Going Digital: Manufacturing is Taking the New Connected World Very Seriously

B. Washburn
B. Washburn

Summary Bullets:
• The manufacturing sector is pulling far ahead of other vertical segments when it comes to going digital.

• Manufacturers are working new digital business on two vectors: Intelligence on their factory floor; and embedded in the products they build and ship.

Here at Current Analysis, we’ve been hearing our share of hype related to the Internet of Things (IoT). As interesting as sensors and connectivity and analytics might be individually, it’s really about the combination of these elements to create totally new digital business models. There’s no shortage of service provider and vendor pitches for going digital. The industry has its photogenic poster children, like Progressive’s behavior-based insurance program; GM OnStar connected car and telematics; and GE Predix with its comprehensive aircraft engine analytics.

Earlier in 2016, Current Analysis launched an Enterprise IoT Investment study, which surveyed more than 1,000 business respondents worldwide about their current and planned adoption of IoT, and how that looked in terms of digital business practices. But things got really interesting when we pulled out the manufacturing vertical for a closer look. Companies in manufacturing are:

• More than three times as likely as other sectors to be exploring IoT-based asset tracking solutions, as well as IoT-enabled energy, water and waste management;

• Also more than three times as likely to be looking to implement IoT-powered predictive maintenance and warehouse/supply chain solutions;

• More than twice as likely as other sectors to be working at IoT-powered quality testing, remote monitoring and control, as well as overall building management.

What’s more, over one-third of respondents in manufacturing are looking to incorporate IoT into their network management systems, and more than two-thirds into their security systems — again, far higher numbers than other sectors. It’s possible to respond with a shrug and chalk it up to “Industry 4.0”, the initiative kicked off by the German government to bring about a digital revolution in manufacturing.

But why specifically manufacturing at the forefront? The vertical has particular qualities that push the sector to adopt these new technologies. High-tech manufacturing relies on expensive, specialized machines, which threaten to shut down the business if they break down. Companies must retool to change their product every so often (the intervals will vary depending on the type of business), and that changeover can be extremely complex. But the machines and products are in controlled environments (e.g., the factory floor or in a warehouse). There is a steady stream of incoming materials and energy, and of outgoing products and waste. That combination of factors is low-hanging fruit for digital automation: Easy, high-performance connectivity from stationary locations; high-value analytics because of the expensive equipment; accountability for efficient use of resources.

At the same time as they are looking to make the factory floor more intelligent, manufacturers in areas involving electronics/hi-tech in some sectors have begun embedding their own sensors and connectivity into products they ship. After all, the manufacturing sector is building the elements that other verticals will use to help their respective businesses in turn evolve their own digital models.


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