THE EVOLUTION OF AUTOMATION EXECUTIVE SUMMARY INDUSTRY RESEARCH REPORT Freedom Drive Suite 600 Reston, VA USA

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1 THE EVOLUTION OF AUTOMATION INDUSTRY RESEARCH REPORT EXECUTIVE SUMMARY Freedom Drive Suite 600 Reston, VA USA Market research report on the advancements in automation in food, beverage, pharmaceutical, and personal care industries.

2 CPG companies are getting more sophisticated all the time and automated machines and software systems are becoming easier to implement, even for smaller companies. Technology Engineer, Component Supplier

3 2017 The Evolution of Automation: Industry Research Report Technology Today Automated Manufacturing in the Future This PMMI report presents the automation challenges, opportunities, advantages, and solutions from interviews with end users, OEMs, and technology suppliers. Their collective voice provides insight into powerful resources such as real-time data collection, edge computing, and cloud analytics that are now all possible through the expansion of automation technology. PMMI The Association for Packaging and Processing Technologies Freedom Drive, Suite 600 Reston, VA Phone: (571) pmmi.org/research Publication Date: August, 2017 Jorge Izquierdo, Vice President, Market Development, PMMI Paula Feldman, Director, Business Intelligence, PMMI Copyright 2017 PMMI, The Association for Packaging and Processing Technologies, Inc. All rights reserved. The information contained herein shall not be distributed or shared by the recipient. No part of this document may be reproduced without the express written permission of PMMI.

4 One day the machines on the plant floor will talk to each other, take corrective action to maintain maximum uptime, schedule repairs, and order inventory automatically and autonomously. Industry Consultant

5 CONTENTS Learn About Automation Resources From Your Peers How are companies managing the implementation of increasing automation? What challenges do end users face along the entire line when introducing a greater level of automation? What design changes can be made now for more flexible, automated machinery; what technology is needed in component advancement? Disparate systems persist; how is the convergence of communications technology advancing full line integration? How can machinery innovation counteract the gap in skilled labor? What s driving standards and what standards are needed? 1 AUTOMATION TODAY 1 Top Trends and Top Challenges 2 A Projection of Automation Advancements 3 Opportunities for Industry Suppliers 5 Technology Innovation Shaping Tomorrow 2 THE CHALLENGES 9 Major Obstacles to Growth 10 Legacy Systems Can Be Upgraded 11 IT/OT Convergence 12 Challenges in the Year Ahead 3 THE OPPORTUNITIES 17 Capital Budgets Increasing 18 Suggestions for Advancing Automation 20 Robotic Usage Continues to Grow 21 Integrated Versus Stand Alone Machines 22 Automation Typically Calls for Customization 24 Support Services Needed 4 THE ADVANTAGES 27 Data Collection 29 Top 5 Improvements of Automation 5 THE SOLUTIONS 31 Embracing Automation 32 Industry Standards 33 Data Transfer is Advancing 35 Cybersecurity is Top of Mind 36 Remote Connectivity Will Steadily Grow 6 THE FUTURE We are facing an unprecedented speed of change in our manufacturing plants; it expands beyond the factory walls, and we need to educate people on how this change will impact jobs. - Industry Expert 39 Smart Machinery Skills Can Be Learned 40 A Look at the Future of Automation 7 APPENDIX 42 Appendix A Growth Trends Charted by Market 50 Appendix B Profile of Participants 52 Appendix C References and Sources

6 SECTION ONE EXECUTIVE OVERVIEW The International Society of Automation defines automation as the creation and application of technology to monitor and control the production and delivery of products and services Interviews References MACHINE AUTOMATION Implementing machine automation is a constant and ongoing process and will ebb and flow depending on specific needs in replacing human tasks. SOFTWARE AUTOMATION Currently, some machines are connected, but many are not; the IIoT (Industrial Internet of Things) will connect M2M (Machine-to- Machine) and machines to people. Edge computing will be used to analyze data on site for improved operations insights and cloud computing will be used for big data analysis across the enterprise. DEFINE YOUR AUTOMATION STRATEGY THE CHALLENGES The major obstacles in implementing and supporting growth in automated operations are internal resources, resistance to remote connectivity, and a lack of knowledge regarding what new 1 technologies are available and the short- and long-term advantages. 2 Some legacy systems can be upgraded with controls, connectivity, and motion when it makes sense; cost is the key determining factor to justify a retrofit or a new purchase.

7 In 20 years our plant will be 100% automated and IIoT deployed and active. Plant Manager, Food, Meat The Growth in Plant Floor Automation and Integrated Communications is at a Pivotal Junction; New Technology is Available And Adoption is Underway As automation technology continues to advance, manufacturers are faced with an expansive array of choices. From something as basic as upgrading an individual machine component, to more complex solutions centered around automated data collection and a robust cybersecurity package, manufacturers have many innovative solutions that can be integrated for a full view of the plant floor. SMALL TO MEDIUM SIZED COMPANIES WILL EMBRACE AUTOMATION TO SURVIVE Data has the potential to improve all aspects of automation, even individual physical machines and component performance, but the vast majority of manufacturers only harness a fraction of that potential. - Industry Expert Hurdles to overcome still center around the fear of uncertainty in evolving technologies; many doubt the value it brings and worry about data security. - CFO,Technology Supplier Cost remains a barrier for small to medium sized companies to advance automation. However, as costs decline, companies are beginning to see the value in taking steps toward automating operations. Replacing human interaction reduces threat of worker injury, and if the automated equipment is maintained properly it is more reliable than human labor. Cloud-based services can give smaller companies access to tools to collect, manage, and utilize data in the same manner as larger companies. Smaller manufacturers, especially newer plants, often have an advantage in organizing a robust data collection and analytics program from the start. The end user is driving automation advancements to achieve greater operational efficiencies and to reduce labor. Design Engineer, Food Six Trends Driving Plant Floor Automation u Lack of skilled labor, labor shortages. v Global increase in product demand. w Rising demand for flexible manufacturing. x Producing products with consistent quality. y Overall operating cost reductions. z Smart machine technology and co-bots. Six Reasons Why Automation is a Gradual Adoption Process u Utilizing data for operational improvements will take years and will require educating the industry on how to gather it, use it, store it, and apply it. v With automation costs decreasing, companies of all sizes will have an easier time achieving an acceptable ROI. w Disparate and legacy systems presist and need to be connected, but upgrading can be expensive. x IT and OT convergence for common strategies is still emerging. y Open platform standards are evolving. z Cybersecurity, in a layered systems approach, will help alleviate security issues. 1 3 IT and OT need to unify networks and systems with one communication protocol to reap the benefits of a smarter plant floor. 4 The challenges in the year ahead to advance automation revolve around cost justification, workforce education, and open communications.

8 There is a Competitive Demand To Adopt Technology on the Plant Floor to Obtain Flexible and Efficient Operations Projected Automation Applications in Packaging and Processing Companies The chart below shows a forecast of how automation will advance at packaging and processing companies from today, in five and in ten years. Machine Automation controls a process with electronic devices, minimizing or replacing human intervention. Nearly every participating company operates automated machinery at some level. There is an extreme range of technology in use, with the vast majority of lines still relying on a human component Today 5 Years 10 Years 10% 50% 100% Data Acquisition measures real world physical conditions, converting them to digital values. 4 of 5 plants are collecting machine data at some level, both manually and automatically, but most plants today are not effectively using data. Easier to implement solutions will encourage more companies to collect and upload data to a central system, to the edge, or to the cloud. Calculating OEE is based on a system of automated processes and motion that can increase productivity. Larger companies are working with OEE more, but it needs uniform calculations and has to become a standard HMI function. Interest is increasing along with expanded data acquisition. 2 Process Optimization is already ingrained at most companies. Advancement correlates to the IIoT and Industry 4.0 and supports a holistic plant floor view. Artificial intelligence, digital twins, and augmented reality will optimize machine design, development, operations, and maintenance in the next 10 years. Data will help optimize the manufacturing process as more data analysis experts enter the field. Line Integration provides real-time insights to prevent and diagnose issues. Most lines from companies interviewed are greater than 50% integrated, with a handful of companies reporting 100% synchronization. Many lines remain loosely integrated due to existing assets and new lines are designed to be connected. Manufacturing lines in Europe generally operate at a greater level of integration. Total Productive Maintenance (TPM) or Autonomous Maintenance Plans provide the operator with more responsibility and allows them to carry out preventive maintenance or autonomous maintenance. The operational possibilities of analyzing maintenance information are just emerging. Predictive Maintenance (PdM) helps determine the condition of the machine to predict when to perform maintenance. Current automated maintenance is primarily reactive, or in some cases scheduled. The future of sensors and warnings will allow equipment to do its own condition monitoring. It will take a decade to be able to utilize big data properly on a large scale. Full IIoT / Industry 4.0 is a continuous flow application that requires an integrated control platform with data collection and management systems, as well as software to collect, monitor, store, mine, and report on the data for use in real-time decision making on the plant floor. The industry is actively discussing continuous flow and just starting to adopt it. Cybersecurity will need to be improved at all levels. THE OPPORTUNITIES 5 End users suggest easier to use equipment, open communications, and support services to help advance automation at manufacturing plants. 6 End users are looking at interactive/intuitive HMIs, smarter sensors, and safety improvements as the next steps toward smarter machines; OEMs and technology suppliers are working together on the solutions.

9 Opportunities for OEMs Provide Machines That Offer Intuitive Maintenance, are Integration Ready, and are Flexible to Changing Manufacturing Demands What Manufacturers Want Robust Equipment with Minimal Maintenance Required Flexible Machinery Smart Machines Convergence of IT and OT Recommendations to the Industry Suppliers Instructional maintenance to reduce human error. Servos that require minimal maintenance. Consider regular visits to help end users achieve optimal run performance. The ability to do line integration at the customer level will be critical. Better design strategies are needed to provide machine flexibility for variances in package size and style. Offer collaborative robots with slow speeds and less precision, at a lower cost. More diversified modular and configurable equipment is needed. Simplify operations machines are often operated by lower-skilled employees. Design intuitive HMI and troubleshooting. Offer remote access-ready machines. Provide enhanced diagnostics and data sensors. Wireless technology is growing fast in industrial connectivity. One major hurdle is the interface with the plant floor and IT systems. Bring the IT and OT departments together for creative collaboration. Define the scope of an automation project what exactly does it encompass? Provide Added Services that Focus on Automation Training, Education, and Consulting What Manufacturers Want Better Technical Training Tools to Assist Maintenance and Troubleshooting Understand Our Challenges Help in Providing TCO, OEE, PM, and PdM Better Education on Internet Data Transfer and Cloud Storage Advantages Recommendations to the Industry Suppliers More preventive maintenance training. Utilize web based interactive training for maintenance technicians. Use the HMI as a training tool. Offer skills assessments and custom training classes. Regulations are becoming increasingly more complex as facilities produce more products. Provide experts on all operations to address any concerns about procedures and compliance. Offer educational programs and consulting services to upgrade legacy equipment. Meet equipment delivery schedules. Offer services to help customers analyze and apply machine data. Be proactive to find out what information end users need for PM and PdM that is the most useful. Calculation standards are needed for operating costs and service costs. Supply preventive maintenance instructions that include what inspections to perform and how often. The industry needs educated advocates to advance the implementation of technology. There will be a need for companies that specialize in data storage, analysis, and application. The real fear is a virus that could shutdown an entire operating system. Cloud-based systems will improve the digital supply chain to help warehouses and distribution centers get connected of 5 end users are collecting at least some machine data now, but more robust data collection and data utilization are on the horizon. 8 The top five most significant improvements that automation will achieve are: uability to run multiple sizes on the same machine vlabor reduction wmaximized uptime xefficient shorter runs yminimized changeover times.

10 4 Digitalization is here to stay. 4The trend shows all companies are going towards digitalization and will ramp up in five years. Increases will continue into the next decade. The shortage of technically-skilled labor is a problem for everyone. Immigration laws are in a state of change One of the most complicated challenges facing the manufacturing industry is a general shortage of labor, both on the highly skilled end and the lower skilled end. In order to fulfill seasonal fluctuations and demand, some companies rely heavily on temporary immigrant labor. With the uncertainty surrounding immigration policies, companies have had to make tough choices based on the dwindling availability of foreign labor. Increasing utilization of OEE is a ten year goal; we will get a user interface, achieve CIP, and have remote connectivity in the next five years. - Production Manager, Small Food Company Most companies still react to maintenance needs now, but in the future there will be more predictive maintenance utilizing sensors and warnings. - Senior Controls Engineer, OEM Conventional Manufacturing: On The Verge of Adaptive Artificial Intelligence MACHINE AUTOMATION Robots That Can Feel Contact Robots with a sense of touch are being perfected, imparting a dexterity and flexibility that are critical for performing high-precision operations such as assembly, positioning, and packaging. In some cases, these robots are now able to do tasks that couldn t be automated before. Smart Glasses A smart headset display that is handsfree for operators and technicians to interact with their environment. Augmented reality technology allows people to see digital imagery overlaid onto the physical world, with potential applications for machine operations and maintenance. Robotic Chef Changing Food Processing APRIL (Automated Processing Robotic Ingredient Loading) has the potential to greatly reduce ingredient waste and energy costs while taking up 50% less floor space. The robot has the ability to check and optimize the process required for every unique production occasion, and ultimately has the potential to eliminate human interaction, optimizing right-first-time manufacturing. 9 4 of 5 companies are using robots and predict the use of robots will continue to increase due to lower cost collaborative robots. 10 The number of integrated versus stand alone machines depends heavily on the age of the equipment and the product on the line. A quarter of machines remain stand alone; only 1 of 5 companies have fully integrated lines.

11 Challenges Ahead in Acting on the Vast Amounts of Data Available: Lack of skilled resources Out-of-date software models Inadequate IT infrastructure Absence of data standards Obsolete data-management systems Often a Little Change Can Make a Big Difference Emerging Technologies That Are Advancing Automation SOFTWARE AUTOMATION Digital Twin The digital twin concept is a dynamic digital representation that enables companies to understand, predict, and optimize performance of their machines and businesses to form a bridge between the physical and digital world. The digital twin predicts and warns about failures and forecasts opportunities. The applications and concepts of digital twin usage are evolving every day. Early Adoption of Digital Solutions Should Focus On: Real time dashboards Remote Machine Monitoring Software and hardware systems are available to enable OEMs and end users to employ remote access for a far greater connected plant floor. The software enables remote access to data, remote management of machines/systems, and remote monitoring of networks. 5 Digitized operating standards OEE, TCO Waste reduction Higher throughput Predictive maintenance Less planned downtime Faster changeovers Appoint an individual or team to converge IT and OT strategies THE ADVANTAGES Digital or Reality Modeling 3D modeling of both machines and plants has become a powerful tool for manufacturers. Modeling software can be utilized to lay out the ideal floor plan for a facility, design and map different lines, and mock-up customized machines quickly and affordably. Machine models integrated into the HMI also enables simple machine maintenance, with very little skill requirements. Modeling allows for faster build times, earlier production starts, optimized layout, rapid model creation, and the ability to build in data monitoring and systems infrastructures that will allow the plant to be flexible as industries evolve. OEMs will need to consider staffing 3D modeling specialists in the future. 11 Requests for automated machinery often evolve into customized machinery, but it slows down the work flow process. 12 End users rely most often on internal engineers to support remote diagnostics and data management now, with an increase in 3rd party services in the future.

12 There is More to Learn From PMMI Intelligence Reports and PMMI Media Group Technology Push PMMI 2017, Meat, Poultry, and Seafood 3 of 4 Meat, poultry, and seafood companies are operating parts of their manufacturing with automated machinery now. What s Now Most machine automation is predicted to occur on the packaging side of the line. 6 What s New PMMI 2017, Food Processing/Packaging 77% Of food processors calculate OEE, but they are looking for the OEM to provide some help with understanding how those calculations are derived and how to set up a system to continue to analyze OEE. Market Pull What s Changing Nearly 50% Of pharmaceutical and medical device companies interviewed have line integration underway and will be tracking more OEE. PMMI 2016 Pharma/ Medical Devices 2 of 5 Pharmaceutical and medical device companies are not yet integrating their manufacturing lines, but plan to in the future. THE SOLUTIONS 13 Industry participants are asking for standards in communication protocols, control systems, and safety systems. 14 Half of end users are transferring data over the internet, but most are only thinking about cloud storage and computing; security is the fundamental issue.

13 There is More to Learn From PMMI Intelligence Reports and PMMI Media Group Indicators of Expanding Machine Automation and Plant Floor Integration a Intuitive instruction from the HMI (human machine interface) to guide operations and maintenance. a Connected devices for vision, marking/coding, weighing, motion, and more. a Data collection for preventive maintenance, predictive maintenance, OEE (overall equipment effectiveness), TCO (total cost of ownership), safety, and more. a Line integration increasing so machines can communicate up and down the line. Much of the technology that will enable new levels of operational excellence and production intelligence is available now. a Modular equipment interest for manufacturing flexibility. a Faster changeover due to increasing SKUs; often looking for automated changeover. a Sanitary design and improved cleaning times are demanding an innovative solution. a Safety standards for both employee safety and product consistency. AUTOMATION WORLD PACKAGING WORLD 7 Technology Webinars Product Innovations ebook Learning Catalyst for transformative solutions and best practices to improve operational excellence. Packaging Machine Language is a consistent approach to achieve a standard look and feel across a plant floor. OMAC s two working groups, Packaging and Machine Tool, lead the way in producing industry consensus guidelines. Established to bring together top talent to pursue innovation and drive tech-based economic development. 15 Cybersecurity is an understandable concern and continued education is needed for end users and OEMs to become comfortable with continuous data exchange and analysis. 16 The ability for machines to connect remotely will steadily increase in the next five years in order to achieve greater maintenance management.