Manufacturing has entered the digital age. The Internet of Things (IoT) is transforming the way manufacturers not only view the way they create and service products, but also how it can help boost quality, efficiency, and productivity within their manufacturing operations. Today, we find ourselves in the midst of another industrial revolution that promises new opportunities for value creation, from improving asset performance, production quality, and operational efficiency to finding additional revenue opportunities through new product and service offerings.
This fourth industrial revolution is defined and driven by the IoT, and the convergence of digital and physical resources in the factory. In effect, this latest wave of change is the logical progression and culmination of the three industrial revolutions that preceded it. In the first industrial revolution, mechanization and steam power allowed us to increase productivity and perform new tasks. Then came the arrival of the assembly line and electricity in the second industrial revolution, allowing us to dramatically increase output. The third industrial revolution arose from automation, computing, and globalization of the value chain, enabling manufacturers to reduce costs while increasing output further still. Industry 4.0, as it is called in Europe, represents the fourth industrial revolution: a new level of organization and control, concerning the whole value creation chain, over the entire life cycle of products, made possible by the IoT.
“This fourth industrial revolution is defined and driven by the IoT, and the convergence of digital and physical resources in the factory”
The Current State
Manufacturing has changed dramatically in the past 50 years. Today, demand volatility is increasing with customers demanding personalized products delivered in record time. Products and manufacturing operations are becoming increasingly more complex, and global competition is on the rise. Yet a few things remain unchanged.
Manufacturing executives are under continuous pressure to improve margins, improve quality, increase speed, and improve flexibility – all while transitioning to sustainable operations and ensuring worker health and safety. While these objectives are difficult to achieve with even the most modern facilities and equipment, they are becoming increasingly out of reach for the vast majority of manufacturing executives. Many factories are populated with systems and equipment that act as an anchoring force against the tide of all this desired innovation.
Factory environments are highly diverse and increasingly complex. You might have one corporate PLM system and one ERP system supporting product development and the enterprise. But, each factory is comprised of equipment and assets coming from different vendors, siloed systems for manufacturing, quality and maintenance, secondary sensors, unstructured data (such as blogs and operator handbooks), and external data sources like climate data and other inputs. This complexity creates big challenges around visibility, flexibility, and ultimately operational performance. Without adequate visibility, it’s virtually impossible to identify and adjust to issues and problems as they arise.
Published in 1995, Lovejoy’s law still holds true today. The three key levers in manufacturing that can drive operational improvement include:
1. Capacity and capability (machines, people, and training) which are expensive and time consuming
2. Inventory (materials)
But, let’s be clear: it’s not that factories lack information. Massive amounts of data are generated by primary and secondary sensors on the shop floor, operators, business, and manufacturing systems, and by external data sources. Factories lack the ability to connect to that information to make quicker decisions. In fact, Gartner estimates that 70 percent of data captured throughout manufacturing goes entirely unused.
The Role of IoT
To improve operational performance, manufacturers need to focus on tapping into their vast, underutilized sources of information. As more manufacturing assets become smart and connected through IoT platform technologies, and these connections are extended to systems throughout the factory and the enterprise, opportunities emerge to gain insight and optimize manufacturing operations. This so-called Industrial Internet is transforming manufacturing and delivering the next wave of operational performance improvements, forcing manufacturers to rethink the fundamental approach to capturing value in the factory.
The promise of the Industrial Internet is to address the challenge of insufficient visibility or flexibility by enabling a closed-loop, real-time digital thread across all equipment, systems and people, inside factories, and across the supply chain. When manufacturers shift their data and complexity from the systems within the plant to the cloud, predictive analytics and other advanced applications become possible, enabling manufacturers to:
• Make decisions quickly by connecting and unifying different sources and structures of internal and external data in real-time
• Streamline their operations and continuously innovate through predictive analytics, digital processes, and an augmented-reality guided workforce
• Achieve optimal execution through continuous, closed-loop process improvement and adaptive operations
How significant is the potential impact of the Industrial Internet or Industry 4.0? According to the McKinsey Global Institute report, “Unlocking the Potential of the Internet of Things,” factories have the greatest potential for value creation in the IoT era. The 1.2 to 3.7 trillion dollars in economic value projected to come from IoT in the factory setting in 2025 represents a massive 30 percent of all of the IoT business value across all the settings McKinsey identified. This dwarfs the opportunities associated with home automation, vehicles, and so on.
The world’s three largest economies—the United States, China, and the European Union—are all undertaking initiatives to accelerate the adoption of IoT in the factory, with the “smart manufacturing” initiatives of private industry in the US, the Made in China 2025 program, and the Industry 4.0 movement in Europe. And, most importantly, manufacturers such as GE and Airbus are blazing the trail to demonstrable value with initiatives such as the Brilliant Factory Initiative and the Factory of the Future. With the IoT changing the way manufacturers operate and create and service products, the manufacturing industry is poised to undergo incredible change once again.