In order to achieve efficient data transfer and improved production management, the industry has evolved into its fourth stage, into Industry 4.0. The key factor in this evolution is the introduction of IoT. Rapid information exchange between identification systems, smart control units and implementation systems have been enabled by IoT, thus creating foundations for smart material flow which is one of the crucial features of smart factories. In this paper, the main links of Industry 4.0 are described. The functioning of smart factories will be described, and we will include a list of traditional production processes which can be upgraded to the smart level.