The IoT in Manufacturing:

3

w w w. M a nu f a c t u r i n g L e a d e r s h i p C o m m u n i t y. c o m ... ... ... ... ... ... ... ... ... .. ... ... ...

Manufacturers that capitalize on the Internet of

Things can

position themselves for a more competitive

future by transforming

into smart enterprises.

By Russell Fadel ... ... ... ... ... ...

A Market

Leadership

Opportunity

that design, operate, and service them. These products are smart, connected, and multiplying in number with no signs of slowing down. According to McKin-sey, the Internet of Things will unleash $6.2 trillion in new global economic value annually by 2025, with $2.3 tril-lion coming from the global manufactur-ing industry alone. To put this into per-spective, the total global gross domestic product for 2013 was approximately $75 trillion.

Companies that can quickly leverage the full opportunity presented by the In-ternet of Things will seize the greatest value, and assume market-leader status in the next decade.

Strategic Positioning and Operational Effectiveness

A

ccording to Harvard Business

School Professor Michael Por-ter, sustainable business success requires both the right strategic position-ing and operational effectiveness. While each is essential for competitive advantage, they represent two different sets of activi-ties. Together they provide a framework by which manufacturers should pursue an IoT strategy, transforming a product of-fering into one that is highly differentiated and assimilating best practices to deliver manufacturing operational excellence.

Successful strategic positioning hinges upon differentiation and requires orga-nizations to make a unique set of choices that delivers distinct value to the mar-ket. Consider companies like Apple or IKEA, which created differentiation by doing things in a new way. By redefining their product categories and disrupting the status quo, these leaders carved out long-lasting, strategic positions in the marketplace.

Operational effectiveness means outper-forming market rivals at comparative activi-ties. It includes any number of practices that improve asset and resource utilization (e.g., reducing downtime in manufacturing, de-veloping products faster, and enabling sales organizations to sell more). Consider ATI Technologies, which has been successfully leveraging practices like Six Sigma, and us-ing Thus-ingWorx, an IoT platform, to com-bine machine data with their business sys-tems such as ERP and MES to drive new levels of operational efficiency.

Companies that neglect strategy or op-erational effectiveness do so at their own peril—risking apathetic market interest and an inability to cost-effectively build, operate, and service products. In short, the value potential of the IoT is tremen-dous, but will only be fully realized if or-ganizations can effectively harness it for

S

INCE THE DAWN OF MODERN INDUSTRY, NO PHENOME-

non has created such a rich array of value opportunities for manufac-turers as the Internet of Things (IoT). Today billions of manufactured products—from simple appliances to complex industrial machines— are communicating in real-time with the people, systems, and things

MANUFACTURING

LEADERSHIP

JOURNAL ... ... ... ... ... ... ... ... ... .. ... ... ... ... ...

Russell (Russ) Fadel

is the President and General Manager of ThingWorx™, a PTC business. He is re-sponsible for driving ThingWorx’ ongoing business to help cus-tomers in a wide range of industries seeking to leverage the IoT. He previously co-founded and led Lighthammer Software Develop-ment, and two success-ful manufacturing op-erations software and hardware companies. He holds a B.S. in Me-chanical Engineering from Duke University.

4

w w w. M a nu f a c t u r i n g L e a d e r s h i p C o m m u n i t y. c o m ... ... ... ... ... ... ...

both strategic positioning and operation-al effectiveness.

How IoT Elevates Business Strategy

I

oT is having an unrivaled strategic

impact on manufacturing organiza-tions, revolutionizing how products are created and serviced. Product usage data is now available to R&D, customer relationships are strengthened through continuous engagement and enhance-ments, and equipment can be remotely diagnosed, administered, serviced, and repaired. These innovations not only im-prove product performance, they can also enable companies to leverage new business models that capture more of the value cre-ated from the IoT and maximize returns across the entire useful life of the product. To learn more about the strategic impact

of IoT, read the recent Harvard Business

Review piece by PTC CEO Jim Heppel-mann and Michael E. Porter, Professor at Harvard Business School (available at http://www.ptc.com/go/hbr-article).

Operational efficiency is expressed through ongoing improvement across all enterprise functions. The Internet of Things introduces new methods for driv-ing operational efficiency that can be im-mediately realized with little disruption to existing business.

IoT technology creates the unique op-portunity to collect real-time data from

things (sensors, devices, and equipment) and combine them with data and intelli-gence from business systems and people. Business processes become smart and con-nected and operational performance can be improved within individual functional organizations—including engineering, manufacturing, supply chain, quality, sup-port and service—or across the enterprise as a whole. Such comprehensive visibility introduces real-time optimization

capabil-“When

processes and data are

locked away in dispersed silos,

manufacturers can’t recognize

and unlock business potential.”

... ... ... ... ... ... ...

+

STRATEGIC POSITIONING ●Creating a unique value proposition

Doing things differently

to deliver value com-pared to rivals

Making Choices Validating and executing

●Assimilating, attaining, and

extend-ing best practices

Doing things

better and better

OPERATIONAL EFFECTIVENESS

Sustainable competitive advantage requires a distinctive strategic positioning and operational effectiveness.

This graphic is a representation of an idea originally published by Michael E. Porter in "What is Strategy," Harvard Business Review, November/December 1996.

ities including orders, materials, equip-ment status, costs, and product quality. A personalized view of this information can be delivered via role-based applications to anyone, anywhere, at any time, allow-ing employees, customers, and suppliers to make educated, split-second decisions with confidence.

Limitations on

Operational Excellence

T

o realize operational excellence,

manufacturers must have real-time and unified visibility into their operations, but today’s complex man-ufacturing environment can limit getting to this level of visibility. The typical manufac-turing landscape is composed of heteroge-neous shop floor equipment that is different from plant to plant and can be coupled with multiple layers of manufacturing systems, at different levels of adoption. Additionally, legacy investments in disparate software systems are creating challenges for manu-facturers trying to adapt and expand how they share information. Challenges that can prevent operational excellence and IoT en-ablement include:

● Limited visibility. The inability to aggre-gate and consolidate meaningful opera-tional intelligence across things

(equip-ment, systems, and people) can lead to a number of challenges. The root cause for failure can be difficult to identify and it tends to repeat. KPIs are challenging to standardize across lines, plants, and the enterprise. The data is typically some-where, but numerous system-specific, often archaic user interfaces make it difficult to find critical information in a timely manner and to react quickly and efficiently to failures.

● Lack of interoperability. Operational ex-cellence requires agility and flexibility, but traditional manufacturing business sys-tems (MES and ERP) are often too rigid and require a full plant roll-out first. They also tend to be focused on enabling repeat-ability, limiting their ability to expose and solve problems. Some BI systems are not well suited to solve this challenge since they simply lack the flexibility to connect direct-ly to equipment, sensors, and devices. ● Lack of flexibility. Huge capital

invest-ments are typically locked into manu-facturing capacity; however, return on investment gets rapidly outpaced by the ever-accelerating need for product and manufacturing processes changes. Man-ufacturers need a way to gain new opera-tional benefits from these investments without having to change equipment and systems altogether.

These challenges can serve as a barrier to operational excellence, and result in seri-ous business implications like:

MANUFACTURING

LEADERSHIP

JOURNAL ... ... ... ... ... ... ... ... ... .. ... ... ... ... ...

“The hard truth for manufacturers

who continue to

rely on traditional

tools to keep pace

... is that they

will increasingly fall behind their

competitors.”

... ... ... ... ... ... ...

● Poor performance. Proactive improve-ments are off the table, and organizations reactively attend to glaring performance problems. Throughput and asset utiliza-tion are reduced, low performance qual-ity can result in scrapping and rework, downtime and inventory spikes can occur without warning, delivery dates can be missed, and fines can be levied.

● Reduced Innovation. Efforts to modern-ize processes, systems, and equipment are stretched out across years and come at a high cost.

● Less-effective people. Lacking the tools to monitor and optimize produc-tion, opportunities to improve perfor-mance are missed by operators, supervi-sors, managers, and executives. Training costs escalate, while productivity is re-duced.

When processes and data are locked away in dispersed silos, manufacturers can’t rec-ognize and unlock business potential. This draws out time-to-market and production and increases the cost associated with man-ufacturing products. As competitors suc-cessfully leverage the IoT to improve opera-tional efficiency across their organizations, they will define the new minimum standard for doing business. To become and remain market leaders, manufacturers must act quickly and align their operations to suc-cessfully adopt the Internet of Things and transition to smart manufacturing.

Transitioning to Smart Manufacturing

I

DG recently conducted a survey of

IT leaders in the manufacturing in-dustry who expect to enter the IoT market in the near future. They were asked to list likely challenges in transitioning to smart manufacturing. These responses were

compared with responses from IT leaders and from manufacturers who had already begun building, operating, and supporting smart, connected products. While the for-mer group correctly identified security as a top issue, there were several stated challenge areas that were not being appropriately rec-ognized. These challenges, cited by smart manufacturers, can serve as a guide for tran-sitioning to smart manufacturing:

● Create realistic deadlines. IT manag-ers are encouraged to identify problem areas, participate in sound systems en-gineering practices, and conservatively budget time when planning to adopt smart manufacturing processes.

● Storing and managing data. With an es-timated 50 billion connected devices by 2020, Gartner has outlined the need for organizations to prepare now for data challenges, including plans for availabil-ity, privacy, storage management, effec-tive data mining, and hardware.

● Development of new business and

soft-ware. Smart, connected products elevate service commitments. Sensors that mon-itor and measure device statuses are only useful if they actuate responses. Organi-zations need to expand plans to accom-modate tracking and automation soft-ware, and service processes.

● Connectivity with remote assets. Glob-ally competing manufacturers will find their products being utilized in increas-ingly remote geographies. Consider smart machinery being used in rural lo-cales with an under-developed telecom-munications infrastructure. Effective data exchange and actuation in remote locations should be regarded as a sub-stantive challenge.

● Expansion of partner ecosystem. From transmitter and software developers to telecommunications and service

fulfill-... ... ... ... ... ... ... “Compa-nies that can quickly lever-age the full opportunity presented by the Internet of Things will seize the greatest value, and as-sume market-leader status in the next decade.“

7

w w w. M a nu f a c t u r i n g L e a d e r s h i p C o m m u n i t y. c o m

ment firms, the IoT revolution is chal-lenging manufacturers to seek out new technology partners.

Realizing the Benefits of IoT through Smart Manufacturing

F

ortunately for challenged

manu-facturers, the industry is in the midst of a global trend towards aligning IoT-based strategy with opera-tional efficiency. Germany’s Industrie 4.0 and the Smart Manufacturing Leadership Coalition in the U.S. reinforce the sound-ness of these strategies, and provide a framework and long-term vision of smart manufacturing.

Connected machinery and systems are nothing new. Even organizations facing the previously referenced challenges uti-lize equipment that creates data. The true promise of IoT is in creating a network of equipment and systems that unify factories into a cohesive, aligned, smart environment. Operational excellence is achieved through real-time visibility, execution, and collabo-ration across people, systems, and things, and using that data in ways that are mean-ingful for your business and its objectives.

Smart manufacturing is transformative, and companies that move quickly to execute on an IoT strategy will gain substantial and long-lasting operational advantages. At a minimum, true enterprise-grade smart manufacturing platforms will deliver: ● Unified visibility and visualization.

Smart and actionable dashboards extend real-time visibility into information from existing systems, equipment, and people across all data types (transactional, time series, and unstructured). Visualization

is both granular and expansive and con-nects to heterogeneous landscapes to pro-vide standardized KPIs across lines and plants throughout the enterprise.

● Role-based visibility. Visibility into operational performance is required in every level of an organization, from the boardroom to the shop floor. Flex-ible views filter and target role-relevant performance data such as KPI calcula-tions, automated alerts and warnings, and event- and user-generated actions. Aggregated information also becomes fully searchable to enable ad hoc visibil-ity into all information.

● Crowdsourced “collective intelligence.” Smart manufacturing platforms facili-tate knowledge and experience sharing across the entire enterprise, allowing the expertise of the entire employee base to be included in every operational excel-lence decision.

● Real-time responses. Systems not only provide an aggregated view of perfor-mance data, but enable real-time action to prevent or respond to issues, mini-mizing, if not eliminating, disruption to operations. Alert systems can be config-ured according to tolerance and condi-tion boundaries, and predictive model-ing can be introduced to prevent issues before they even occur.

● On-demand access. User access is de-vice-independent to enable monitoring, interaction, and execution from behind a desk, down on the shop floor, or in the field. Smart equipment is flexibly sup-ported for on-premise or cloud data so-lutions, and wireless provisioning. ● Flexible. A system-agnostic view across

system, people, and things, combined with rapid mashup capabilities, allows for rapid creation and updates of actionable dashboards to empower every

stakehold-MANUFACTURING

LEADERSHIP

JOURNAL ... ... ... ... ... ... ... ... ... .. ... ... ... ... ...

8

w w w. M a nu f a c t u r i n g L e a d e r s h i p C o m m u n i t y. c o m ... ... ... ... ... ... ... ... ... ... ... ... ... ... “Smart, connected equipment empowered with system-configured workflows and rules can

automati-cally respond to conditional triggers and drive action across users, devices, and business systems.”

er to get the right information they need. ● Smart process automation. Smart,

con-nected equipment empowered with sys-tem-configured workflows and rules can automatically respond to conditional triggers and drive action across users, devices, and business systems. Human error is reduced and response times are accelerated.

Translating IoT Benefits into Smart Manufacturing Success

T

hese benefits translate into

bet-ter outcomes for manufactur-ers. The ability to innovate new processes is accelerated, the return on existing manufacturing investments is increased, and companies are better po-sitioned to identify new value opportu-nities. Manufacturers can dramatically improve uptime while maximizing asset utilization. Better utilization and uptime optimizes inventory turnover, shortening the cycle. Automation and visibility im-prove performance and quality, reducing the need to scrap and rework products. As a result of improved efficiency and quality, delivery dates are more reliable, improving relationships with customers and vendors. Smart manufacturing and the resulting operational efficiency is and will be fundamental to how manufactur-ers derive value from the IoT revolution and will be necessary to gain and sustain market leadership in the next decade.

In addition to the general, ongoing pro-cess of efficiency goals, IoT-enabled smart manufacturing opens the door to new op-erational objectives:

● Customizing for personalization and

regulation. Smart factories are more flex-ible to change in product demand. This can include broader customization to meet the regulatory requirements, or finely grained differences (even one-off items) to meet customer specifications. A fully suc-cessful smart factory will be able to cus-tomize without disrupting processes. ● Minimizing external disruptions.

Par-ticularly as manufacturers operate within a global market, external conditions, such as supplier disruptions or power outages, are unavoidable. Smart, dynamic process-es enable real-time adjustments to mini-mize the effects of disruption and enable manufacturers to react to the disruptions quickly and with laser focus.

● Blurring product and service

boundar-ies. Smart manufacturers are able to

position themselves more strategically by improving the value of products through IoT-enabled smart services. These smart, connected products can be remotely monitored, updated and serviced—increasing uptime, improv-ing performance, extendimprov-ing product life, and strengthening the relationship between manufacturers and customers through raised product value and cus-tomer satisfaction.

“Smart manufacturing and the

resulting operational efficiency

is

and will be fundamental

to how

manufacturers derive value

from the IoT revolution.”

... ... ... ... ... ... ...

The Larger Social Context

S

mart manufacturing goes beyond

direct operational improvements and objectives, and addresses some of the systemic challenges caused by global industry, such as resource and en-ergy efficiency, urban production, and de-mographic change. Continuous resource productivity and efficiency gains that are delivered across a value network result in diminished resource demands and smaller waste footprints. Smart industries have organized work in such in a way that de-mographic changes and social factors can be taken into account. Smart assistance systems liberate workers from perform-ing routine, mundane, and repetitive tasks, enabling them to refocus on more creative, value-added activities. In the context of the predicted global shortage of skilled work-ers in the coming years, smart manufactur-ing will reduce physical demands of em-ployees, allowing workers to enjoy longer, more productive careers.

Operational performance improve-ments, particularly those created by smart manufacturing, can drive swift improve-ments for the bottom line. As organiza-tions assess the need for and advantage in leveraging the IoT, they should be asking themselves candid questions. We

prob-ably have the data we need somewhere, but do we have real-time visibility into this data? Can the current visibility keep pace with rapidly changing processes, business needs, and conditions? Can the morning daily production reports we get (describ-ing what happened yesterday) be used to drive interactive and automated responses to make improvements, solve, and pre-vent operational issues? The hard truth for manufacturers who continue to rely on traditional tools to keep pace with the IoT market transformation is that they will in-creasingly fall behind their competitors.

The strategic consideration of incorpo-rating the IoT into manufacturing opera-tions will, perhaps more than any other de-cision made over the next decade, impact a manufacturer’s competitive positioning in the global manufacturing landscape. The good news for those seeking to move forward is that only a fraction of the mar-ket has made concrete steps, such as em-bedding sensors and provisioning wire-less capabilities. This offers a temporary, but substantial, opportunity to lay claim to market leadership now. Operational improvements are not an event, but a con-tinual process; manufacturers know this in their bones. The question for these compa-nies is not if, but when they will adopt the necessary transformations to continue im-proving operational efficiencies and create strategic value through smart manufactur-ing and IoT. M

MANUFACTURING

LEADERSHIP

JOURNAL ... ... ... ... ... ... ... ... ... .. ... ... ... ... ...

“The strategic consideration of

in-corporating the IoT into

manufac-turing

will ... impact a

manufactur-er's competitive positioning in the

global manufacturing landscape.”

... ... ... ... ... ... ...