How IoT Will Change Operations (Guide)

It’s no secret that the Internet of Things (IoT) is poised to have a big impact on how organizations design, produce and sell products and services. More and more, companies are looking at how the IoT can be leveraged across their entire operation, from how they identify new business models and source materials, to how they streamline production and manage the customer experience.

The Internet of Things (IoT) is changing the landscape of how businesses gather and analyze data across nearly every industry and sector. More than 40 percent of organizations expect Internet of Things (IoT) to transform their business or offer significant new revenue or cost-savings opportunities over the next three years, according to industry analyst firm Gartner. 

Though IoT is still in the early adoption stage, manufacturers for example, have been integrating data from sensors and instrumentation on the shop floor via manufacturing operations management (MOM) systems for many years. This makes it more important that organizations have a solid understanding of the differences between MOM systems and industrial IoT platforms.

Both have their strengths and play a role in delivering key insights to improve real-time performance and operational visibility to enable the smart, connected enterprise. Manufacturing operations management systems are not going away. In fact, many experts expect them to evolve into key components of Internet of Things applications.

The general consensus today is that MOM systems are not going away anytime soon. It is expected that they will continue to act as components of a hybrid traditional/IoT solution. To this end, manufacturers should consider IoT strategies alongside continued MOM investment. This approach allows manufacturers more flexibility, better performance and reduced cost in running their plants. 

And it is also safe to assume that changes will continue to be made to legacy platforms, leading to ever-increasing agility and integration, thereby providing manufacturers direct access to data to make better and more informed decisions. As the need to apply traditional control hierarchies to the flow of non-control-related information erodes, the IoT platform will increasingly provide direct access to information on the shop floor. 

However, control and other time-critical applications will remain firmly in the plant for the foreseeable future. This understanding of how MOM and IoT complement one another can benefit manufacturers greatly. Manufacturers that support their MOM solution with an industrial IoT platform will gain a key competitive advantage—improved operational efficiency, productivity and the agility to support current and future manufacturing needs.

Additionally, the growth of digital business and the Internet of Things (IoT) is expected to drive large investment in IT operations management (ITOM) in the next three years, according to Gartner. Organizations are moving to ITOM open-source software (OSS) for lower cost of ownership.

“While acceptance of OSS ITOM is increasing, traditional closed-source ITOM software still has the biggest budget allocation today,” said Laurie Wurster, research director at Gartner. “Moreover, complexity and governance issues that face users of OSS ITOM tools cannot be ignored. In fact, these issues open up opportunities for ITOM vendors. Even vendors that are late to market with ITOM functionality can compete in this area.”


The Fourth Industrial Revolution And Operations Management

Since the late 1700’s, there have been four recognized shifts in manufacturing processes and technology. The first, emerging in 1783, centered around the introduction of water power for increased efficiency, steam engines powering machinery such as looms and cotton gins, and the use of conveyors. These innovations led to unprecedented economic growth and laid the foundation for manufacturing today.

The Second Industrial Revolution, emerging around 1870, brought us electricity. The invention of lightbulbs and power stations enabled automation of factories, and thus gave way to mass production. Ninety years later, in 1960, we saw the third wave of the Industrial Revolution come to fruition. 

Computers and digital technology replaced analog technology, leading to increased trade, globalization, and information technologies. This revolution has led us to the world we know today, but change is constant and, especially with technology, we must always be on our toes. The fourth wave, Industry 4.0, has begun to emerge. 

This will be the era of cognitive business operations – where IoT sensors, big data, predictive analytics, and robotics will forge the future of business operations across all industries. The IoT enables devices to connect and exchange data. In manufacturing for example, the IoT connects assets to processes, systems and people.

IoT focuses on driving improved performance and value to three fundamental pillars of manufacturing operations:

Intelligent Assets & Equipment:

When referring to an intelligent asset or piece of equipment, by enabling these assets with IoT sensors and cognitive capabilities, they can sense, communicate, and self-diagnose issues in order to optimize performance and reduce downtime. 

Just like when you may start to feel like something is off with your own body, you have the cognitive abilities to sense it, communicate the problem, and likely even have a fairly good idea of what is wrong before going to the doctor for confirmation. By catching problems early, it avoids disaster down the road.

By using intelligent assets and equipment, it is possible to:
  • Prevent production delays and improve production line performance
  • Reduce equipment downtime and increase process efficiency
  • Expedite equipment repairs
  • Cognitive processes & operations

Manufacturers have been collecting and storing data for the purposes of improving operations since the first Industrial Revolution. As data has grown in size and complexity, it has gotten far more challenging to make sense of the output. The concept of a cognitive process lies in the fundamental ability to take existing data and analyze it to drive decisions around improved operations, quality, and safety. 

By analyzing both structured data being collected in databases, and unstructured data such as photos or video footage, it is possible to bring more certainty to decision-making and business operations. With cognitive processes and operations, businesses can:

  1. Improve productivity of the production line through inventory and scrap reductions;
  2. Expedite service calls and repairs and reduce warranty costs;
  3. Improve quality and yield due to improved quality practices;
  4. Smarter resources & optimization.

When it comes to production optimization, Recent Forbes Insights research found that 45% of executives surveyed identified IoT-enabled manufacturing as a high or very high priority for their enterprises—despite only 21% of respondents being directly involved in the manufacturing sector. This seems logical given the impact the IoT can have on almost any product-oriented business.

For example, when IoT-based solutions are introduced on the factory floor, they can have a dramatic impact on overall quality by helping manufacturers detect substandard materials and ensuring adherence to product specifications. For brands, the resulting higher level of quality generates cost savings throughout a product’s life cycle.

Production optimization drives additional benefits. For companies like Harley-Davidson, with complex manufacturing operations, investing in IoT-enabled production facilities is a relatively simple decision with tangible results. At the Harley-Davidson manufacturing plant in York, Pennsylvania, for example, every step in production is now tracked and recorded into a real-time performance management system. 

As part of the implementation, Harley-Davidson installed software and sensors that measure, record and manage the performance of different equipment and processes. The paint booth, for example, is monitored for heat and humidity, and software automatically adjusts the speed of fans when measurements deviate from acceptable ranges.

The system also returns real-time data to employees and managers via large screens, computers and smart devices. This information gives them better visibility into what is happening on the plant floor and improves decision making in the fast-paced environment. The results of Harley-Davidson’s efforts to optimize production have been profound. 

They have reduced costs by 7%, improved employee productivity by 2.4% and increased net margin by an impressive 19%. Optimizing resources, whether it be people, energy, or knowledge, is critical to keeping costs low and improving overall engagement and productivity levels. When it comes to organizational operations in general, using IoT and cognitive insights, it’s possible to utilize inputs like geolocation data, usage data, individual data, and environmental conditions, combined with analytics, to:


Improve worker safety and gain better workforce management as well as increase worker productivity and expertise. Here are other key areas where IoT is having the most impact within industrial companies.

Supply Chain Management: In a Forbes Insights survey, 64% of executives said that the overall management of the supply chain was a priority for their company. For companies with sprawling logistics operations, this seems obvious. Amazon, for example, has experienced rapid growth in the past few years.

It currently manages over 500 million stock keeping units (SKUs) (up from 400 million) and operates more than 490 fulfillment centers, hubs and other locations around the globe, some of which are over 1 million square feet in area. Amazon employees used to walk through these massive fulfillment centers, scanning and picking products. 

But in 2012, Amazon acquired Kiva Systems, which manufactures IoT-enabled robots that are now used to automate that some of the process. By improving warehouse efficiency, these robots have cut operating expenses by 20%, saving an estimated $22 million every year. If the Kiva robots were installed globally, at all of Amazon’s estimated 255 distribution centers, it could save the company more than $5 billion annually.

Amazon is not alone, and warehousing is not the only application. Solutions enabled by the IoT can also help streamline the costs of distribution and logistics in many types of commercial and industrial enterprises. In the healthcare industry, for example, the supply chain for medical devices and implantable wastes $5 billion annually due to complexity, redundancy, inaccessible data and inadequate analytics.

A recent report from Strategy Analytics suggests that IoT capabilities could help slash medical supply chain costs by 25% or more, saving the industry more than $1.25 billion per year.

Asset Tracking And Management: The IoT can also improve asset tracking and management, another area that’s important to executives. Seventy-four percent of respondents in the Forbes Insights survey said asset tracking and management was a large priority for their companies. For organizations with a large inventory of assets, the IoT can provide important information about the location, health and efficiency of equipment. Consider Sullair, for instance. 

For more than 50 years, the company has manufactured air compressors that are used in a wide variety of industrial applications. The company’s redesigned remote monitoring IoT solution—AirLinx—is a standard feature across Sullair’s product line, enabling customers to monitor their compressors and receive maintenance alerts that help minimize downtime.

Downtime is costly in any production environment, and the prevalence of air compressors in industrial settings makes reliability critical. According to Jon Hilberg, Sullair’s vice president of commercial and industrial air systems, “compressor downtime in a factory is one of the most critical problems a user can face.” Having the ability to monitor the health of that equipment and eliminate unscheduled maintenance is an important way to ensure overall productivity.

Of course, asset management is a need in virtually every industry and business type. Assets can include everything from handheld devices, furniture and vehicles to raw materials, parts and large industrial equipment. When armed with near real-time data, including asset location, environment and health, companies can optimize how assets are used and deployed to help maximize return on investment.

Financial Decision Making: One challenge for financial leaders in any business is gaining access to metrics that can help avoid risk while simultaneously taking advantage of the opportunities these new insights present. Perhaps it’s not surprising then that 82% of executives in the Forbes Insights survey said that finance was one of the functions they were prioritizing most.

IoT can play an important role in financial decision making by providing real-time visibility that complements data from enterprise resource planning (ERP) and accounting systems and allows for a more holistic view of the enterprise. Take Atria Power, for instance. Atria Power is one of India’s largest independent power producers.

Through a partnership, it recently created a forecasting model for its power generation and distribution network. Atria has multiple locations that use both wind and solar technology sourced from several different manufacturers. 

To populate the forecasting model, Atria needed an IoT solution that would enable it to capture and analyze information from its equipment, including environmental factors, such as wind direction and cloud cover, despite variances between the OEMs in how data was stored and transmitted. Atria began by collecting data from its wind turbines, which use sensors to measure things like the speed and angle of the turbine’s blades and temperature of components.

Every 90 minutes, the IoT-enabled solution sends details on the equipment and environmental conditions and helps Atria determine how much energy will be produced over the next 24 hours. With this information, Atria Power can more accurately forecast how much energy it can provide to utilities and plan for the storage of excess energy that can be sold later.

Customer Experience: One of the most broadly applicable manifestations of the IoT is in its potential to help organizations improve the customer experience (CX). Again, in the Forbes Insights study, 90% of executives said that potential improvements to CX was one of the most important opportunities for the IoT. While this seems obvious in the consumer space, the IoT can also dramatically impact how customers procure and consume industrial equipment.

Heavy equipment manufacturer Caterpillar, for example, is transforming its business by incorporating the IoT and other digital technologies. More than 10 years ago, the company began outfitting its equipment with sensors and embedded connectivity. 

Today, almost everything Caterpillar produces, from locomotives and industrial generators to construction and mining equipment, can measure and communicate critical data. As a result, over 560,000 Caterpillar vehicles now collect and transmit data to their owners. To help customers engage with these new data streams, the company has also developed a suite of software, analytics tools and application programming interfaces (APIs) that enable customers to retrieve, process and analyze their data.

Caterpillar’s IoT-enabled products increase the value it provides to its customers by reducing operating costs, increasing efficiency and improving productivity. In some cases, these tools have even led to full autonomy. Caterpillar’s autonomous mining vehicles, which can function for longer periods and along more precise routes than manually driven vehicles, have helped increase mine productivity by over 20%.

As these examples show, the IoT has the potential to help almost any company move its business forward. Whether it’s through production optimization, a streamlined supply chain, better asset tracking and management, improved financial decision making or a better customer experience, the IoT can, and will continue to, improve the bottom line for companies in nearly every vertical.


The Opportunities And Challenges Of IoT:

Organizations around the world are placing big bets on the Internet of Things (IoT), including platforms, hardware, and applications. According to an IDC report, global spending on IoT reached $700 billion in 2016 and is expected to reach 1.3 trillion by 2020. However, turning investment into a positive return is the critical question for executives leading IoT transformation. 

Several challenges – lack of clear business case, security concerns, constrained analytical capabilities and uncertainty about IoT standards and protocols – are limiting organizational ability to realize value from their IoT investments.When it comes to ITOM, through 2020, public cloud and managed services are also expected to be leveraged more often for ITOM tools, which will drive growth of the subscription business model for both cloud and on-premises ITOM.

However, on-premises deployments will still be the most common delivery method. This imposes multiple challenges to incumbent ITOM vendors.

First, those vendors that do not offer a cloud delivery model will face continuous cannibalization from ITOM vendors that can deliver ITOM through both cloud and on-premises.

Second, platform vendors, such as Microsoft Azure and Amazon Web Services (AWS), are providing some native ITOM functionalities on their public clouds.

Customers that are running workloads solely on these platforms may prefer these native features. There are also “hybrid” requirements for ITOM tools that can seamlessly manage both cloud and on-premises environments.

As the IoT in general continues to grow, solutions need to be able to grow with a customer’s needs.


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