From Henry Ford’s automotive assembly line to the production of the iPhone, embracing and driving innovation has been at the forefront of manufacturing. That is because the sector always needs to boost productivity and efficiency. Manufacturers arguably missed out on the last big technological revolution – mobile technology – and its spoils. But today the Internet of Things (IoT), a key part of the so called “fourth industrial revolution”, is helping manufacturing become smarter, faster and more efficient.
The UK is well placed to benefit but more companies need to embrace the opportunity. The Confederation of British Industry (CBI) found in 2016 that more than half (54%) of UK businesses are investing in the technology, with 73% saying that the IoT will be critical to their future success.
However, that also means 46% of British companies are not getting involved with IoT. They are missing out, not only, on the benefits of real-time intelligence to make their businesses more efficient and productive but most importantly the possibility to develop new business models to compete more effectively.
In an ultra-competitive economic environment, manufacturers cannot afford to ignore the IoT shake-up. The McKinsey Global Institute has predicted that between $3.9 trillion and $11.1 trillion-a-year in economic value could be created by 2025 by linking the physical and digital worlds. The UK Government-commissioned Industrial Digitalisation Review found the manufacturing sector could unlock £455 billion over the next decade by, among other things, adopting IoT technologies.
“Government and industry must work together to seize the opportunities that exist in this sector and promote the benefits of adopting emerging digital technologies, as well as cutting edge business models,” Business Secretary Greg Clark said in reaction to the October report.
What are the opportunities? The key to IoT is data. In any manufacturing facility there are a huge number of things that can be measured. Correctly analysed, this data can provide an incredible amount of information to better inform key business and investment decisions.
The first step for any business is having the right tools to understand the data. For example, Welsh start-up WePredict is using sophisticated analytics to help the automotive industry reduce failure rates of individual components used in a vehicle.
Often a year or more before the manufacturer would identify the same issues. Car companies have to set aside large sums of capital on their balance sheets in case they need to pay out on warranties. This is currently based on generic information. More accurate data means more realistic warranty prices and the freeing up of cash for investment elsewhere.
Investment is one of the ingredients needed for a successful manufacturing enterprise. The other is the ability to manage costs to help maximise margin. Manufacturers need to ensure that machines can produce as much of a particular product as efficiently as possible.
Successful factories are automated to reduce labour costs and where machines run for as long as possible without maintenance to maximise time in use and reduce material waste.
IoT start-up Senseye offers a cloud-based solution that helps manufacturers reduce maintenance costs. By automatically identifying and predicting machine failure through machine learning algorithms, businesses can avoid uncertainty and profit-hitting downtime.
However, it is also about reducing other costs of production. Factories use a huge amount of energy The disruptive technology of enModus allows companies to monitor and automatically control all of their mains-powered devices such as lighting without the need to put in new cables or wires. Not the sexiest bit of kit, but think how much companies can save on their monthly bills by ensuring lights are only ever on when they are needed?
Added together all these IoT technologies can fundamentally change the economics of manufacturing in the UK. Combined with other innovations such as robotics, the days of outsourcing to lower cost territories in the far-east could be over. And Governments understand how critical manufacturing is for economies.
In the UK Brexit has created the demand for the UK to be a more productive, export-led economy as part of the recipe for survival outside the EU. That means UK manufacturing needs to be lean, fit and competitive which means technology will be critical. Helpfully, the UK government launched a £10 million fund in 2015 to help British businesses develop the new generation of hardware that takes advantage of the IoT.
Large companies are also taking notice of this great shift, with the likes of US machinery giant Caterpillar and German technology firm Siemens adopting IoT solutions. The former has teamed-up with an industrial analytics company, while the latter has embraced Germany’s “smart factories” initiative.
Consultants Capgemini said in a 2017 report that using digital technologies, including the IoT, in these type of factories could add up to $1.5 trillion in value to the global economy in five years.
However, take up remains slow. A survey of businesses in North America, Western Europe, India and China between February and March, also worryingly found that only 6% of manufacturers were “digital masters”. “Those firms that score high on both dimensions of digital and transformation management intensity,” according to Capgemini.
Elsewhere, the research revealed that 43% of respondents had an operational smart factory initiative, with just 14% of manufacturers describing themselves as “satisfied” with their level of smart factory success. This means there is an opportunity for the UK to take a lead.
Findings from the CBI demonstrate that manufacturers – both in the UK and abroad – realise that there are large financial prizes to won by embracing the IoT. However, it is obvious that much more needs to be done to adopt the technologies, train employees and executives, and start fully reaping the benefits from the IoT.
Manufacturers must act now or risk falling further and further behind the IoT revolution and allowing their competitors to overtake them as the sector moves into a new, better connected and data-driven future. Profits, revenues and ultimately livelihoods are on the line as digitalisation becomes the norm.
Emanuele Angelidis, CEO, Breed Reply, a leading operational investor in IoT
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