The business impact of Industrial IoT

In this fourth article on the Industrial Internet of Things, Alan Griffiths of Cambashi explores the business reasons behind companies implementing the IIoT.

Industrial IoT IIoT Industrial Internet Data Connectivity - Stock Image
As with any investment in business systems or technology, there are two main reasons to invest in IoT – efficiency and competitive advantage.

I explained in an earlier article that most of the technology used in IoT solutions has been around for some time, and that its recent growth is commercially driven – the rapidly falling cost of sensors and the affordability of cloud computing.

Nevertheless, companies must still assess the business value that can be achieved before deciding to go ahead with a project, and technology providers need to understand this before investing in solution development.

In this article, I will discuss the different ways manufacturing businesses are benefiting from IoT solutions, how technology vendors are gearing up to provide solutions and the effect this is having on the market.

The business case for IoT

Is there a business case for IoT in your company? As with any investment in business systems or technology, there are two main reasons to invest in IoT – efficiency and competitive advantage.

This article first appeared in the September issue of The Manufacturer magazine. To subscribe, please click here.

Efficiency

The efficiency route means doing more for less:

  • Cost reduction – reducing the cost of design, production, supply, distribution, marketing or general administration
  • Quality improvement – reducing the cost of quality
  • Regulatory compliance – reducing the cost of conformance.

For example, Kaeser, a German company that supplies air systems, has worked with its ERP supplier (SAP) to improve efficiency in operations and provide predictive maintenance. (Click here to see a video interview with Falko Lameter, CIO Kaeser Kompressoren, where he discusses the use of real-time analytics from sensors on customers’ equipment to develop a predictive analytics capability and enable pre-emptive maintenance).

Fusheng, a Chinese company that makes compressors, used Intel’s Adlink IoT Gateway to channel data from the sensors on its compressors to the cloud and at the same time provide security.

Microsoft Azure, the cloud platform they use, provides the analytics engine. By monitoring their compressors in the field, Fusheng was able to perform valuable data analysis and implement effective predictive maintenance.

This improved downtime, reduced MTTR (mean time to repair) and improved energy efficiency by fixing poorly operating compressors (see cast study at the bottom of this article).

The advantage of going for efficiency savings is that it is a low-risk approach. Problems or areas for improvement can always be identified, and an incremental solution can be implemented as shown in the Kaeser and Fusheng examples.

However, there is a risk that the search for reducing cost becomes all-consuming and results in a race to the bottom.

Competitive advantage

By contrast, competitive advantage means doing something new to steal a lead on your competitors, for example:

  • A new (disruptive) business opportunity
  • A new payment model, making it easier for a customer to buy your product
  • Enhancing an existing product or service to attract new customers or more revenue
  • Disruptive action may be needed in order to remain competitive.

Although the benefit of competitive advantage is harder to calculate than efficiency savings, its value can be much greater. Peterson and CNH Industries are two examples of companies disrupting their industries – see boxes.

Getting started

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The business impact on a company using IoT will depend first on the overall approach.

However, a company decides to balance efficiency and competitive advantage, there are three ways to get started:

  • Build from scratch using an IoT platform and other components
  • Use a packaged solution or build upon an existing enterprise system, such as ERP or MES
  • Go for a proof of concept experiment to learn from and create a plan.

The choice will depend on budget availability, in-house expertise and the strength of the relationship with the enterprise system provider. To get an idea of where to start, Maciej Kranz of Cisco, in his book Building the Internet of Things identifies four paths to IoT payback:

  • Connected operations, such as joining meters to a network
  • Remote operations, such as asset management
  • Predictive analytics, to identify an issue and quickly take corrective action
  • Predictive maintenance, to increase up-time by pre-empting failure.

Business impact

The business impact on a company using IoT will depend first on the overall approach; going for efficiency is incremental and doesn’t require major changes to the business; going for competitive advantage may require business transformation and change the relationship with the customer.

The impact of IoT on each industry will be very different. Some, like the process industry, have been using sensors and systems to control production for many years, and the effect of new capabilities in IoT will enhance this approach.

In other industries, such as agriculture and transport, the effect could be transformative, with winners and losers. Even though ‘big things move slowly’, big companies are paying attention to IoT.

Not only do they see the efficiency and competitive advantage, but every player also wants to make sure their business is not disrupted by a fast moving, probably smaller company that offers something new.

Case study 1 – Fusheng Air Compressors

Fusheng is using IoT for data acquisition, predictive maintenance and efficiency improvements:

  • Predictive has advantages over preventative maintenance
  • Fusheng compressors continually report the status of their internal parts so that only those that need replacing are ordered
  • The data collected in the cloud is analysed to improve performance

Benefits

  • Downtime improved by 25%
  • MTTR improved by 15%
  • Improved energy efficiency by fixing poorly-operating compressors (before they fail)

Implementation

ADLINK IoT Gateway (from Intel) provides:

  • Hardware security
  • Data filtering

Microsoft Azure Cloud (GoService) provides:

  • Monitoring
  • Predictive Maintenance
  • Data analysis

Case study 2: Peterson – disrupting the forestry business

Peterson, a US forestry equipment company saw an opportunity to add a new recycling line to its forestry equipment business.
Peterson, a US forestry equipment company saw an opportunity to add a new recycling line to its forestry equipment business.

Peterson, a US forestry equipment company saw an opportunity to add a new recycling line to its forestry equipment business. In 2016, Matt Prenevost, remote monitoring IoT manager at Peterson, began the company’s digital transformation, focusing on IoT technology – a first in their industry.

Azure IoT was retrofitted to active machines and built into new ones. Operators and technicians can now monitor performance metrics, anticipate when a particular part is going to fail, and have a replacement delivered before there’s even an issue.

Technicians can also update operating code or apply safety updates remotely rather than sending someone from the factory, which enables customers to get up and running rapidly. The upgrade means Peterson’s machines are smarter, customer satisfaction is higher, and their investment is protected.

The Peterson team now interact with customers in new ways: they can work directly with people using their machines, walk through problems remotely, analyse data to obtain insights and anticipate issues before they happen. Customer satisfaction is higher and Peterson uses the data to guide product development.

Case study 3: CNH Industrial – transformation for IoT

CNH Industrial is one of the world’s largest capital goods companies, specialising in the manufacture of agricultural and construction equipment, commercial vehicles and buses.

CNH Industrial embarked on a transformation to make smart connected products an integral part of its portfolio of customer offerings.

One goal was to build customer loyalty through greater visibility into the total cost of ownership of the machines, which involved performance monitoring as well as integration with core enterprise business systems, such as ERP and CRM.

Currently, CNH Industrial enables three categories in its IoT offerings:

  • Monitoring – enables the comprehensive monitoring of a product’s condition, operation, and external environment through sensors and external data sources
  • Control – uses software, embedded in the product or in the cloud, to allow customisation of product performance and personalisation of the user experience
  • Connected vehicles – CNH can predict failures and reduce downtime via remote services and help farmers monitor their fields and equipment to improve efficiency.

Now, as a participant in the Internet of Food and Farm 2020 (IoF2020), a European consortium fostering large-scale IoT adoption in the farming and food value chain, CNH Industrial will lead a use case on interoperability.

This area focuses on enabling agricultural machinery, independent of brand, to work as part of one unified agronomic production system, leading to operational efficiencies, with the ultimate aim of improving overall agricultural productivity.

Alan Griffiths, Industry Analyst, IIoT and Cloud computing

Further information:

For more insight into the IIoT, please contact the author at: Cambashi, 52 Mawson Road, Cambridge CB1 2HY

+44 (0)1223 460439 //  www.cambashi.com