This article is the second instalment in a series taken from a longer report, Smart manufacturing: asset management, predictive maintenance, dynamic scheduling and other use cases, from August 2018.
The report tells the story of smart manufacturing in four chapters. The first two examine the expectations surrounding the IIoT movement (‘The hype and the glory’), and its application in the manufacturing sector to date (’An alternative truth’, see below).
The second two chapters consider practical advice for manufacturers starting down the road to digital transformation, by turns offering guidance about how to approach the technology (‘Use case modelling’, see below), and, how to fund and recover investments in digital change projects (‘Buying digital change’).
The full report features additional information and use cases – as well as the article in its entirety. Click here to download the full report. See links at bottom for all instalments.
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Is the revolution in manufacturing really so easy, or is it a long road ahead, revealing an alternative truth, of inflated expectations? Matt Wilkins, senior analyst for enterprise and IoT research at Strategy Analytics, thinks so. “Industrial IoT will bring great benefits to businesses of all kinds in the coming decade. But to refer to it as a market in the trillions of dollars is overly optimistic. Claims the IoT market has progressed from tentative to mainstream are not supported,” he says.
Strategy Analytics says the ‘industrial vertical’ represents an opportunity of only eight per cent of the total IoT market. There remain major challenges and roadblocks, before smart manufacturing technologies take deeper root (see page 11). Just last year, the firm ran a poll of 1,200 enterprise executives in France, Germany, the UK and the US, posing questions about their progress and spending on industrial technologies.
It turns out the top three applications for industrial IoT are basic on/off commands, primarily for buildings management, and rarely for manufacturing processes, security functions to lock down raw materials, finished goods, machines, and tools, and widgets to measure and control flow on the production line, typically to manage bottlenecks. “It paints a clear picture that IoT is being put to use for relatively simple tasks at this point in time,” comments Wilkins.
Joe Speed, field CTO for the IoT solutions and technology business at ADLINK, a firm moving intelligence to the edge of the manufacturing floor, says: “For all the apparent sophistication and success stories, we should try to remember that we’re very early in this process; we’re in the early innings.”
A report by the Information Technology and Innovation Foundation (ITIF), a think-tank for science and technology policy, claims 16 per cent of US manufacturers have yet to ‘identify a need’ or ‘develop a strategy’ around industrial IoT. Fifteen per cent have ‘no sense of why it matters,’ it says.
The narrative about falling prices for cellular IoT chipsets – LTE-M modules from AT&T and Verizon have fallen below $10 per unit, and below $1 per unit with Sigfox – might be misleading, or at least derivative. The cellular IoT market will not reach doubled-up targets of 3.5 billion units by 2023, as Ericsson predicts, by joining a race-to-the-bottom, comments Nordic Semiconductor. Chip design is everything, says the chip designer. “It doesn’t matter what the unit price of a wireless IoT module is if it doesn’t work very well,” comments Svein-Egil Nielsen, its chief technology officer.
More than this, there remains a general shortage of heavyweight case studies describing industrial transformation at the hands of digital technologies. It is rare for a German car maker, after all, to lift the hood on the digital pyrotechnics lighting up its factory floors. Manufacturers are cautious and competition is intense. “Larger companies – those we might consider to be more advanced – are less inclined to share information,” says Yost. “Many even feel they’re behind; they’re working to get ahead of the curve, and gain competitive advantage.”
Smaller organisations are more inclined to talk. “Information tends to be anecdotal,” he says. This competitive streak is ingrained in manufacturing. “They will have breakthroughs at process level, and realise efficiency gains, but they won’t talk about it.”
Meanwhile, platform vendors are busily curating libraries of case studies to inspire confidence among prospective customers. The depth of the content is varied; most go little beyond the contract win and the working agenda. Siemens, absent from this report because of “a bigger reorganisation”, points to a trove of lightly-detailed customer wins. Gallant at PTC explains: “The challenge is many customers with significant wins will talk about it at a high level, but are reluctant to reveal numbers and percentages.”
Nevertheless, PTC has clocked up over 1,000 factories using its technology, it says, and worked them into categories to signpost its roadmap, and create “accelerators and apps” in its ThingWorx platform to drive ‘time-to-value’.
But manufacturers are in the innovation game, as well, and take technological advancement in their stride. Operational improvements, achieved with automation and instrumentation, have been a feature of their stock-in-trade; newer technologies are integrated into their systems organically, as a matter of course, without pause or remark.
Again, it’s in the blood, says Yost. “It’s just a part of what they do. It’s not a separate initiative; it’s business-as-usual, even if the definition of usual has been stretched.”
INDUSTRIAL SKEW
Can we say which manufacturing sector is leading the way, without hard proof? The ITIF considers the US picture, and reckons furniture makers and appliances brands have invested most in industrial automation during the past five years (see left); appliances and minerals will see most investment during the next three. But automation is hardly new. Ruh at GE says the “first sector to fall” to higher-grade digital transformation will be the car market, already impacted by in-vehicle software for remote engine diagnostics and ‘infotainment’ services, and mindful of the rise of new ride-sharing models in the mobility market at large.
“The automotive market has not changed in the last 100 years, except for mergers and acquisitions. In the future, in the context of autonomous cars, those automotive brands that provide the best software will be the ones that win,” he says. “The business model will change. Will people continue to buy cars? That’s why car makers are interested, and worried. There will be foundational change. It will be the same in every industrial sector.”
The automotive and aerospace industries tend to be held up as beacons, but they, more than any sector, are tight-lipped. “Automotive manufacturers don’t hand out a lot of information; they’re hard to get examples out of,” comments Owen at ABI.
Telit says it connects “99 per cent of all 300mm semiconductor fabs”, and seven of the 10 top car makers. It places these sectors top. “They are a step ahead,” says Buranello. “The manufacturing sector is advancing quickly. Any large and serious company today has a group of people analysing the right path for industrial digitisation.”
Semiconductors are hot, it seems. OSIsoft is unequivocal. “Nothing beats chip manufacturing. But you have to give kudos to pharmaceutical companies. They manufacture to a ‘golden batch’, with strict requirements about maintaining data about each step of the process and supply chain,” comments Enrique Herrera, industry principal for manufacturing at the California data management company.
PTC sees most traction in discrete manufacturing, where it made its name, and in batch (or ‘hybrid’) manufacturing. It also sees a rising hunger in the oil and gas, pharmaceuticals, metals, and chemicals markets, which is where Rockwell Automation, which has just taken a $1 billion stake in the Boston firm, plies its trade.
Jean-Philippe Provencher, vice president for manufacturing strategy and solutions, says: “At a high level, we don’t see a market today that stands out. All manufacturing executives are pretty convinced right now IoT can help solve problems they haven’t been able to for the last 20 years with traditional ERP and MES systems.”
Ruh agrees. Early results make clear the value of intelligent automation. “The economic impact is a foregone conclusion. This is starting to move quickly. The ‘c-suite’ inside all industrial firms is making this move… to innovate around new business models. This is the biggest opportunity in the next decade.”
What about regional differences? Anecdotal accounts are contradictory. Speed at ADLINK picks up the question about vertical markets, and effectively answers the question about regional markets too. “It’s a bit of a mixed bag,” he says.
“Some that have the best infrastructure are also the most risk averse. German automakers invested heavily in autonomous driving, but have found themselves doing much of the R&D and test driving elsewhere because Germany’s regulatory environment is too slow moving to accommodate driverless vehicles. In some markets, they have the skills and capital to automate but labour and social pressures result in cautious movement.”
Buranello at Telit says the technology transcends borders. “The world is becoming flat. Car makers, pharmaceutical companies and semiconductor makers compete globally. The adoption of industrial IoT technology is not an option, but a matter of survival.”
Greg Kinsey, vice president at Hitachi Vantara, takes a different view. International markets are skewed, he says. The US is way behind, fixated on sensors in factories, while Europeans rewrite the industrial rule-book with open technologies and collaborative working. “We are witnessing a two-speed market,” he says. “The EU is about the digitisation of manufacturing operations and processes; the US is very focused on IoT.”
REGIONAL SKEW
The ITIF report bears this out, or at least the part about US tardiness. US manufacturers are trailing their international competitors in adoption of shop-floor smart manufacturing implementations. “Most US companies remain just at the initial stages of manufacturing technology adoption,” says ITIF vice president Stephen Ezell. “Other countries are doing more to support the digitisation of their manufacturing sectors, and the US should develop a more comprehensive strategy to support its domestic industry.”
There are fundamental differences between digital manufacturing and industrial IoT, insists Kinsey. “Americans just think digital is a new name for IT. And it’s not; it’s completely different. Europe understands that, and particularly France and Germany, and Sweden and Switzerland – where the really strong use cases are materialising.
“The US is engaged in this conversation around IT stacks, which is very different to what we are talking about in Europe. Here, in Europe, the dialogue is about open-source collaboration and innovation. Automation and the connection of assets – that story has gone. The story in Europe is about what to do with the data – about the analytics and machine learning, and the business value from it.”
He qualifies earlier points from GE and Telit about the rising digital agenda for business leaders. “I don’t see it as a boardroom topic among American manufacturers to the same extent I see it in Europe. In Europe digital has been made a key strategic objective for every major executive. For CEOs in Europe, it is the most important thing they’re doing.” He cites PwC research that 60 per cent of French corporations have appointed a chief digital officer, compared to just 20 per cent of US firms. “There is a deeper understanding of the difference between digital and IoT.”
The IoT messaging from technology firms does not resonate (“at all”) among the top 500 companies in Europe, he says. It does not work in Hitachi’s home country, either. “Japan is more closely aligned with EU innovation.”
DIGITAL LEADERSHIP
The digital agenda has not just been raised up to boardroom level in Europe; it sits as a permanent fixture on government desks, a part of the political discussion about economic transformation. Kinsey points to Germany’s Industrie 4.0 movement, which makes industrial transformation a central part of the German government’s economic policy, and France’s parallel Alliance du Futur scheme, and other schemes elsewhere.
“There is such a high degree of government sponsorship of digital in Europe. In the US, we don’t see any government sponsorship of digital at all,” says Kinsey.
Speed comments: “It matters. Sponsorship, test beds… these things are all helpful. Having the right incentives and removing blockers are important steps that governments can take to promote growth in this area.”
Telit is not buying it. “Governmental initiatives can help, but the private sector will be the ultimate driver for technology adoption and maturity,” says Buranello.
Neither is PTC, which does most of its business in the US. If anything, Europeans are more risk averse, reckons Provencher, and therefore slower to gamble, and slower to win. “We don’t see a lot of difference. If anything, Europeans tend to talk a lot, before acting; in the US, they act sooner, and talk later. There is more appetite in the US for quick wins, in six-to-eight weeks.”
Gallant adds: “The German market tends to spend more time on process and scoping, where others will kick the tyres for six weeks.” PTC knows the German market. Apart from its roster of clients in Germany, it has helped establish a pair of demonstration facilities, in the shape of the Digital Capability Center in Aachen, near the border with Belgium, with McKinsey & Company and the ITA Academy, and the European 4.0 Transformation Center in the same city, with Elisa, the Fraunhofer Institute, and Hewlett Packard Enterprise.
It has also been closely engaged with the German Academy of Science and Engineering, known as Acatech, taking a lead in its Industrie 4.0 Maturity Index. Provencher echoes Buranello’s earlier line about the cursory impact of government sponsorship on a country’s industrial transformation. “Industry 4.0 is more recognised as a term in Germany because the government is behind it. The perception is Germany is serious. But I’m not sure it makes much difference when it comes to adoption.”
ABI splits the difference. It’s an even contest, with South Korea a half-step back. “The leading markets are the US, China, Japan, and Germany – not even Europe, but Germany. Europe is not as innovative and not as big in manufacturing. Germany is on different level.”
A full version of the article, including additional information and use cases, is available for download. Click here to download the full report. A new report and webinar on edge computing in industrial IoT setups, called AI and IoT at the cutting edge – when to move intelligence out of the cloud and closer to the action, is also available; go here for the webinar; go here for the report.
State of things | Smart manufacturing (part 1): The hype and the glory
State of things | Smart manufacturing (part 2): An alternative truth
State of things | Smart manufacturing (part 3): Use case modelling
State of things | Smart manufacturing (part 4): Buying digital change
