but rather something that needs to be regulated to prevent the negative effects, and which needs to be invested in to promote the positive ones.

Q: When I had the privilege of visiting Dubai recently, I was very impressed by how the government of the UAE thinks strategically and long-term by making investments that are not necessarily warranted by today’s challenges, but which open platforms for the future. Where do you see Israeli AI companies being useful in achieving the UAE’s AI goals, and how should they go about connecting to the UAE’s strategic initiatives and vision?

A: First, there is an undeniable need for us to collaborate, this is a fact. Because of the nature of our countries – we are medium-size countries with a lot of innovation – but unfortunately, we don’t compete with giants globally, so the only way for us to actually have a seat at the table is for us to work together.

Second, since both countries are medium-sized markets, there is a challenge to scale up and enable continuous growth, so it’s important to work together and open up our markets to surrounding countries and growing economies. The UAE is a hub for the Middle East, Africa, India and Asia, the way that Israel is a hub for European and American investments. Working together makes the markets much bigger; it makes investments more appealing and also allows us to create systems and companies in these two countries that can compete with the big giants, and even become giants of their own.

Third, I believe that the strength of being an agile government, the strength of having 200 nationalities – the diversity of the population in the UAE – will allow for Israeli companies to do a lot more a lot faster. At the same time, it’s important for us to bring our talent and ideas from the UAE to Israel to learn and grow together towards a win-win situation.

Finally, the UAE has developed robust AI capabilities based on the “3 Vs”: the velocity, variety and volume of data. These 3 V’s ensure that the UAE today is one of the best markets when it comes to artificial intelligence. For instance, our logistics companies operate over 70 ports around the world. So, the amount of data that we have is the Holy Grail of logistics data when you look at the volume, variety and velocity. And I think that the UAE and Israel can work together and actually make use of this data, and create the next unicorns, when it comes to leading these fields. If we work together, we can dominate the AI world.

Q: Using AI to digitize physical assets – in your case, in the mining, logistics and aviation industries – means applying AI to drive operational efficiency and resilience, while at the same time increasing the sustainability and the flexibility of the processes. What is your advice to companies in these sectors on how to establish collaborative efforts with potential partners in and outside of the UAE? Who are their most likely partners?

A: The COVID-19 pandemic has shown that the world is completely changing, and globally, we are becoming a lot more agile. People are working virtually, and are hiring people to work for them virtually around the world, and they’re also trying to move much more aggressively with regards to deployment. In this regard and others, I would recommend looking at the UAE as a gateway to Africa, India, and the Middle East.

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From March to November 2020, in the midst of the COVID-19 pandemic, the NASDAQ-100 Technology Sector Index has shown an impressive growth of 23%. Looking closely at the top-performing companies, eight out of 10 are software-based companies. When large parts of the world are homebound due to quarantine and social distancing, software – which is distance agnostic – is thriving. All you need is an internet connection and you are good to go.

In the Industry 4.0 sector, despite the rising need for automated manufacturing solutions, things are quite different. Most startups in this sector combine hardware and software-based solutions, and therefore require installing on-premises. The inability to travel during COVID-19 has therefore posed a problem for the sector, which is threatening its sustainability. However, Israeli Industry 4.0 startups responded by adapting their strategies, and have managed to continue servicing their customers during this time.

This article will focus on one unique challenge industry 4.0 startups are facing – remote, on-premises installation. Augury, a provider of machine health diagnostic solutions, is one of the startups that tackled this obstacle in an innovative way. “We employed augmented reality (AR) tools to guide the customer through the installation, seeing what they saw in real time,” says Gal Shaul, cofounder & CTO of Augury. “We also created a network of third-party partners who can assist in installation; in addition, we’ve developed new training materials and a certification program for third-party installers.” This allowed the company to actually increase its installation rates above pre-COVID levels, and enabled it to raise a recent $55 million D round, one of the highest recorded rounds for this sector.

Here are some of the novel approaches the Industry 4.0 sector is using for remote installations:

Focus more efforts on the local industry

Many Israeli startups have leveraged the COVID-19 forced localism by shifting their efforts to markets where they have an existing presence. An example of this strategy is working with Israeli manufacturers and increasing technological development and productivity within the local industry.

Razor Labs, an Israel Industry 4.0 startup that provides AI-based data analysis solutions for manufacturers, has done exactly that: “Since the beginning of the pandemic, we have witnessed an increase in local demand for our AI technology,” says Raz Roditti, CEO of Razor Labs. “Combined with travel restrictions, it is more appealing for us to put more focus on the Israeli market.”

Provide global customers with DIY installment kits and digital training

Startups have adapted to the new COVID-19 reality by delivering their products overseas with online training kits, so their clients can do it themselves. To use this strategy, startups send a kit with instructions, digital training, and provide online support. This method has the added advantage of enabling easier scaling in the long run.

One example is VocalZoom, a developer of advanced vibration sensors used for machine health monitoring. According to Tal Bakish, CEO & Founder of VocalZoom, “working with kits has helped us scale faster in several ways: for the customer, it is cheaper, and a decision to start a POC is made faster; we get to work with many customers simultaneously, and they do most of the work; and, since it is less capital intensive, the success rate for possible next steps is much higher.”

Develop capabilities for remote installation with local integrators

The typical process for an early-stage Industry 4.0 startup is to use its in-house team for the first installments, and only then leverage this knowledge to train integrators at the target market. COVID-19 has broken this natural cycle and forced startups to work with integrators from the start.

Leo Bakman, CEO & Founder of Halo Digital, a developer of a digital twin solution for manufacturers, says the company has “redesignated half of our development team from the development of our product towards building capabilities for remote installation with third-party integrators, with the understanding it would impact our advancement and release of new features of our product.” He added that the startup is “now building an in-house team to support that shift; these developments were originally meant to occur only a year from now.”

In conclusion, COVID-19 creates great demand for Industry 4.0 startups, but at the same time raises obstacles to seizing these opportunities. Those startups that can adapt quickly and overcome these obstacles will thrive. Nowadays, the difference between success and failure may be entirely dependent on who can adapt best to new methods of customer acquisition. Based on Start-Up Nation Central’s analysis, the Industry 4.0 sector is expected to boom in the coming years. But this won’t mean much if startups don’t take the necessary actions to adjust.

To learn more about these strategies and others, register to attend our virtual Industry 4.0 Global Leaders Summit on Dec 1-3.

The following experts contributed to this article: Leo Bakman, Cofounder & SVP of Business, Halo Digital; Amir Kaufman, Cofounder & COO, WonderLogics; Amir Bahalul, Business Development Director, Augury; Tovit Neizer, VP Business Development, Nanofabrica; Tal Bakish, Founder & CEO, VocalZoom; Evyatar Meiron, Founder & CEO, Fieldbit; and Adam Tabor, Cofounder & COO, Kitov.ai.

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COVID-19 has become a powerful accelerator for the adoption of Industrial Internet of Things (IIoT) and Industry 4.0 technologies, as manufacturers around the world realize the need for more remote accessibility, monitoring and management capabilities for production plants, as well as more visible and ‘closer to home’ supply chains. The pandemic has also accelerated digitization and automation, as global manufacturing hubs, such as Michigan, are adopting Industry 4.0 solutions to keep their competitive edge in the new coronavirus era and beyond.

Israel, the Startup Nation, is playing a significant role in developing smart technologies for manufacturers around the world. Despite having a very small manufacturing sector of its own, Israel’s 255 startups in the fields of operation optimization, inspection and testing, supply chain, maintenance, 3D printing, robotics, connectivity and security vulnerabilities, are gaining recognition for their Industry 4.0 solutions, deriving from Israel’s well-known strengths in cybersecurity and AI/ML, computer vision, sensors, and complex systems integration capabilities.

Moreover, Israel is now placed third in the world (after the US and China) in terms of venture capital investments in the field of Industry 4.0, which more than tripled in five years: from $112 million in 2014 to $349 million in 2019; there are more than 50 multinational corporations that have chosen to develop IIoT solutions in Israel, including car manufacturers Ford and General Motors, but also medical equipment corporation Medtronic, appliances giant Bosch, and others. 

It’s important to note that Michigan has its own startup ecosystem, backed by local venture capital firms. With venture investors backing 97% of all Michigan venture-funded startups, the state’s entrepreneurial economy hinges on investors’ ability to consistently fund high-growth, high-potential companies. In 2019, there were 144 venture-backed startup companies in Michigan.

“There is a big win in bringing Michigan and Israel together”

Ahead of the Industry 4.0 Global Leaders Summit, to be held Dec. 1-3 by Start-Up Nation Central and Grove Ventures, we spoke with Michigan experts on the state’s needs in this field – beyond the automotive industry. 

“Michigan is known for the ability to build things, its manufacturing prowess, and Israel is known for digitization and chutzpah – audacity,” says Scott Hiipakka, CEO of the Michigan Israel Business Accelerator (MIBA). “There is a big win in bringing these two leaders together.”

“Michigan is known for the ability to build things, its manufacturing prowess, and Israel is known for digitization and chutzpah”

According to venture capital expert Adrian Fortino, managing director of the Mercury Fund, “industrialists in Michigan are now embracing AI in a way that they haven’t before, they are waking up and figuring out how to adopt it much faster.” He points out that the two Industry 4.0 areas that are drawing the most attention focus on visibility: supply chain visibility and production visibility – both needs that are gaining momentum in the COVID-19 reality.

In these fields in particular, Israeli innovation has some unique offerings. Take for example Israeli startup OptimalPlus, whose lifecycle analytics solutions are already serving suppliers and OEMs in the automotive, semiconductor, and electronics industries. Its platform provides real-time product analytics and extract insights from data across the entire supply chain. 

Another Israeli startup, Plataine, offers Industrial IoT and AI-based optimization solutions for advanced manufacturing. Its solutions provide manufacturers worldwide, including Airbus, GE, and Renault F1 Team, intelligent, connected digital assistants for production floor management and staff, enabling manufacturers to make optimized decisions in real time. 

Israeli startup Matics, on the other hand, is developing a secure, plug-and-play, cloud-based digital manufacturing real-time operational intelligence solution for small and medium enterprises. Matics provides a real-time window into the manufacturing environment for instant control and visibility over operations. 

Castor and Onvego are Israeli I4 startups gaining memntum in Michigan, helping manufacturers push production capabilities to new heights. Both startups are part of the I4 Accelerator of Automation Alley, Centropolis and Lean Rocket Lab. Castor’s 3D printing software automatically scans a company’s parts catalog to identify what parts can be manufactured using a 3D printer. This decision-support software ultimately allows manufacturers to decide if and when they should use 3D printing to save time and money, proving to be particularly helpful in the pandemic era.

Onvego’s voice assistant solution for IIoT devices is also getting attention in Michigan. As today’s mainstream voice assistant solutions — Alexa, Siri, and Google Home — are not made to tackle industrial tasks, Onvego comes in to allow IoT companies to embed voice control into their IoT devices, even when offline. 

A host of Israeli Industry 4.0 startups will be profiled in Start-Up Nation Central’s “Industry 4.0 Best Applications Guidebook,” which will be unveiled at the Industry 4.0 Global Leaders Virtual Summit. 

Among its various panel discussions, the Summit will feature a session focused on Michigan’s manufacturing ecosystem, which has been recognized for its opportunities to leverage Industry 4.0 innovation. Organized by the Michigan Venture Capital Association (MVCA) and the Michigan Israel Business Accelerator (MIBA), this virtual session will bring together some of Michigan’s leading venture capitalists, including Doug Neal, Managing Partner at eLab Ventures and Adrian Fortino, managing director at the Mercury Fund, as well as Michigan industry experts Matt Tsien, President of GM Ventures, and John Absmeier, the CTO of Lear Corp.

To find out more about the virtual Industry 4.0 Global Leaders Summit, and to register, click here.

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You know of Israel as the breeding ground for some of the world’s leading cybersecurity, FinTech, artificial intelligence, and AgriTech companies with groundbreaking technological solutions, but with a small nascent industrial manufacturing sector, it may come as a surprise that the country is also a leader in Industry 4.0 (I4) technologies. The top destination for I4 venture capital investment after the US and China, Israel delivers innovative solutions to some of the world’s largest multinational corporations (MNCs) and manufacturing giants. Indeed, as COVID-19 rewrites standards and accelerates digitalization across industries, Israeli companies’ unique approaches to I4 are drawing increasing interest from international investors, executives and financial institutions.

With the goal of introducing these solutions to the world and facilitating dialogue on market trends in Industry 4.0, Start-Up Nation Central and Grove Ventures will host the Industry 4.0 Global Leaders’ Summit – an enriching, three-day interactive event (December 1-3), bringing together leading investors, MNCs, corporate innovation divisions, and the best of the Israeli I4 startup scene. Attendees will have the opportunity to visit the virtual exhibitor stands and take a closer look at various I4 technologies, as well as book B2B meetings to engage in more in-depth discussions.

In order to facilitate meaningful discussions around solutions for specific global manufacturing challenges – such as in the fields of medical devices, supply chain and manufacturing, and consumer goods packaging – the Summit will include an array of event platforms, including visionary speaker panels, networking roundtables, meetings on a virtual B2B platform, and an exclusive I4 startup expo.

Topics to be covered in the context of the Summit include: innovation in energy management for Industry 4.0 implementation; an overview of trends impacting traditional industries, such as oil & gas and mining; supply chain resilience and the acceleration of digital transformation; and insights into the corporate venture capital and I4 investment landscape. The Summit will address the impact of COVID-19 on manufacturing, including strategizing for nearshoring, developing sound logistical frameworks, tracking downtime, and developing supply chain resilience.

To discuss current solutions and future outlooks for I4.0, Start-Up Nation Central and Grove Ventures, have pooled their networks to bring together executives shaping global Industry 4.0 trends, including: Emmanuel Lagarrigue, Chief Innovation Officer and Mourad Tamoud, Head of Global Supply Chain at Schneider Electric; Luca Graf, Head of Digital Innovation at the Danish transport and logistics company DSV; Neil Ackerman, Global Supply Chain Digital Executive at Johnson & Johnson; and Pavel Cyrani, Chief Commercial Strategy Officer at CEZ. Investors and venture capitalists slated to participate include Lior Endleson of Grove Ventures, Adrian Fortino of Mecury Fund, Petr Mikovec of Inven Capital, Doug Neal of eLab Ventures, and Bill Pescatello of Evolv Ventures.

On the startup scene – Ariel Rosenfeld, CEO of 3D Signals; Nir Giller, CTO and cofounder of CyberX; and Gal Shaul, cofounder and CTO of Augury – will discuss their technological solutions. The Startup Expo portion of the event will host artificial intelligence and deep-learning companies like INTSITE, Razor Labs, and Brillianetor, imaging technology company Qsee, as well as automation and data management solutions RealiteQ, SCADAfence, IOSight, and Datumate, among others.

We look forward to hosting you for a one-of-a-kind Industry 4.0 professional business and networking event! Register by clicking here.

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I would like to focus my remarks on the effects of COVID-19 on manufacturing facilities and supply chains:

Distributed supply chains are not as attractive and efficient as they once seemed – rare events can really disrupt them, and not in a good way. Countries and firms demand more resilient supply chains, including additional capacity closer to home in case of a major disruption, so as not to depend on political decisions of other countries.

Manufacturing facilities must become much more flexible and resilient to disruptions, and allow for remote monitoring, remote management, and better business continuity, once disrupted. This is demanded not only by the manufacturers, but also by their customers, investors, creditors, and insurers. As a result, an extensive digitization of the shop floor, including its integration with all the other systems is becoming essential rather than nice to have. It provides the necessary first layer of high-quality data, upon which another layer of insight generation, decision support, and control of production processes – all in real time – must be superimposed. Such systems must become an order of magnitude better than what exists today.

These imply that COVID-19 is also likely to accelerate the adoption of digital technologies in manufacturing and supply chain management, which until now was lagging behind other sectors. Relevant technologies include big data collection from the shop floor without disturbing the operations, using advanced sensors and novel data platforms, to create digital replicas of the processes. Advanced artificial intelligence (AI) and machine learning (ML) tools detect inefficiencies, future problems, and anomalies, including cyber threats. Distributed systems, such as industrial 3D printing and remote manufacturing add to the mix, but require much more sophisticated data handling and communication, and a higher level of cybersecurity. Many such technologies (Industry 4.0) will be needed in newly constructed manufacturing facilities; however, they can also support the digitization of brownfield operations, substituting OPEX (operating expenses) for CAPEX (capital expenditures).

Israel, the Startup Nation, is well-known for its cybersecurity and AI/ML, computer vision, sensors, and complex systems integration capabilities; their innovative combinations are essential for Industry 4.0 solutions, which explains why Israel – a country with a very small manufacturing sector – plays such a disproportionate role in the Fourth Industrial Revolution, helping create smart, resilient and agile industries around the world.

Start-Up Nation Central – a nonprofit organization promoting Israeli tech innovation – facilitates this process by helping large corporations connect to the Israeli Industry 4.0 sector. We see first-hand that more and more corporations realize that a much faster adoption of Industry 4.0 solutions is essential to keeping their competitive edge in the post-coronavirus era.

Explore Industry 4.0 solutions on Start-Up Nation Finder.

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But while investment is growing strong, actual business growth – revenues, paying customers, scaling companies – has been slower as the sector is still in its early stages. While Industry 4.0 startups typically look to initially partner with local manufacturers, Israeli industry offers limited opportunities.

While Israel does have exceptional manufacturers, local industry is smaller and not competitive globally (unlike manufacturing powerhouses such as China, Taiwan, Germany and Japan). While those countries’ manufacturing sectors are historically robust, many of their companies are struggling to innovate and keep ahead of long-term, disruptive trends globally.

Israel’s industrial base is not much different. The legacy and cultural challenges slowing the adoption of I4 technologies by manufacturing companies are global. They include adapting existing human capital and machinery, the cost involved in customizing the technological solutions, and overcoming the fear of security vulnerabilities once the manufacturing facility is digitally connected.

But as noted above, while there is a growing group of tech companies that can help traditional industries make the digital leap, those startups need traditional industry companies to be more open to change.

One of the main business and tech challenges for startups is to find their first customer and successfully demonstrate their solution with them. Like many other countries in the world, cooperation between local industry and startups in Israel is an area where there is room for improvement

The problems for the Israeli manufacturers: low productivity and tight regulation

About half of all Israeli manufacturers have not yet started to plan for the Fourth Industrial Revolution (Industry 4.0), according to a survey by the Manufacturers Association last November. The results of the survey reveal that many factories across the country do not meet international standards of competitiveness due to their poor technological state. They are accustomed to traditional manufacturing processes that lead, among other things, to low productivity and the inability to cope with competition and changes at the global level. In addition, Israeli industry is highly regulated, which makes manufacturing here more expensive compared to other countries.

The incentive to be more innovative is due mainly to three reasons: the Israeli market is becoming more open and exposed to imports from foreign competition; the government is now incentivizing local manufacturers to adopt technology; many immigrants from the former USSR, who are employed as industry workers, are starting to retire.

Things are, hopefully, moving in the right direction for old industry and new I4 startups to collaborate.

The problem for Israeli startups: limited testing ground

There are currently only a few Israeli manufacturers that are open to adopting innovation from startups, and to make things worse, the ones that do are often unwilling to pay for a proof-of-concept pilot. They see their role as helping the startups rather than as real clients who benefit from the exercise.

While it can be tempting for startups to use Israel just for beta testing (if they can afford to – which is a big if), this can have consequences later. Even if a startup has successfully worked with a factory in Israel, it is often not enough for many overseas companies because it is not clear to them what the standards are in Israel.

Secondly, there is the physical distance between the startup and the client. In some sectors this is less important, but in Industry 4.0, implementation involves creating a customized connection between the physical and digital. The startup often has no choice but to devote its limited resources to be on the ground at the client’s location for some time to install systems and provide ongoing support.

Lastly, implementation at a foreign client is an expensive process and large amounts of capital need to be raised to fund it. However, later-stage investors usually want to see that the startup has at least 1-2 clients before they are willing to invest, and potential brand-name clients are reluctant to work with a startup that has not raised money from a significant investor. 

The solution: better collaboration between manufacturers and startups

Granted, implementing innovative digital technology doesn’t necessarily mean partnering with startups. In Germany, for example, most of the technology is developed internally within corporations. But this requires a lot of expertise and capital.

Another option is to use an external vendor, such as a large I4 technology supplier, but these are usually more expensive and less agile than startups. Therefore, there is plenty of room for synergy between startups and the local industry to create win-win situations.

In summary, Israeli manufacturers can benefit from the most advanced Industry 4.0 technologies, tailor-made to their specific needs, cost-effective, faster and more agile. On the other hand, Israeli Industry 4.0 startups can benefit from simpler testing for their products, the experience of working in a real factory, easier access to external funding at an early stage and the chance to start earning.

Case Study: How Industry 4.0 Technologies Helped Manufacturer Ham-Let

Israel’s Ham-Let is a traditional metal processing manufacturing company. By nature, it tends to adapt at a slower pace than more agile startups. In order to inject innovation into its manufacturing processes, Ham-Let created Let-Lab, an innovation lab focused on Industry 4.0 solutions . This hub is a platform that provides financing and a 12-month support program for business development, as well as a pilot program. Currently, Let-Lab has four active startups in its program.

One of the startups in the Let-Lab program is Qsee, an artificial intelligence solution that helps process manufacturers by predicting quality parameters ahead of time. Ham-Let used Qsee* in its production as well as in a process pulp and paper mill company, which is a sister company of Ham-Let.

Qsee was able to test and implement its solution in the customer’s 400-meter machine with thousands of parameters such as water, pressures, materials added, and more, in order to predict the quality of paper at the end of the assembly line. The results showed significant improvement in manufacturing performance.

Furthermore, Ham-Let signed an agreement to distribute Qsee’s solution under Ham-Let’s name (the Q-Let), expanding its network and solution to all of Ham-Let’s current pulp and paper process companies.

On its own, Ham-Let cannot speed up development; Qsee cannot easily become an approved vendor. Milestones that could take years for both companies have been achieved within weeks.

To learn more about the Industry 4.0 revolution, attend Industry 4.0 Week: Digitizing the Value Chain. Register here!

*Are you an Industry 4.0 entrepreneur? We want to hear about your startup! Email us.

Agmon Porat of Let-Labs contributed to this article.

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Over the past four years, the number of Israeli Industry 4.0 startups has grown by 60% to 230, according to a recent Start-Up Nation Central report. Moreover, Israel is now placed third in the world (after the US and China) in terms of venture capital investments in the field; there are more than 50 multinational corporations with a presence in Israel that choose to develop IIoT solutions locally.

Dubbed “The Fourth Industrial Revolution,” or IIoT (Industrial Internet of Things), Industry 4.0 is making manufacturing much more connected and a lot smarter, by using cutting-edge technologies that enhance factories with wireless connectivity and sensors, as well as systems that can visualize the entire production line, and make decisions on their own. For example, IIoT can be used to prevent the overstocking or understocking of inventory, or it can store and manage designs for 3D printers so they can be produced on-demand wherever they are needed. Industry 4.0 technologies can also predict problems along the assembly line, which can then be quickly solved without (costly) disruption to production. 

Pushing production capabilities to new heights

In theory, almost all business operations can become more efficient. With advancements such as machine learning, deep analytics, and artificial intelligence, there is no shortage of advanced equipment and technical solutions that can transform manufacturing and push production capabilities to new heights.

We are moving towards a future where we rely less on manpower and more on digitization and automation. When this occurs, efficiency becomes more data-oriented, and actionable insights allow better throughput and higher uptime, which are directly linked to increased efficiency and higher revenues. Therefore, it is important for manufacturers to identify barriers to reaching their business goals, whether it’s production inefficiency, process inefficiency, or even energy inefficiency. 

These Israeli Industry 4.0 startups* work to reduce operational inefficiencies:

3DSignals
Did you know that only 8% of the 64 million machines worldwide are network connected? 3DSignals helps manufacturers increase machine productivity by digitizing machinery to become part of the “factory of the future.” Using a range of non-invasive and highly accurate sensors, the 3DSignals solution generates actionable insights within hours, by providing visibility into the production floor. The dashboard allows for visualization of the production line, so that manufacturers can significantly reduce operating costs, predict electro-mechanical failure, and ultimately increase their operational efficiency.

Founded by Amit Ashkenazi and Ofer Affias in 2015, 3DSignals has so far raised $26.6 million from Grove Ventures, State of Mind Ventures, and others. 

Castor
3D printers are an essential part of digital transformation, as they allow for mass customization and accuracy for important machine parts, they reduce lead time by removing the middleman, and help manufacturers avoid costly spending on limited quantities of parts. Castor is helping manufacturers unlock the full potential of 3D printing, with its 3D printing software that automatically scans a company’s parts catalog to identify what parts can be manufactured using a 3D printer. This decision-support software ultimately allows manufacturers to decide if and when they should use 3D printing to save time and money.

Founded by Elad Schiller and Omer Blaier in 2017, Castor has so far raised $2.4 million from TAU Ventures, the Chartered Group, and others.

Matics
For manufacturers to truly stay ahead of the curve, they need to understand that analyzing past performance is not enough anymore. Matics’ smart manufacturing insights understand this; the company’s plug-and-play operational intelligence solution provides a real-time window into the manufacturing environment for instant visibility over all operations. By connecting to the manufacturing system across the entire production floor, Matics provides comprehensive insights to allow for more effective prioritization of resources, digital documentation and knowledge capturing, and smart alerts on critical issues and performance discrepancies.

Founded by Amir Aloni in 1999, Matics has so far raised $5 from Firstime Venture Capital. 

Seebo
Process inefficiencies can lead to financial losses. Seebo’s AI-driven solution allows manufacturers to predict and prevent losses in production yield and quality, by understanding when and why they happened in the past, but also how to prevent and avoid them in the future. Seebo aggregates data from the production line, including automated quality-inspection data, and applies machine learning to offer a holistic view of the entire production process. This aggregation allows manufacturers to maximize their production profitability, prevent product issues from recurring, predict process disturbances and excessive waste, and ultimately to significantly improve quality and throughput.

Founded by Liran and Lior Akavia in 2012, Seebo has so far raised $16.5 million from Viola Ventures, TPY Capital and others.

Visual Factories
Many manufacturers are often able to answer the questions ‘What went wrong?’ and ‘Where did it go wrong?’ but very rarely, they are able to ask ‘Why?’ Visual Factories connects to the cloud and can visualize areas of the factory which were previously unseen, using sensors that are quick and easy to assemble and attach to machines. In this way, machine operators, floor managers, and top managers can easily assess the activities of each machine to receive accurate information on each machine, understand cycle time, and optimize production. 

Founded by Matti Tiano in 2014, Tel Aviv-based Visual Factories has raised $2 million from Digital Horizon.

Industry 4.0 companies are bringing about real change within organizations, as large enterprises and private companies alike adopt their solutions in the pursuit of greater efficiency, uptime, and streamlined operations. 

To learn more about these revolutionary Industry 4.0 startups and others, attend Industry 4.0 Week: Digitizing the Value Chain. Register here!

*Are you an Industry 4.0 entrepreneur? We want to hear about your startup! Email us.

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Despite its leadership in information and communications technology sectors, Israel’s strength in Industry 4.0 might seem surprising. After all, Israel does not have a strong manufacturing sector that can serve as a first-customer or from which start-ups and entrepreneurs can spin-out.

So why is it happening in Israel?

1. The Ocean is Blue

From interactions with many start-ups in this field, Start-Up Nation found that many of these start-ups did not come from the manufacturing industry, but rather chose this sector as part of a “blue ocean” strategy. They believe that this large and fast-growing market gives new entrants a better opportunity to make a larger impact, as the market is not yet crowded and every small improvement in efficiency that they offer can have a potentially dramatic effect on profitability.

2. The Spillover Effect

The Israeli Industry 4.0 sector benefits from past achievements in other sectors. Israel is known for its vibrant and innovative ecosystem with sectors such as Cybersecurity and Fintech leading the way; investors already familiar with the country who have invested in multiple companies are willing to invest in other domains, especially when they are recommended certain start-ups or know them by association. Also, multinational corporations that are already active in Israel have extended their efforts to the Industry 4.0 sector; for example, Volkswagen opened an innovation arm called Konnect, and PMatX is an open innovation lab operated by the German healthcare company Merck and the American semiconductor company Flex.

3. Government Support

Industry 4.0 has sparked significant government interest to garner support for several initiatives. In 2018, the Ministry of Economy published a strategic plan for this sector emphasizing the need for connecting the manufacturing industry with tech start-ups developing solutions for them.

The Israel Innovation Authority has also emphasized advanced manufacturing as a theme in its five-year strategic plan. Alongside the standard MOFET program that supports R&D for advanced manufacturing, the Innovation Authority also launched the Innovation Labs Program in 2017. This program encourages open innovation and offers entrepreneurs the opportunity to reach proof of concept through access to a large corporation’s unique technological infrastructure and industry expertise.

4. This is Our Nature

Israel has developed expertise in the main technologies that Industry 4.0 utilizes: sensors, image and video processing, big data, algorithms, and real-time analytics. Many young people gain experience in these technologies during their military service, providing them with detailed knowledge of how they work and various use cases for them. This knowledge is utilized later to either start or seek employment in companies which utilize non-military applications of the technologies. As mentioned above, Industry 4.0 is one of the more attractive sectors to exploit this experience.

The development of Industry 4.0 in Israel bears some similarities to Israel’s achievements in the advanced automotive sector. That sector lacks a history of large-scale manufacturing in the country, yet this has been overcome by a strong infrastructure for start-ups consisting of technical skills, experienced entrepreneurs, the availability of capital and government assistance. Industry 4.0 is a more recent development, but these elements also appear to be driving the strong growth experienced in the sector so far.

To learn more about the Industry 4.0 ecosystem in Israel and its growth, download Start-Up Nation Central’s Finder Insights Series: Israel’s Industry 4.0 Sector in 2018.

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