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The True Business Value of IoT in Manufacturing

Graham Immerman
January 03, 2019

There’s an old proverb that says the “proof is in the pudding”.  The original meaning was that you had to try a food before you could decide whether it was good.  These days, a lot of companies approach industrial IoT a lot like that old proverb. But despite unprecedented adoption projections – IoT spending in 2016 was already at $700 billion with expectations for $1.3 trillion by 2020 – an astonishing number of companies are still hesitant to take a seat at the table.

There are reasons why many are reluctant to move forward.  A large number of companies are concerned about security with around 62% worried about cyber risks that could damage their operational abilities and brand names.  Others are concerned about standards and protocols with fully half concerned about standardization issues.  It seems no one wants to get caught out in the cold having adopted the “wrong” platform.  But one key reservation centers on the issue that could be the driver of the true business value of IoT technology in manufacturing – analytics.  And as the pace of adoption quickens globally, fully 60% of companies don’t have the analytical capability to use the data collected from connected devices and benefit from its core value.

The Value is in the Data

As it turns out, the mountain of potential data collected by IoT devices is the real source of value in manufacturing IoT.  So, if data is king - or in this case pudding - what benefits are achievable? A company can be saturated in connectivity, but what will drive process improvement and cost reduction is the ability to analyze the data, automate decision making at a pace faster than human decision making could ever achieve and to deploy solutions to capture benefits identified within the data.  Here are a few ways that data analytics can drive IoT business value:

Better Shop Floor Control:  The obvious place to start is the shop floor.  Through IoT connectivity, manufacturing companies with the right analytics platform can streamline their processes.  This can be done through practical applications such as planning and scheduling to ensure the correct production rate without over or under producing.  Or, it could be more robust by deploying platforms that utilize machine learning to hone production volumes in real time without human intervention.  

In short lot/high mix environments, data analysis can plan changeovers and deployment of human assets to optimize changeover time and reduce idle time throughout the factory to increase Overall Equipment Effectiveness (OEE).  And, predictive maintenance can identify problems before they occur and schedule the appropriate repair at the most efficient time (For example, a bearing read by a sensor as overheating can be scheduled for replacement during an upcoming changeover.  This reduces unplanned downtime by replacing when the machine is scheduled to be down instead of waiting until the part eventually fails).

Utilizing IoT in conjunction with the right analytics platform at the shop floor level reduces raw material waste, improves equipment up time and allows more precise and automatic production adjustments during the run to maintain quality.  As processes become more efficient and cost effective at the shop floor level, value is realized throughout the enterprise.

Stretching the Field:  In sports, the term “Stretching the Field” is used to describe a player whose strengths are so extensive that it increases the reach of the entire team into parts of the field where it was previously limited.  Manufacturing IoT technology brings with it the value-added capability to stretch the field in several ways by allowing manufacturing companies to use data outside the factory to improve processes within.

One way manufacturing can stretch the field is through more accurate consumer data for real-world use of products.  By monitoring and analyzing actual consumer use, accurate data can be included in production planning, warranty planning, parts inventories and other aftermarket or service related areas that impact production.  It also helps companies who produce seasonal or perishable goods to narrow their production windows and plan more accurate and cost-effective forecasting based on real-time usage data.

Manufacturers can also stretch the field in the other direction by connecting the factory directly to their supply chain.  Internally, this means that inventory of raw materials and components are not just monitored.  As materials are used, the system could check on hand versus allocated and review current schedules or forecasts.  It could then assign production based on tracked in-bound material and vendor lead times and place orders as needed to maintain optimal inventory – all without human interaction and with more accuracy.

ERP Enhancement:  While ERP systems and IoT would seem to be an instant match, many companies have not fully realized the value in linking the two to allow ERP systems to leverage the power of connected data.  One study indicates that only 16% of marketing managers, contracting managers and execs consume IoT data within their ERP system.  But with an enterprise spanning ERP tied to all key business systems, there is value in integrating manufacturing IoT connectivity.  

Enhancing ERP capability with IoT data would have two key advantages, both of which add value to each system.  First, it improves data availability and provides key decision makers such as directors and execs to make better informed and more precise business decisions.  With a better understanding of what is happening on the shop floor through access to this data, other functional areas within the ERP are also enhanced, such as customer service, scheduling, planning and inventory management to name a few.

Second, communication is improved throughout the enterprise.  This includes communication between internal stakeholders who now have complete access and analysis of the data.  It also includes improved communication between vendors on the supply chain as well as customers who use the company’s production and whose data can be included in current production forecasting.

Unlocking Value

Value perception is a subjective concept driven by many factors.  But real value that is expressed in dollars saved or new business growth is more than perception.  It is just good business. The volume of data provided by the IoT must be paired with analytical capabilities to leverage its inherent value.  Those companies investing in such platforms are already reaping the benefits and gaining an edge against competitors. And for those who have yet to start their IoT journey, I suggest they try the pudding.  Based on current results…it’s very very good.

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