You may already be using IoT on the production line to enable condition monitoring, predictive maintenance, and overall equipment effectiveness (OEE). However, market factors are quickly driving manufacturers to think beyond the factory floor. According to IDC, demand fluctuations and mass customization needs will drive 35 percent of manufacturers to consider augmenting factory capabilities in 2019 using customer, connected-product, and social media data.
This post, the third in our series about leveraging IoT in manufacturing, focuses on the opportunities within other business units inside a manufacturing company. In your role, you may think of IoT as outside your core area of expertise. The fact is, the technology is permeating across the enterprise—to great success. Using data and insights from IoT solutions throughout the business can create efficiency, improve products, and enhance the workplace. Let’s take a look at some typical manufacturing business functions and the role IoT is playing in helping them drive the bottom line.
Supply chain: intelligent efficiencies
In a study of original equipment manufacturers (OEMs) conducted by The Economist Intelligence Unit on behalf of Microsoft, 99 percent of those surveyed said they believe the digital transformation of their supply chain is important to meeting their organizations’ strategic objectives. IoT is a critical piece of this puzzle. Deploying sensors on vehicles, warehouse shelves, and products—and connecting the data chain from raw materials to end customers—is a proven path to visibility, agility, and efficiency.
One of the world’s largest beverage companies, Anheuser-Busch InBev, is doing exactly that. The company is pilot testing an RFID program in its warehouses using Azure IoT. The solution tracks pallets of beer from the brewery to the wholesaler to the retailer in order to optimize inventory, reduce out-of-stock scenarios, and better forecast future retailer consumption trends.
The same study from The Economist Intelligence Unit found that 75 percent of OEM professionals partner with suppliers more frequently compared to five years ago. This is another area where IoT is being used to a competitive advantage. When you know where materials and products are in the process at all times, you can share that data to help suppliers improve performance. Using predictive models, problems can be spotted and collaboratively addressed before they cause disruptions.
Perhaps the most exciting development is the way supply chain boundaries have expanded with the advent of connected products. The division between upstream activities (the movement of materials and parts to the manufacturer) and downstream activities (the delivery of products from manufacturers to customers or intermediaries) is no longer clear cut. With the ability to connect products to the cloud after delivery to customers, goods can continue to deliver data back to you indefinitely, enabling new business models, continual improvement, and closer customer relationships.
Nearly three-quarters of respondents in The Economist’s OEM survey believe IoT is critical to transforming supply chains. Capabilities like those above have expanded the possibilities for transformation, including:
- AI-driven demand forecasting.
- Optimizing inventory across multiple locations to drive better service and reduced cost.
- Intelligent sourcing with rich spend analytics, contracting, and bill of materials management.
- Tracking and predicting supply chain disruptions to reduce risk.
- Dynamically optimized warehouse space utilization.
- Integrated track and trace for regulatory compliance and customer visibility.
Research and development
Just as IoT enables the supply chain to become more agile and insight rich, it can also transform how products themselves are developed. The time is ripe for this because today’s customers increasingly demand solutions tailored to their needs. One of the most promising approaches for manufacturing research and development (R&D) is the digital twin. These detailed digital simulations of physical objects are built from real-world data, empowering your designers to improve offerings in ways that make a measurable difference to customers.
Enriching R&D with IoT data helps get better products to market. Connecting those products makes it possible to continuously improve them even after sale and delivery: You can adapt your offerings to match how customers actually use them. You can also discover new opportunities by segmenting those usage patterns with analytics. With additive manufacturing capabilities, parts and products can be specifically tailored to the needs of individual customers.
thyssenkrupp Elevator, a worldwide leader in elevator technology, used the digital twin approach in building its Innovation Test Tower, which is both an R&D facility and a functioning office building. The platform they developed is called Willow Twin. “We don’t have to install massive new physical assets for testing because we do it all through the digital replica—with keystrokes rather than sledgehammers,” says Michael Cesarz, CEO of the MULTI technology division at thyssenkrupp. “We have this flexibility thanks to Willow Twin and its Azure infrastructure.”
Sales and marketing: delivering differentiated customer experiences
Putting IoT data to use in sales and marketing also brings customers closer. Connected products provide detailed insight into product usage and customer behavior that you can use for personalization and reputation building. This becomes a virtuous cycle, with data from CRM, marketing, social media, and other sources combining with IoT data to feed design, production, and supply chain capabilities.
It also results in better predictions of customer needs, so you can drive sales faster with less upfront investment. Rather than only talking to customers during the hot part of the sales cycle, you can have an ongoing conversation with them that creates brand affinity and leaves less room for competitors to step in.
Kohler Co. is using this approach with its KOHLER Konnect platform, gathering data to help it build the next generation of smart kitchen and bath products. “Today, when a tub, toilet, or faucet leaves our manufacturing facility, we never see it again,” says Fei Shen, Associate Director of IoT Engineering at Kohler. “But with KOHLER Konnect, we will be connected to our products all the time so that we can learn homeowners’ preferences and even get to the point where we can predict their needs.”
Finance: driving efficiency and profitability
The accounting department might not be the first place you think of when it comes to IoT and manufacturing, but data is the lifeblood of finance. Strategically used, IoT data has a strong role to play in improving financial performance. For example, it can help create an end-to-end, “quote-to-cash” solution that connects a customer’s intention to buy with your realization of revenue, encompassing the entirety of the sales, contract, and customer-relationship lifecycles. Using machine learning, you can automate insights from IoT data to recommend products, upsells, and cross-sells based on purchase history.
With IoT, your finance department gains real-time insight into your assets, which can support more effective risk management and more accurate financial valuations. Finance decision makers can also better understand what’s actually going on in the business as opposed to relying solely on abstract financial reports. Audit functions can detect anomalies using machine learning applied to data collected from the physical realm—in real time, not after the fact. Risk reduction and fraud prevention get much easier, through smarter tracking of physical assets, identification of suspicious inventory patterns, and closing of gaps in the traceability of materials and products.
C-suite: well-informed strategy
As you make the transition to Industry 4.0, it’s critical to give C-suite decision-makers access to insights flowing from connected devices to your business. Designing IoT solutions with CXOs in mind can deliver a lot of value—and not just in the typical realms of operations and technology. Imagine the Chief Product Officer being able to know exactly which features are being used most. Or the Chief Marketing Officer learning that there are unaddressed customer needs that constitute a new opportunity competitors have yet to spot.
Company leaders and board members have to digest a lot of information in a short amount of time. To facilitate this, IoT insights can be combined with traditional executive dashboards to provide a comprehensive view of business health that supports strategic decision-making. The huge quantities of data that connected factories and products generate can be distilled into relevant, easily consumed reporting. Leading thread manufacturer Coats took this approach, deploying executive-view dashboards that refresh every hour with high-level information about things like utilization and efficiency levels.
Bringing insights to light
Those who are using IoT to full potential across the manufacturing business are doing more than plugging sensors into the cloud. Success typically starts on the factory floor. The results spur company leaders to rapidly explore where else IoT could help.
The best IoT solutions are capable of this sort of scaling. The technology should make it easy to discover insights in the data and deliver them in the right form to the right person at the right time. That could mean an alert to a service team, customer insights for marketing, or integrating IoT data into a financial dashboard. Microsoft is focused on delivering a flexible, open, end-to-end ecosystem that helps you maximize the value of your IoT investment in every corner of your manufacturing business.
Watch for part four in this blog series, which will examine how IoT is changing how people do their jobs in manufacturing, and how companies are helping their workforces adapt and thrive in this new environment.
Learn more about intelligent manufacturing.