Success factors for 2017: skills, services & IoT

Keyboard Key Success Digitalisation Factors Stock Image - Image courtesy of Pixabay.
Manufacturers need to think carefully about what skills, technology and business approach is most relevant to them - image courtesy of Pixabay.

Bridging the skills gap and boosting services will be top priorities for manufacturers over the coming year. Antony Bourne, IFS global industry director for manufacturing, outlines his three key predictions for 2017 and beyond.

Apprenticeships will become more important than degrees

The future of every industry depends on its people; and sometimes good people are hard to find. Across Europe and the US manufacturers are wrestling with a skills gap. In 2017, solving the skills shortages could bring in a new era of apprenticeships, in-house peer training and firms working more closely with local education institutions to get younger talent into the industry.

Antony Bourne, global manufacturing industry director, IFS.
Antony Bourne, global manufacturing industry director, IFS.

A Deloitte study found “over the next decade nearly 3.5 million manufacturing jobs in the US will likely need to be filled. The skills gap is expected to result in 2 million of those jobs going unfilled”. In Europe the picture is similar. More than 80% of the executives surveyed in Deloitte’s report believe the skills gap will impact their ability to meet customer demand; almost the same amount believe it will impact their ability to increase productivity and implement new technologies.

The study also shows that a career in manufacturing is ranked consistently low. Only 37% said they would encourage their children to go for a manufacturing career. So what is to be done? Manufacturers need to start being more proactive role in spotting and training talent young. Apprenticeships and in-house training will move up the agenda. For young talent, apprenticeships mean solid, bankable skills with no debt attached. For Employers it means the skills they really want.

There are also new types of skills that will become particularly high in demand in the future. A factory will often consist of thousands of IoT sensors and a number of new devices connected to the internet continuously gathering data. This will result in a greater need to analyse large data volumes and automating key processes based on data. For young apprentices the technical, analytic and personal skills learnt are gifts that will keep giving.

In some countries, like the UK, manufacturing salaries are higher than the national average. So bring in new blood. Think carefully about how you build up your skills set. Ask yourself: Who will benefit my company more in the long run—a graduate with a degree? Or a young, eager professional schooled in the reality of my business and committed to its success?

75% of mid-sized manufacturers in Europe and the US will adopt servitization before 2018

It’s not easy being a manufacturer: The price of manufactured goods in the West has been falling for decades. Within the next decade, western manufacturers will no longer be able to compete on price. The days of ‘make it and sell it’ as a default business model are over. So how else can manufactures compete?

Servitization Meeting Oil & Gas Stock Image
Servitization is simply understanding the bottom line of what your customers really want, moving away from providing standalone products towards offering capabilities.

Servitization is simply understanding the bottom line of what your customers really want, moving away from providing standalone products towards offering capabilities. IFS customer, Beijer Electronics is a great example. A global innovator in industrial automation and data, Beijer makes smart black-box systems that optimise input output devices. With copies of its technology appearing at ever cheaper prices and hardware sales predicted to decline, Beijer needed to be both proactive and innovative. So the company servitized, launching the online WARP Engineering Studio.

With WARP customers can integrate, customise and better control how they use Beijer’s products. WARP provides premium services customers can operate on top of their black boxes – and speeds up their processes. For Beijer, selling products as a service through WARP means customers will not want, or need, to compare them on product price. The capabilities the Studio delivers are what the customer value. Servitization gives Beijer a highly strategic competitive edge, allowing it to monetise vast in-house expertise, harnessing it to make sure that their customers get what they really want.

So, how can manufactures start building their services?

  • Step one: start small. Are you offering customers spare parts and consumables that add value to their purchase?
  • Step two: what maintenance services do you offer customers? Built-in maintenance de-risks a customer’s purchase. Service contracts that guarantee, for example 99% uptime, can be optimised through live IoT feeds, where you, the supplier, schedules preventative maintenance that lets the customer focus on their core business.
  • Step three: share risk – and revenues. Selling capabilities rather than just equipment. Customers pay a monthly fee for a guaranteed service. Manufacturers get a solid, predictable revenue stream independent of falling product prices.

The journey isn’t easy, sales cycles can be longer, new service departments may need to be created, revenue gaps can occur before services mature. But when manufacturers move beyond the factory walls and ask themselves what it is their customers really need from their products, new relationships, growth and opportunity can flourish.

More than 80% of manufacturers will realise they already have IoT solutions – the question is: How easily integrated are they?

IoT Internet of Things
Currently, 50% of the cost of implementing IoT projects goes to integration.

After years of hype we tend to forget that many manufacturers already have IoT capabilities; and have had for years. They just might not identify them as such. But systems like Supervisory Control and Data Acquisition (SCADA) and Programmable Logic Controller (PLC) have efficiently gathered performance data from equipment since the 1980’s and 90’s. And many continue to do so.

Manufacturers need to think carefully about which data performance tracking technology is most relevant to them. For those producing large-scale capital equipment to be deployed in the field, new sensor-enabled data gathering technology is a fantastic value-add. It enables them to offer maintenance and services around the clock, in tough environments – a serious competitive edge.

But for manufacturers producing a higher volume of smaller products in-house, for example, IoT field sensors and monitoring would be hugely costly. In these cases, preventing problems before the goods leave the factory is the priority. So If SCADA or PLC do the job – an IoT solution is already effectively up and running.

Currently, 50% of the cost of implementing IoT projects goes to integration. Some of it, for sure, unnecessarily. For these high-volume manufacturers an open architecture ERP system that lets them integrate their existing legacy systems without costly integration could be money better spent. So carry out an audit. Identify which KPIs, measured where, really count for your business. Today’s IoT offers tremendous advantages for some… But for others it can be a costly irrelevance.