Exploring IoT Business Opportunities In Manufacturing By : Jim Brown President Tech-Clarity

Transcription

1 1 Exploring IoT Business Opportunities In Manufacturing By : Jim Brown President Tech-Clarity

2 2 Manufacturing in an Era of Innovation The manufacturing industry is currently in an era of significant innovation. Manufacturers are actively adopting smarter products, new materials, increased automation, and new manufacturing techniques like additive manufacturing/3d Printing. These changes are introducing new opportunities and new challenges for manufacturers around the world. Of all of the changes facing manufacturing, the Internet of Things (IoT) is potentially the most disruptive development facing the industry. Intelligent products, devices, and equipment can now sense their environment, access and share information, and respond intelligently. Connecting these devices to each other, the Internet, big data analytics, and enterprise applications offers some radically new business opportunities that have the potential to change the competitive landscape. On one hand, none of this is entirely new. Clearly the Internet is not new. Machine to machine (M2M) communication is not new. Business intelligence and big data aren t new. Tagging and tracing items is not new. And plant-level information backbones have been around for a while. What s changed is that a lot of these technologies are hitting their maturity at the same time and the technologies can be used for the first time in combination to provide business benefits far beyond the value of each individual component. IoT enables a lot more than just new ways to do the same thing, like replacing EDI as a communication mechanism, because IoT has intelligence to it. This intelligence is the key to unlocking tremendous new value and dramatically rocking the status quo. Change is on the way and manufacturers who learn to take advantage of it will find new sources of value. Those that don t will risk becoming noncompetitive and irrelevant. Now is the time for manufacturers to educate themselves on what IoT has to offer and create a strategy to leverage it.

3 3 Exploring IoT Opportunities IoT initiatives offer as much potential disruption to the business of manufacturing as the explosion of the worldwide web did for retailers. But it also comes with the hype that all new technologies stir up, resulting in a lot of confusion. Manufacturers need a strategy. It s time to step back and look at the business to determine what problems, inefficiencies, or opportunities are the most critical and analyze if (and how) IoT can address them. It s time to pick some exploratory projects that will provide experience and insight in addition to short-term value. But where should manufacturers start? This paper discusses opportunities related to several different aspects of the manufacturing enterprise where IoT is being applied, specifically: Smart products Intelligent factories Connected supply chain / logistics New business models including Product as a Service (PaaS) Manufacturers have to address a lot of questions in order to take advantage of any of these opportunities. They must consider what information to gather, where it will be stored, how it will be analyzed, and how it creates value. They need to determine whether their best opportunities come from applying IoT concepts internally, to the supply chain, in the field, or with customers. Regardless of the approach, IoT initiatives have a significant impact on business processes and enterprise systems. Manufacturers are discovering that IoT must integrate with existing information systems and external data sources. Modern, flexible enterprise platforms that are easily connected play a key role in supporting IoT initiatives that can increase efficiency and visibility across the plant, supply chain, and products at every stage.

4 4 Strategy 1 - Smart, Connected Products Manufacturers have been taking advantage of the ability to embed intelligence into their products for some time. Many have already invested in increasing the amount of electronics and software in their products in order to improve performance, drive higher levels of innovation, and reduce cost. Increasingly they re extending the advantage by leveraging information from embedded sensors and processors and connecting these products to the Internet. There are numerous advantages to smart products connected in the IoT. Some of the key ways that manufacturers are leveraging this connectivity include: Getting better feedback on product performance Gaining insight into how products are actually being used in the field Enabling predictive service to prevent product failures Delivering remote fixes to products to prevent recalls Upgrading or enhancing products in the field Smart product data provides new information that would have previously been prohibitively difficult to collect. Coupling that with data analytics gives manufacturers insights that people didn t know to look for, like differences in the way equipment performance varies in different operating environments or is used during different shifts. Integrating those insights with enterprise applications makes the information actionable to improve customer service, satisfaction, and profitability.

5 5 The Value of Smart, Connected Products The lowest hanging fruit for smart products is connecting service operations to improve customer support and relationships. Many manufacturers are seizing the opportunity to monitor products to keep track of product usage, performance, and health. Examining product feedback helps manufacturers identify and address potential failures before they occur, dramatically increasing customer value and satisfaction. It may also help them narrow down which equipment has issues to only fix what s necessary. Ideally, issues identified can be fixed remotely via a software patch to help save money on warranty and recalls. Another benefit of smart, connected products is gaining product and customer insights by connecting with ERP, product lifecycle management (PLM), and Customer Relationship Management (CRM). Manufacturers now have the potential to know more about the products their customers use than the customers know themselves. This provides better new product requirements based on broad knowledge about product usage. It can also uncover potential training opportunities for products being misused or sales opportunities when a machine is overutilized or reaching end of life and ready to replace or upgrade. Smart, connected products and the IoT also enable products to be enhanced, fixed, or upgraded in the field. Much like a smartphone can gain new capabilities by adding apps, intelligent products can be enhanced by changing software to unleash new capabilities or features. These may be preplanned or they might address new requirements that weren t even thought about until products are in the market or a competitor launches a new product.

6 6 Strategy 2 - Intelligently Integrated Plants The IoT is also the logical extension of the plant information backbone, evolving to become the Industrial Internet. New or retrofitted production equipment with sensors and processors can now interact more broadly both inside and outside of the plant. This provides the opportunity to extend automation and visibility to provide better central monitoring and control. It better allows plant personnel to better understand status and manufacturing conditions and look for trends and anomalies. Further, integration with other systems like quality management (QM) can allow people to look for readings that precede product quality or equipment maintenance issues to prevent future problems. Connected production equipment can also become more autonomous. Not only can they report what s happening through real-time process monitoring, they can respond. This opens up the potential for equipment to cooperate to optimize productivity across equipment and work cells. Connecting equipment via the IoT can also allow machines to respond to an issue with another piece of equipment, for example initiating a safety shutdown. Integrating the plant via IoT helps beyond the plant s four walls as well. For example, equipment suppliers can monitor for issues and correct them proactively (and potentially remotely) to maximize uptime and productivity. Or customers could be given access through a portal to get real-time access to the visibility of their orders in the plant. Connecting plant information with existing enterprise systems via the IoT offers the potential to enhance internal and customer facing processes of all kinds.

7 7 Strategy 3 Seamless Supply Chain IoT potential reaches beyond the manufacturer and into the supply chain. It offers the potential for a continuous, free flow of information between partners and even from goods in transit. For example systems can monitor shipment location, transit conditions, and inventory levels and compare them to plans to identify exceptions. Other exceptions, such as drops or temperature problems, could be reported in real time so corrective action can be taken immediately to reduce downstream impacts in addition to creating a historical record. Companies can tag pallets, transport vehicles, or individual products depending on their goals to gain more timely, accurate supply data. IoT improvements could even start in supplier sites during production and track inbound purchases. Ideally, integration of supply chain data via the IoT with ERP could provide even better visibility than in the old days when vertically integrated manufacturers had all operations in the same plant. This is becoming even more important as supply chains get more diverse and fragmented. Real-time IoT data can improve supply chain efficiency and exception handling dramatically. Manufacturers have invested significantly in EDI and other initiatives. Connecting across customers, suppliers, and third party logistics (3PL) companies with IoT could take those capabilities to the next level. This connectivity has the potential to make communications more accessible and easier to integrate with other data, and supply chain partners could add a layer of intelligence that drives greater visibility, better decision-making, and higher performance.

8 8 Strategy 4 - New Business Models IoT can help solve problems and enable better execution on existing initiatives. But it can also open up new opportunities and business models. For example smart products could be sold as a service as opposed to an asset. This approach, known as Product as a Service or PaaS, reduces barriers to product sales by shifting products from a capital expenditure to an operational expense. It can also enhance consumable sales to complement equipment and generate an ongoing revenue stream. The shift to paying for equipment as a service also adds value in the plant. Equipment can be paid for based on usage, helping companies scale and align costs with production volume. It also encourages the equipment supplier to provide better preventative maintenance, because production downtime directly impacts their revenue stream. In the supply chain, measuring customer inventory directly via sensors could trigger replenishment of products, or customer inventory systems could account for goods in transit with a very high level of precision. Breaking down communication barriers in the supply chain helps streamline processes, react more quickly to exceptions, and increase efficiency. Some manufacturers are even looking for ways to monetize the data they collect via the IoT. For example, they may sell aggregated data on equipment usage to allow customers to benchmark their usage against others. Or data may be useful for other purposes, like helping customers forecast based on data aggregated across a market. New IoT opportunities are exciting and innovative ideas are being explored and introduced all of the time.

9 9 Enabling IoT for Manufacturers IoT opportunities are varied and compelling, and bring a host of new challenges. One thing has become clear. Integrating the information gathered via the IoT with other systems increases the value of both significantly. Manufacturers need the right platform to interact with products and store data. These technical requirements of IoT are met by infrastructure software known as the IoT stack. But integration with other sources requires an open, flexible platform that can integrate enterprise data with IoT and make it actionable. Enterprise systems will need to change in order to support IoT initiatives. They must be able to interact with data from products in the field, manufacturing equipment, and the supply chain. They may also need to combine 3 rd party data such as traffic, weather, or other environmental data to help drive better decisions. In some cases, enterprise systems will need to change directly. For example, most transactional systems assume that customers take ownership of products. Product as a Service shifts sales and billing from a process involving a shipment and an invoice to subscription, usage, or performance-based billing. Sales and accounting functions in ERP must be flexible enough to accommodate these non-traditional transactions. The combination of business information and IoT data in the context of enterprise-level processes and technology promises transformative improvements to operational performance and company profitability. Enterprise systems must be flexible and rapidly adaptable as business models change during this opportunity-rich, disruptive time as IoT matures.

10 10 Conclusion and Recommendations IoT offers tremendous opportunity for manufacturers, spanning new product strategies, plant operations, and supply chain operations. IoT can improve current operations or be used to drive new business models. It s time for manufacturers to learn and experiment, but also choose initiatives with real business value. Manufacturers need to prioritize and choose what to focus on, and may choose a variety of initiatives to explore the value available from smart and connected products, plants, and supply chains. The evolution to higher value through IoT demands a strong enterprise platform to support it. Cloud solutions are a natural choice given the nature of IoT, but manufactures must also make sure their solutions are flexible and agile applications to support new business demands s they arise. Based on industry experience and research for this report, Tech-Clarity offers the following recommendations: Develop an IoT strategy based on business needs Consider internal, supply chain, and field usages Explore new business models Ensure you have the enterprise infrastructure in place to take advantage of the opportunity Be flexible and open to respond to new opportunities as they arise

11 11 TechClarity.inc Exploring IoT Business Opportunities In Manufacturing About the Author Jim Brown is the President of Tech-Clarity, an independent research and consulting firm that specializes in analyzing the business value of software technology and services. Jim has over 20 years of experience in software for the manufacturing industries. He has a broad background including roles in industry, management consulting, the software industry, and research. Jim s experience spans enterprise applications including PLM, ERP, quality management, service lifecycle management, manufacturing, supply chain management, and more. Jim is passionate about improving product innovation, product development, and engineering performance through the use of software technology. Jim is an experienced researcher, author, and public speaker and enjoys the opportunity to speak at conferences or anywhere he can engage with people with a passion to improve business performance through software technology.