Executive Briefings

Get Your Supply Chain Ready for the Industrial Internet of Things

 

The Industrial Internet of Things (IIoT), the sophisticated, connected B2B sibling of IoT, is still in its relative infancy. Yet, companies which don't take baby steps now might soon find themselves scrambling to keep up with faster-maturing peers on the path to the optimized, synchronized, automated manufacturing vision of “Industry 4.0.”

Leading manufacturers are already exploring the IIoT as a way to provide demanding customers more and diverse products and services. These companies are working to link IIoT with Lean Sigma and Big Data via “Smart Operations”—an evolutionary step toward a more connected, smarter supply chain.

Fortunately, new industry research, tools, and best practices are emerging, that can help you move toward the goals of supercharging value chains, improving quality, traceability, sustainability, and overall efficiency.

Early Mover Advantage

Global logistics company UPS, in conjunction with Industry researcher IDC, recently studied 100 companies working to transform their manufacturing operating models and supply chains. Most participants judged their companies to be “relatively immature.” However, researchers found a gap already widening between those aggressively embracing Smart Operations (“Thrivers”) and those falling behind (“Survivors”). 

Thrivers, they predict, will enjoy “superior revenue growth and higher margins in the emerging digital economy,” and Survivors, the opposite. The findings seemed to support a separate study by MIT’s Sloan School of Management that found companies vigorously pursuing this type of transformation enjoy profits 26% higher than those who don’t.   

Charlie Chung, UPS senior marketing manager, Industrial Manufacturing, says the long-term impact will be even greater. “The flexibility and operational efficiencies promised by smart operations will revolutionize manufacturing and distribution processes as we know them,” Chung said. “The only question is when this will take place. Given the pace of business change, it will be sooner than most people think.”

Others point to the worldwide embrace of the broader, consumer-oriented Internet of Things as a strong indicator of inevitable IIoT adoption by producers. “IoT has had a transformative impact on businesses of every kind around the globe,” notes Jahangir Mohammed, founder and CEO of Jasper Technologies Inc., a World Economic Forum Technology Pioneer. “Soon,” he predicts, “every business will be an IoT business.”

Small Steps—Now

What steps should you take to prepare your supply chain to benefit from the still-evolving IIoT? Here are some places to start, suggested in the UPS and IDC study, to gain momentum:

1.    KNOW WHERE YOU STAND

Use industry data to compare your company’s investments and maturity of smart operations plans to your peers. Take a look at the chart below. Where are you? An honest assessment of where your company stands provides a good starting point for creating a viable plan to move up the maturity curve. 

Take a look at your investments in cloud connectivity for products and related assets, real-time process analysis and intervention, and data analytics. IDC and UPS researchers found a strong link between aggressive investments in these areas and Smart Operations readiness. 

Figure 1: Maturity Curve | UPS 2016

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2.    LOOK AT DECISION-MAKING AND STRATEGY  

Identify key decision points. This lets you highlight the most important sources of data, most strategic value chain participants, and the role of third-party service providers.

Set priorities for connecting products in the field and the assets in the value chain. The whole value chain doesn’t have to be instrumented all at once; by focusing on the most critical areas, a company will get the highest returns, and will also gain valuable insight as to how to best deploy the technology.

3.    FIND HELPING HANDS

Leverage strategic suppliers, sales channel partners, and your logistics provider, to achieve higher levels of process integration. 

Third-party service providers can bring scale, process expertise, and advanced technology knowledge to the transformation. They can help “survivors” gain ground quickly, and “thrivers” scale rapidly. Data from the UPS and IDC study indicates that at least 40% of companies are planning to increase their use of 3PLs over the next three years, at least partly because of talent shortages, but also to scale rapidly and improve operational excellence.
 
Figure 2:  Use of Third-Party Service Providers (3PLs) Over the Next Three Years | UPS 2016



 
Going it alone isn’t always the most efficient adoption path. “Many companies that try to [implement] their own IIoT infrastructure do so at the wrong level, only to learn that what they really need is very difficult to build,” cautions Diego R. Tamburini, a manufacturing industry strategist for Autodesk not affiliated with the study. 

Jim Brown, president of Tech-Clarity, an independent research and consulting firm specializing in manufacturing, strongly agrees. “Most companies’ IIoT initiatives will require a wider selection of more advanced IT skills than they can afford,” he wrote in the recent ebook “Ten Build-Buy Factors for IoT Platforms.” The same holds true for the more complex IIoT.

Partners can also help companies avoid the common mistake of gathering data for IIoT without first having a clear purpose in mind, says Autodesk’s Tamburini. “You don’t have to boil the ocean. Figure it out upfront, rather than getting flooded with data that you don’t know what to do with.”

Analysts say companies needn’t—and shouldn’t—try tackling too many preparatory steps for “Smart Operations” at once. But with more than half of all manufacturers expected to reach higher levels of IIoT maturity within three years, the next evolution of manufacturing and synchronized industrial automation is quickly readying itself to run.

Leading manufacturers are already exploring the IIoT as a way to provide demanding customers more and diverse products and services. These companies are working to link IIoT with Lean Sigma and Big Data via “Smart Operations”—an evolutionary step toward a more connected, smarter supply chain.

Fortunately, new industry research, tools, and best practices are emerging, that can help you move toward the goals of supercharging value chains, improving quality, traceability, sustainability, and overall efficiency.

Early Mover Advantage

Global logistics company UPS, in conjunction with Industry researcher IDC, recently studied 100 companies working to transform their manufacturing operating models and supply chains. Most participants judged their companies to be “relatively immature.” However, researchers found a gap already widening between those aggressively embracing Smart Operations (“Thrivers”) and those falling behind (“Survivors”). 

Thrivers, they predict, will enjoy “superior revenue growth and higher margins in the emerging digital economy,” and Survivors, the opposite. The findings seemed to support a separate study by MIT’s Sloan School of Management that found companies vigorously pursuing this type of transformation enjoy profits 26% higher than those who don’t.   

Charlie Chung, UPS senior marketing manager, Industrial Manufacturing, says the long-term impact will be even greater. “The flexibility and operational efficiencies promised by smart operations will revolutionize manufacturing and distribution processes as we know them,” Chung said. “The only question is when this will take place. Given the pace of business change, it will be sooner than most people think.”

Others point to the worldwide embrace of the broader, consumer-oriented Internet of Things as a strong indicator of inevitable IIoT adoption by producers. “IoT has had a transformative impact on businesses of every kind around the globe,” notes Jahangir Mohammed, founder and CEO of Jasper Technologies Inc., a World Economic Forum Technology Pioneer. “Soon,” he predicts, “every business will be an IoT business.”

Small Steps—Now

What steps should you take to prepare your supply chain to benefit from the still-evolving IIoT? Here are some places to start, suggested in the UPS and IDC study, to gain momentum:

1.    KNOW WHERE YOU STAND

Use industry data to compare your company’s investments and maturity of smart operations plans to your peers. Take a look at the chart below. Where are you? An honest assessment of where your company stands provides a good starting point for creating a viable plan to move up the maturity curve. 

Take a look at your investments in cloud connectivity for products and related assets, real-time process analysis and intervention, and data analytics. IDC and UPS researchers found a strong link between aggressive investments in these areas and Smart Operations readiness. 

Figure 1: Maturity Curve | UPS 2016

?

2.    LOOK AT DECISION-MAKING AND STRATEGY  

Identify key decision points. This lets you highlight the most important sources of data, most strategic value chain participants, and the role of third-party service providers.

Set priorities for connecting products in the field and the assets in the value chain. The whole value chain doesn’t have to be instrumented all at once; by focusing on the most critical areas, a company will get the highest returns, and will also gain valuable insight as to how to best deploy the technology.

3.    FIND HELPING HANDS

Leverage strategic suppliers, sales channel partners, and your logistics provider, to achieve higher levels of process integration. 

Third-party service providers can bring scale, process expertise, and advanced technology knowledge to the transformation. They can help “survivors” gain ground quickly, and “thrivers” scale rapidly. Data from the UPS and IDC study indicates that at least 40% of companies are planning to increase their use of 3PLs over the next three years, at least partly because of talent shortages, but also to scale rapidly and improve operational excellence.
 
Figure 2:  Use of Third-Party Service Providers (3PLs) Over the Next Three Years | UPS 2016



 
Going it alone isn’t always the most efficient adoption path. “Many companies that try to [implement] their own IIoT infrastructure do so at the wrong level, only to learn that what they really need is very difficult to build,” cautions Diego R. Tamburini, a manufacturing industry strategist for Autodesk not affiliated with the study. 

Jim Brown, president of Tech-Clarity, an independent research and consulting firm specializing in manufacturing, strongly agrees. “Most companies’ IIoT initiatives will require a wider selection of more advanced IT skills than they can afford,” he wrote in the recent ebook “Ten Build-Buy Factors for IoT Platforms.” The same holds true for the more complex IIoT.

Partners can also help companies avoid the common mistake of gathering data for IIoT without first having a clear purpose in mind, says Autodesk’s Tamburini. “You don’t have to boil the ocean. Figure it out upfront, rather than getting flooded with data that you don’t know what to do with.”

Analysts say companies needn’t—and shouldn’t—try tackling too many preparatory steps for “Smart Operations” at once. But with more than half of all manufacturers expected to reach higher levels of IIoT maturity within three years, the next evolution of manufacturing and synchronized industrial automation is quickly readying itself to run.

How smart are your manufacturing operations? Find out by taking our quiz.