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Posts tagged ‘MES’

Industry 4.0’s Potential Needs To Be Proven On The Shop Floor

  • 99% of mid-market manufacturing executives are familiar with Industry 4.0, yet only 5% are currently implementing or have implemented an Industry 4.0 strategy.
  • Investing in upgrading existing machinery, replacing fully depreciated machines with next-generation smart, connected production equipment, and adopting real-time monitoring including Manufacturing Execution Systems (MES) are manufacturers’ top three priorities based on interviews with them.
  • Mid-market manufacturers getting the most value out of Industry 4.0 excel at orchestrating a variety of technologies to find new ways to excel at product quality, improve shop floor productivity, meet delivery dates, and control costs.
  • Real-time monitoring is gaining momentum to improve order cycle times, troubleshoot quality problems, improve schedule accuracy, and support track-and-trace.

These and many other fascinating insights are from Industry 4.0: Defining How Mid-Market Manufacturers Derive and Deliver ValueBDO is a leading provider of assurance, tax, and financial advisory services and is providing the report available for download here (PDF, 36 pp., no opt-in). The survey was conducted by Market Measurement, Inc., an independent market research consulting firm. The survey included 230 executives at U.S. manufacturing companies with annual revenues between $200M and $3B and was conducted in November and December of 2018. Please see page 2 of the study for additional details regarding the methodology. One of the most valuable findings of the study is that mid-market manufacturers need more evidence of Industry 4.0, delivering improved supply chain performance, quality, and shop floor productivity.

Insights from the Shop Floor: Machine Upgrades, Smart Machines, Real-Time Monitoring & MES Lead Investment Plans

In the many conversations I’ve had with mid-tier manufacturers located in North America this year, I’ve learned the following:

  • Their top investment priorities are upgrading existing machinery, replacing fully depreciated machines with next-generation smart, connected production equipment, and adopting real-time monitoring including Manufacturing Execution Systems (MES).
  • Manufacturers growing 10% or more this year over 2018 excel at integrating technologies that improve scheduling to enable more short-notice production runs, reduce order cycle times, and improve supplier quality.

Key Takeaways from BDO’s Industry 4.0 Study

  • Manufacturers are most motivated to evaluate Industry 4.0 technologies based on the potential for growth and business model diversification they offer. Building a business case for any new system or technology that delivers revenue, even during a pilot, is getting the highest priority by manufacturers today. Based on my interviews with manufacturers, I found they were 1.7 times more likely to invest in machine upgrades and smart machines versus spending more on marketing. Manufacturers are very interested in any new technology that enables them to accept short-notice production runs from customers, excel at higher quality standards, improve time-to-market, all the while having better cost visibility and control. All those factors are inherent in the top three goals of business model diversification, improved operational efficiencies, and increased market penetration.

  • For Industry 4.0 technologies to gain more adoption, more use cases are needed to explain how traditional product sales, aftermarket sales, and product-as-a-service benefit from these new technologies. Manufacturers know the ROI of investing in a machinery upgrade, buying a smart, connected machine, or integrating real-time monitoring across their shop floors. What they’re struggling with is how Industry 4.0 makes traditional product sales improve. 84% of upper mid-market manufacturers are generating revenue using Information-as-a-Service today compared to 67% of middle market manufacturers overall.

  • Manufacturers who get the most value out of their Industry 4.0 investments begin with a customer-centric blueprint first, integrating diverse technologies to deliver excellent customer experiences. Manufacturers growing 10% a year or more are relying on roadmaps to guide their technology buying decisions. These roadmaps are focused on how to reduce scrap, improve order cycle times, streamline supplier integration while improving inbound quality levels, and provide real-time order updates to customers. BDOs’ survey results reflect what I’m hearing from manufacturers. They’re more focused than ever before on having an integrated engagement strategy combined with greater flexibility in responding to unique and often urgent production runs.

  • Industry 4.0’s potential to improve supply chains needs greater focus if mid-tier manufacturers are going to adopt the framework fully. Manufacturing executives most often equate Industry 4.0 with shop floor productivity improvements while the greatest gains are waiting in their supply chains. The BDO study found that manufacturers are divided on the metrics they rely on to evaluate their supply chains. Upper middle market manufacturers are aiming to speed up customer order cycle times and are less focused on getting their total delivered costs down. Lower mid-market manufacturers say reducing inventory turnover is their biggest priority. Overall, strengthening customer service increases in importance with the size of the organization.

  • By enabling integration between engineering, supply chain management, Manufacturing Execution Systems (MES) and CRM systems, more manufacturers are achieving product configuration strategies at scale. A key growth strategy for many manufacturers is to scale beyond the limitations of their longstanding Make-to-Stock production strategies. By integrating engineering, supply chains, MES, and CRM, manufacturers can offer more flexibility to their customers while expanding their product strategies to include Configure-to-Order, Make-to-Order, and for highly customized products, Engineer-to-Order. The more Industry 4.0 can be shown to enable design-to-manufacturing at scale, the more it will resonate with senior executives in mid-tier manufacturing.

  • Manufacturers are more likely than ever before to accept cloud-based platforms and systems that help them achieve their business strategies faster and more completely, with analytics being in the early stages of adoption. Manufacturing CEOs and their teams are most concerned about how quickly new applications and platforms can position their businesses for more growth. Whether a given application or platform is cloud-based often becomes secondary to the speed and time-to-market constraints every manufacturing business faces. The fastest-growing mid-tier manufacturers are putting greater effort and intensity into mastering analytics across every area of their business too. BDO found that Artificial Intelligence (AI) leads all other technologies in planned use.

How Blockchain Can Improve Manufacturing In 2019

  • The business value-add of blockchain will grow to slightly more than $176B by 2025, then exceed $3.1T by 2030 according to Gartner.
  • Typical product recalls cost $8M, and many could be averted with improved track-and-traceability enabled by blockchain.
  • Combining blockchain and IoT will revolutionize product safety, track-and-traceability, warranty management, Maintenance, Repair & Overhaul (MRO), and lead to new usage-based business models for smart, connected products.
  • By 2023, 30% of manufacturing companies with more than $5B in revenue will have implemented Industry 4.0 pilot projects using blockchain, up from less than 5% today according to Gartner.

Blockchain’s greatest potential to deliver business value is in manufacturing. Increasing visibility across every area of manufacturing starting with suppliers, strategic sourcing, procurement, and supplier quality to shop floor operations including machine-level monitoring and service, blockchain can enable entirely new manufacturing business models. Supply chains are the foundation of every manufacturing business, capable of making use of blockchain’s distributed ledger structure and block-based approach to aggregating value-exchange transactions to improve supply chain efficiency first. By improving supplier order accuracy, product quality, and track-and-traceability, manufacturers will be able to meet delivery dates, improve product quality and sell more.

Capgemini Research Institute’s recent study, Does blockchain hold the key to a new age of supply chain transparency and trust? provide valuable insights into how blockchain can improve supply chains and manufacturing. A copy of the study is available here (PDF, 32 pp., no opt-in). Capgemini surveyed 731 organizations globally regarding their existing and planned blockchain initiatives. Initial interviews yielded 447 organizations who are currently experimenting with or implementing blockchain. Please see pages 25 & 26 of the study for additional details regarding the methodology.

Key takeaways of the study include the following:

  • Typical product recalls cost $8M, and many could be averted with improved track-and-traceability enabled by blockchain. Capgemini found that there was 456 food recalls alone in the U.S. last year, costing nearly $3.5B. Blockchain’s general ledger structure provides a real-time audit trail for all transactions secured against modifications making it ideal for audit and compliance-intensive industries.

  • Gaining greater cost savings (89%), enhancing traceability (81%) and enhancing transparency (79%) are the top three drivers behind manufacturer’s blockchain investments today. Additional drivers include increasing revenues (57%), reducing risks (50%), creating new business opportunities (44%) and being more customer-centric (38%). The following graphic from the study illustrates the manufacturer’s priorities for blockchain. Capgemini finds that improving track-and-traceability is a primary driver across all manufacturers, consistent with the broader trend of manufacturers adopting software applications that improve this function today. That’s also understandable given how additional regulatory compliance requirements are coming in 2019 and those manufacturers competing in highly regulated industries including aerospace & defense, medical devices, and pharma are exploring how blockchain can give them a competitive edge now

  • Digital marketplaces, tracking critical supply chain parameters, tracking components quality, preventing counterfeit products, and tracking asset maintenance are the five areas Capgemini predicts blockchain will see the greatest adoption. Based on interviews with industry experts and startups, Capgemini found 24 blockchain use cases which are compared by level of adoption and complexity in the graphic below. The use cases reflect how managing supplier contracts is already emerging as one of the most popular blockchain use cases for manufacturing organizations today and will accelerate as compliance becomes even more important in 2019.

  • Manufacturers have the most at-scale deployments of blockchain today, leading all industries included in the study. Blockchain adoption is still nascent across all industries included in the study, with 6% of manufacturers having at-scale implementations today. Customer products manufacturers lead in pilots, with 15% actively [purusing blockchain in limited scope today. And retailers trail all industries with 91% having only proofs of concept.

  • Combining IoT and blockchain at the shipping container level in supply chains increases authenticity, transparency, compliance to product and contractual requirements while reducing counterfeiting. In highly regulated industries including Aerospace & Defense (A&D), Consumer Packaged Goods (CPG), medical devices, and pharma, combining IoT and blockchain provides real-time data on the shipping container conditions, tamper-proof storage, each shipment’s locational history and if there have been changes in temperature and product condition. Capgemini sees use cases where a change in a shipment’s temperature as measured by a sensor change sends alerts regarding contractual compliance of perishable meats and produce, averting the potential of bad product quality and rejected shipments once they reach their destination.

  • Capgemini found that 13% of manufacturers are Pacesetters and are either implementing blockchain at scale or have pilots in at least one site. Over 60% of Pacesetters believe that blockchain is already transforming the way they collaborate with their partners. Encouraged by these results, Pacesetters are set to increase their blockchain investment by 30% in the next three years. They lead early stage experimenters and all implementers on three core dimensions of organizational readiness. These include end-to-end visibility across functions, detailed and defined supportive processes, and availability of the right talent to succeed.

  • Lack of a clear ROI, immature technology and regulatory challenges are the top three hurdles Pacesetter-class manufacturers face in getting blockchain initiatives accepted and into production. All implementations face these three challenges in addition to having to overcome the lack of complementary IT systems at the partner organizations. The following graphic compares the hurdles all manufacturers face in getting blockchain projects implemented by the level of manufacturers adoption success (Pacesetter, early-stage experimenters, all implementers).

Source: Capgemini Research Institute, Does blockchain hold the key to a new age of supply chain transparency and trust? October, 2018

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