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White Paper

Internet of Things in Manufacturing: Driving Revenue and Improving Operations


The Internet of Things (IoT) brings meaning to the concept of ubiquitous connectivity for businesses, governments and consumers with its innate management, monitoring, and analytics. In this white paper, we focus on the tremendous business opportunities in the Internet of Things.

Essentially, several crucial advances in technology have come together to create the IoT opportunity in manufacturing:

  • Low-cost sensors
  • Reliable and affordable communication
  • Big data and analytics (BDA)
  • Storage

IoT For Manufacturing
As these four technology areas (low-cost sensors, reliable and affordable communication, big data and analytics, and storage) converge, the possibilities open up for significant business benefit to manufacturers. The opportunities can be split into two broad categories: using the technology to improve the process or using the technology to enhance a company's products.

Improving the Process: Realizing the Factory of the Future
A number of government- and industry-led initiatives worldwide seek to define the future of manufacturing, from the smart manufacturing coalition in the United States to 'Industry 4.0' in Germany. Central to this vision is the notion of cyberphysical operation where the factory is densely instrumented to be demand oriented, data driven, and digitally executed. There is a popular factory metric in use, overall equipment effectiveness (OEE), that provides a measure of the performance of any work center. OEE also gives companies  a framework for thinking about how they apply IoT - improving throughput (efficiency), utilization and reliability.

The Role of Analytics and Identifying the Benefits
Collecting the data faster and more reliably is necessary but not sufficient to realize the benefits. IoT instrumentation must work hand in hand with a big data and analytics investment. As a company begins to build its case for investment, four crucial benefit dimensions should be considered: 

  • Cost takeout: This benefit is perhaps the most common, and direct conclusions can be made as to the benefit of eliminating waste, reducing the cost of adverse quality, or optimizing equipment maintenance costs.
  • Resilency: Even if costs are not reduced, there are opportunities to improve a company's ability to adapt to changing market conditions and capture revenue.
  • Speed: Tim Cook, CEO of Apple, is known for handing out the book Competing Against Time to new operations executives. The principle is that, in today's markets, manufacturers must be able to move with greater rapidity, and many are beginning to take a "time is money" approach to investment decisions.
  • Reliability: In addition to reducing the cost of adverse quality, improved reliability helps protect a manufacturing company's reputation from the damage that can be created by a quality spill. One doesn't have to look any further than the recent issues in the automotive industry for proof.                    

Improving the Product: Competing in an "as a Service" World
IoT technology plays an important role in this area as well. The ability to instrument, connect, and remotely analyze and adjust products will be integral to design requirements. The potential for new service-based revenue will come from four broad categories:

  • Health Monitoring: Pay for Performance
  • Assisted Operations: Remote Execution
  • Applications: Product as Platform
  • Augmented Services: Enhancing the Value

The Role of Analytics and Identifying the Benefits
As manufacturing companies look to increase the impact of digitally delivered services, they will have to invest in and establish competency operating an IoT platform. The business justification will center on generating revenue growth, but it is also important to consider other outcomes. Optimizing the profitability of these new digitally delivered services will be enhanced by IoT investment. Another important consideration will be long-term customer satisfaction — a poorly considered deployment will result in service failure and unhappy customers. Advanced analytics will play a key role in managing all of these considerations. Any plans for IoT-centric product improvement should include a consideration of the analytic data model.

Essential Guidance
IDC Manufacturing Insights recommends that manufacturing companies create a program management office or center of excellence to govern and manage IoT projects across the organization. Many companies are doing a proof-of-concept activity — sometimes several — without a clear strategic direction. The center of excellence group should focus on three things initially — setting priorities, validating infrastructure, and selecting a strategic partner.

Understand and Prioritize the Opportunities
An IoT program office will have to be adept at managing demand for investment as it is likely to come from several different areas within the company. We recommend that companies look at and manage these proposed projects as a portfolio and assign priority based on a balance between risk and reward.

Validate the Infrastructure
It is important to note  that many standards related to IoT are still being formulated and vetted, especially in the area of near-field communication (machine-to-machine networks). Choose the standards that make the most sense for your context, but leave yourself some latitude to change course should a particular standard emerge as dominant.

Infrastructure isn't just the technical capabilities. Some important areas need examination:

  • Installed base
  • Operations control
  • Design processes
  • Administrative

Get Professional Help
Look for a provider at the earliest stages that can assist in evaluating opportunities and that can stay with you through the systems integration and implementation stages. The opportunities to harvest business value from IoT technologies are numerous for manufacturers. Understanding which are best for your company should be a top priority.