Of the many industries that are attaining greater speed, scale and simplified operations from IoT-based technologies and solutions, manufacturing has the most to gain.
Sensor-based data from across supply chains shows potential to improve traceability, pull-based replenishment, and improve inventory turns and cash flow. Combining the data gathered from production equipment and workflows with Manufacturing Intelligence analytics applications is improving asset performance, yielding breakthroughs in Overall Equipment Effectiveness (OEE) measurement.
- Boston Consulting Group (BCG) predicts that by 2020, 50% of Internet of Things (IoT) spending will be from discrete manufacturing, transportation and logistics, and utilities industries.
- BCG is predicting that spending on IoT applications will generate $64.1B by 2020.
- Manufacturing Intelligence, a vital part of IoT analytics spending, is predicted to be one of the fastest growing areas of application spending, generating $21.4B by 2020.
These and other insights are from the recent Boston Consulting Group market analysis, Winning In IoT, It’s All About The Business Processes. BCG predicts that by 2020, $267B will be spent on IoT technologies, products and services. The greatest two sources of revenue growth in the IoT market will be from services and IoT applications investment.
IoT will revolutionize predictive maintenance use cases in the next two to five years by combining real-time machine monitoring and Manufacturing Intelligence to deliver insights not available before.
Exploring How The Internet of Things (IoT) Is Redefining Manufacturing
The ten ways IoT is redefining manufacturing based on BCGs’ findings and further research including visits with early adopter manufacturers are provided here:
1. Real-time insights into manufacturing operations performance based on equipment-based sensors and Manufacturing Intelligence analytics are improving the speed and quality of decisions.
Manufacturers are finding the quickest strategy for gaining value from IoT pilots is accelerating data capture and analysis from the shop floor to the top floor. Being able to track production activity then translating these metrics into financial reports in real-time is providing manufacturers with greater control over costs than ever before.
Real-time manufacturing intelligence is also helping to optimize production scheduling and improving manufacturing execution performance.
2. Automating lot traceability, lot tracking, lot control and manufacturing traceability using IoT systems to collect and track throughout production to customer delivery will save manufacturers thousands of hours a year.
All manufacturers face the challenge daily of needing to excel at traceability. In pursuit of this goal many spend thousands of hours a year dedicating their teams to accomplish this manually.
Having IoT-based systems that can scale to support variations in traceability workflows across plant floor operations in all production centers provides real-time insights, saving valuable time.
3. Predictive maintenance is anticipated to be one of the most lucrative IoT use cases for manufacturing in the next two to five years.
Being able to predict when production equipment and machinery needs preventative maintenance, determining OEE in real-time and providing insights into optimizing production levels are just a few of the many areas where IoT can streamline predictive maintenance in manufacturing.
The following graphic from the BCG report, Winning In IoT, It’s All About The Business Processes, provides an overview of the ten IoT use cases BCG sees as the most valuable across a broad spectrum of industries.
4. IoT systems are accelerating inventory turns, reduce carrying costs and out-of-stock inventory in best-selling products, redefining inventory management in the process.
Capturing inventory data in real-time using IoT sensors and then interpreting patterns using Manufacturing Intelligence application is delivering benefits today. High-tech and consumer electronics manufacturers piloting IoT systems for inventory management are seeing inventory turn and velocity improvements according to a study completed earlier this year (Hwang, Lee, Park, Chang, 2017).
5. Improving production yield rates from the machine to plant floor level, across all production center locations.
Manufacturers are relying on IoT sensors and manufacturing intelligence to improve yield rates on their most expensive production processes. In semiconductor manufacturing for example, improving yield rates from 40% to 60% delivers a $96,000 improvement in gross contribution margin for a high-end silicon wafer-based chipset.
When the yield improves to 80% there is a $192K improvement in gross margin.These figures are from a recent Gartner study, Learning From IoT/OT Implementation in Semiconductor Manufacturing, published September 14, 2016 (client access required).
6. The Perfect Order is more attainable and manufacturers can improve their scores by 10% or more when they use IoT to streamline operations.
Getting the right product to the right customer at the right time is an excellent measure of how well-coordinated a manufacturing operation is. One of the more common metrics used for measuring this is the Perfect Order, which many manufacturers average a score of 60%.
With IoT providing real-time availability and creating situational awareness on the plant floor, this figure could easily jump 10% or more.
7. Improved enterprise compliance and quality management performance by automating inbound product inspections and gaining greater insights into supplier quality performance.
Migrating from manually-based inbound inspection approaches to an automated approach that relies on IoT sensors and manufacturing intelligence-based analytics delivers valuable Cost of Quality (CoQ) metrics not easily attained before. Knowing what the costs of good and bad quality are and taking action to reduce the impact on financial performance is critically important.
Combining IoT and Manufacturing Intelligence, integrated to financial reporting, helps to reduce losses from the bad cost of quality by giving management teams insights fast. Using IoT to redefine enterprise compliance and quality management strategies also enables manufacturers to better control Non-Compliance/Corrective Action (NC/CA). Manufacturers can also more effectively manage Corrective Action and Preventative Action (CAPA) requirements.
8. Taking on the challenge of offering mass customized products that reflect what customers want becomes more achievable with IoT as a means to capture customer requirements.
IoT-based systems can make customers collaborators in creation by having them provide real-time data on the problems they are trying to solve. Creating a highly customized electric motor or engine requires in-depth data on which specific requirements the customer has.
By providing IoT data based on monitoring the broader machinery the electric engine is go9ng to be used in, manufacturers can better customize and build exactly what customers want. In complex manufacturing, IoT data sharing is going to be the new normal by 2020.
9. IoT is redefining the role of Manufacturing Execution Systems (MES) by enabling more real-time data and greater control over the most complex aspects of manufacturing operations.
With real-time data, production planners will be able to optimize the selection of which operators, team members and machines complete which task. IoT will also quickly be able to catch any errors in work instructions and reroute products going through Q.A. back, specifying why. In short, IoT has the potential to improve Perfect Order performance for all manufacturers.
10. Turning Maintenance, Repair and Overhaul (MRO) into a profitable business by having IoT sensors on the most valuable products and being able to gain insights into lifetime asset value and performance.
Manufacturers whose products are integral to their customers’ operations including production machinery that is often a capital expense (CAPEX) are increasingly relying on IoT to track a wide variety of performance metrics.
From temperature and vibration to output, IoT can deliver a data stream that can be easily turned into a new revenue source by providing customers with insights into how to prolong the life of their assets. Lufthansa has started a specific business unit just to analyze and reseller aircraft engine data based on their IoT initiative for example.
Winning at IOT: It’s All About The Business Processes, BCG Perspectives from the Boston Consulting Group (January 5, 2017) by Nicolas Hunke, Zia Yusuf, Michael Rüßmann, Florian Schmieg, Akash Bhatia, and Nipun Kalra. Link: https://www.bcgperspectives.com/content/articles/hardware-software-energy-environment-winning-in-iot-all-about-winning-processes/
Hwang, G., Lee, J., Park, J., & Chang, T. (2017). Developing performance measurement system for Internet of Things and smart factory environment. International Journal Of Production Research, 55(9), 2590-2602.
Mathaba, S., Dlodlo, N., Smith, A., & Adigun, M. (2011). The use of RFID and Web 2.0 Technologies to Improve Inventory Management in South African Enterprises. Electronic Journal Of Information Systems Evaluation, 14(2), 228-241.
Zhang, Y., Zhang, G., Wang, J., Sun, S., Si, S., & Yang, T. (2015). Real-time information is capturing and integration framework of the internet of manufacturing things. International Journal Of Computer Integrated Manufacturing, 28(8), 811-822.