Becoming a Smarter Manufacturer: How IoT Revolutionizes the Factor

By: Ashish Pujari, General Manager and

Vice President, IoT and Digital Supply Chain,

SAP Asia Pacific & Japan

I recently asked a 16 year-old what the Internet of Things (IoT) meant to him, and he said “IoT means being able to text your toaster!” While IoT may seem relegated to the realm of automated lightbulbs and door locks, the truth is that more businesses are realizing an interconnected system of devices can really unlock true business value. The change is most evident on the factory floor.

In smart factories, processes are fully digitized and connected, allowing manufacturers to build and deliver orders more quickly. Smart factory applications also allow customers to personalize their purchases. This type of connected manufacturing is often referred to as Industry 4.0 or the fourth industrial revolution.

In short, smart manufacturing is the use of IoT devices to improve the efficiency and productivity of manufacturing operations. These “things” collect and exchange data, creating endless business possibilities. By 2025, according to McKinsey research[1], the potential economic impact of IoT applications could be as high as $11.1 trillion, and as much as $3.7 trillion is allotted to IoT within the factory environment.

Manufacturers want insights across complex supply chains and IoT technologies drive just that. Similar to how the connected devices in our personal lives can deliver insights and make recommendations, IoT in factories connect the top floor to the shop floor, allowing manufacturers to take an interconnected approach to manufacturing. With the help of connected data, information such as incoming raw materials and outgoing goods can enable business processes, such as warehouse management, to work in complete tandem with each other.

In fact, manufacturers report a 7.7% boost in production plan adherence when they integrate delivery dates with resource availability and real-time manufacturing conditions – to create schedules optimized for machine and labour capacity.[2] However, it’s not just about connecting the “shop floor to the top floor”. To remain competitive, manufacturers must think beyond the limits of individual factories.

Making Data Work Harder

The key benefit that IoT brings is the enablement of informed manufacturing where all products, people, processes and infrastructure involved in the organisation can work seamlessly together, sharing information in real-time to create more automated, intelligent and streamlined processes. Manufacturers should consider how they can make use of that to move from creating products that are sold and forgotten, to creating things that provide meaningful data throughout their lifecycle.

For example, if an airline manufacturer installs its aircraft engines with sensors, and can ensure that data is processed quickly and analysed in real-time, it then provides a service to the airline that enables any issues to be addressed swiftly by mechanics. The data produced is valuable not only to the manufacturer and its customer, but the manufacturer’s whole ecosystem.

Just-in-time logistics also takes on a whole new meaning with IoT. With increasingly globalized supply chains, lean manufacturing methods are used to keep minimum stock. Individual parts can travel the globe and arrive just in time for production. Sensors and devices that are laid across factories in different regions then maps out the production process in relation to the speed of incoming resources.

By 2020, according to research by SCM World[3], at least half of all manufacturing organizations expect to have visibility across the supply chain at this unit level; and only 10% predict they’ll still be limited to single factory-level insights and control.

Predict demand

Today’s digitally empowered consumers are dictating what, when and where they want a product, and will pay a premium for their demands – fuelling the need for personalization.

Simply put: customers will be at the centre of the changes to value chains, products and services.

The opportunity is there not only to greatly increase the ability to respond flexibly and more rapidly to customer demands but also to anticipate demands, helping the customer move ahead in a range of predictive ways.

The use of data analytics will also substantially improve customer relationships and customer intelligence along the product life cycle. Greater integration of data between manufacturers and customers can open up new collaboration opportunities. Clever use of pooled data, such as point-of-sales, news feeds, and marketing insights can converge and funnel through the factory floor, driving efficiencies within the customer’s operations as well as vice versa.

While companies used to mine data simply to learn from the past, recent advances such as in-memory computing, real-time analytics, and IoT will help manufacturing organizations to take action on plausible spikes in demand with a high level of confidence.

Run simpler and faster

Manufacturing is an incredibly complex field with intricate processes and planning spanning across different functions. To keep up with rapidly changing market conditions, manufacturers need to take out the complexity so that processes can run simpler and faster. On top of that, automation and visibility will help business to make smarter and better decisions.

Connected manufacturing is the key to enabling the factory floor, the front and the back offices to share a singular view into the business, ultimately driving insights that will define every company’s future.

So while navigating the IoT marketplace and reworking entire business models is no easy feat, and is definitely more complex than “texting your toaster”, manufacturers that see IoT as more than a method to streamline factory operations could well reap the reward that this lucrative market offers.