The future of manufacturing is digital

The Fourth Industrial Revolution is under way, and leading manufacturers are deploying technology not only on their factory floors and back offices but throughout their entire value chain. The result? Significant changes in what manufacturers produce and sell — and how they conduct business and make money. Their embrace of technology is transforming who they are.

Consider the case of KONE Corp.

KONE has manufactured machinery and industry components for a century, making elevators, escalators and automatic doors found in buildings around the world. The company also has had a service component throughout its existence, providing technicians to repair its own and its competitors’ equipment.

But KONE says it’s not simply a manufacturer anymore: It’s a solutions provider. It doesn’t just make and fix machines that transport people; it provides the intelligence to efficiently manage the flow of people.

KONE is rolling out its Residential Flow solution that uses cloud, mobile and networking technologies to connect automated doors, elevators and intercom systems to a smartphone app to move people effortlessly into and through buildings by essentially knowing where they are and where they want to go.

“We’re not a traditional manufacturer anymore,” says Antti Koskelin, senior vice president and CIO at the Espoo, Finland-headquartered company.

More manufacturers are following suit, harnessing the power of artificial intelligence, cloud, mobile and other technologies to deliver entirely new products and services — and, thus, value — to customers.

Manufacturing transformation

The 2017 report “Manufacturing in Motion: Transforming for a New Industrial Era” polled manufacturing executives across the United States and found that 27 percent of responding manufacturers have already undergone substantial transformation.

Another 36 percent were in the process of transforming some parts of their organizations, 19 percent were developing a transformation strategy, and 10 percent said that they see transformation as an imperative although they don’t yet have a strategy in place.

Only 6 percent said they hadn’t identified a need for significant transformation.

The survey, conducted by The Economist Intelligence Unit (EIU) and sponsored by Prudential, based its finding on responses from 537 U.S. manufacturing executives from eight industry segments in companies varying in size and geography.

The survey also found that responding manufacturers identified big data, cloud, the internet of things (IoT) and mobile as the technologies that will contribute the most value in the upcoming three years.

Meanwhile, analysts, consultants and researchers along with manufacturing executives interviewed for this story and polled in other studies also cite increases in connectivity, lower-cost sensors and radio-frequency identification (RFID) technologies as well as machine learning and artificial intelligence as other key enablers of transformation.

“This technology, this connectivity, this digitalization, this real-time availability of information about products performance will start to change what manufacturers really offer,” says Eskander Yavar, national leader for management and technology advisory at BDO. “It used to be a physical product with a field service component. But you’ll start to see where they’re not offering products any more but services where they guarantee results.”

Manufacturers aren’t the only ones, however, seeing these technologies transform their industry. Yes, this Fourth Industrial Revolution speaks to how manufacturers are using technologies to remake their businesses to deliver new value propositions to customers, but that switch from producer of physical goods to solutions provider mirrors the digital transformations happening in other business sectors as well, as organizations of all stripes are learning now to leverage IT to do their work differently — or risk falling behind and going extinct.

As such, the manufacturers at the forefront of Industry 4.0 provide insight into how organizations of all kinds need to formulate transformational strategies.

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“The overwhelming theme is digitalization,” Yavar says, “and what that means as our business world and our personal world becomes more digitized is that the need for transformation will be more and more pervasive.”

From products to peace of mind

Like Yavar, executives at KONE saw the world moving increasingly into the digital realm and knew that they, too, had to follow, Koskelin says, explaining that company executives articulated the desire to use technology “to focus on the people flow experience.”

So the company increased its deployment of sensors; utilized the growing amounts of connectivity; brought on board advanced analytics and intelligence; and leveraged mobility to get information to and from its technicians in the field.

KONE uses the Salesforce platform to gain a complete, real-time view of its customers, which gives its field services operations access to better, more timely information that it uses to provide more efficient and effective service. And it uses IBM’s Watson IoT Platform to gain advanced data analytics capabilities.

The combination of technologies allows KONE to provide predictive maintenance services to its customers, which helps prevent unexpected equipment failures and offers the intelligence needed to manage the flow of people, Koskelin explains.

What’s the end product then? As Koskelin says: “We’re going to provide some sort of peace of mind.”

Leading in the 21st century

Forrester Research articulates the transformation happening in the manufacturing sector, noting in its 2018 report “From Grease To Code: Industrial Giants Bet Their Future On Software” that “industrial firms must move faster, deliver new value to new stakeholders, and respond to the shifting expectations of both their customers and their customers’ customers” if they want to survive in the 21st century.

“The manufacturing sector has come from a world where their entire obsession was about making a physical thing as consistently and as affordably and as flexibly and efficiently as possible,” says Forrester analyst and report author Paul Miller. “But building a great product isn’t enough anymore. Manufacturers have to deliver services around the edges.”

GE Transportation offers a case in point. The company, which has made diesel freight locomotives for a century, has grown its digital business in the past decade to bring more services to customers.

Its digital solutions include GoLINC, a network, communication and application management platform, and EdgeLINC, a comprehensive solution leveraging SAS software to deliver industrial IoT (IIoT) edge-to-cloud connectivity with device management, configuration and streaming analytics capabilities. These asset management platforms work with locomotives manufactured by GE Transportation as well as those made by other manufacturers.

Using data from multitudes of sensors, these solutions help customers operate and maintain their locomotive engines at the most efficient levels, says Garret Fitzgerald, general manager of transport intelligence at Chicago-based GE Transportation.

As valuable as that is for its customers, who can lose significant amounts of money when there are unexpected delays and locomotive engine downtime, Fitzgerald says the GE Transportation technology will deliver even more valuable capabilities — such as the ability to shut off an engine idling in a service yard — in the future.

“This is where a lot of the value is going to be derived,” he says. “Customers can capture all the data out on the locomotive or on mining trucks or on a ship and run analytics out on the edge on that asset and [get information] fast enough to change something in the real world.”

‘Not enough to be top in product’

Similarly, the Michelin Group is using technology to extend its reach further than it ever has and in ways unthinkable for manufacturers in the past.

Michelin uses digital technologies to strengthen its customer relationships and better meet their service expectations through its global ENGAGE program, which leverages the Salesforce platform to aggregate customer data — from sales history to tire references — and provide a holistic view of customers in real time.

Sophie Foucque, the Charlotte, N.C.-based director of Michelin’s B2B Digital Factory, says Michelin relies on technologies such as analytics and RFID embedded in tires used in trucking, mining and other industrial segments to create an ecosystem with its customers, allowing Michelin to take and analyze the right data at the right time so it can deliver more valuable services.

“We know that it’s not enough to be top in product. That’s why we decided that that the new battle is [around] customer experience,” Foucque says.

A layered approach

Of course, not all manufacturers are engaged in transformation initiatives. Nor do all manufacturers have an equal need to do so, says Russ Rasmus, who as managing director for Accenture Strategy leads the firm’s manufacturing practice.

But market forces and competition are putting pressure on more manufacturers to make investments in transformative technologies, he says. So while eyeglass makers, for example, aren’t selling connected products now, they may someday have the business case to do so.

Moreover, experts say manufacturers of all types — even those who don’t have a need (yet) to be connected to their customers — still must modernize their IT infrastructure by leveraging automation, robotics, IoT, analytics and machine learning within their own organization if they want to remain viable businesses.

It’s a daunting task for sure.

“Many are asking: ‘Where do I start on the digital journey?’” Rasmus says.

Rasmus says he advises manufacturers to start as they should with any IT initiative, by first identifying use cases where the technology can deliver real returns and then devising strategies on how to deploy the components to meet the needs of that specific use case.

“It starts in layers, and when you get the foundation layers in place, you can get to the next level,” he says.

Manufacturers seem to be taking that approach.

In the “2018 National Manufacturing Outlook and Insights” survey report from the Leading Edge Alliance, 66 percent of the responding 455 manufacturing executives said increasing productivity and efficiency were top business drivers for their technology investments in 2018.

Another 45 percent said improving customer service and response time were top drivers; 34 percent listed gaining access to more relevant data; and 34 percent said improving product quality, consistency and offering.

Delivering ROI

There are big returns in those areas, says Jim Beilstein, vice president of advanced manufacturing at Toledo, Ohio-based Owens Corning.

Owens Corning, a maker of insulation, roofing and fiberglass composites, has increased automation, implemented more analytic capabilities and invested in advanced process controls that use modeling and algorithms to measure hundreds of points within the manufacturing process.

“We’re focused on asset performance maintenance and management, and we’re getting data like quality measurement, service and delivery, and scheduling so operators and engineers can look at the entire system and workflow and functions to optimize how we operate every single day,” says Beilstein, who is part of the company’s global information services organization and reports to the CIO.

Such transformative technologies allow operators and process engineers to be more effective when they troubleshoot and to make smarter decisions about when assets need maintenance, thereby increasing the overall effectiveness of the company’s manufacturing equipment.

As valuable as that is, Beilstein says he sees even more potential in digitization and, in particular, in machine learning and AI. He expects the company to leverage those technologies to implement predictive analytics for equipment maintenance (a critical advancement for a company with continuous manufacturing where every minute of production time counts) and to more efficiently manage inventory, reduce waste, shorten lead time and become more agile in meeting customers’ needs on demand.

“Efficiency has all sorts of tentacles into the business,” he says.

All of that can mean significant ROI for companies, experts say.

“It’s really about driving greater speed to market, speed to decision that allows for manufacturing to be more agile in how they serve their marketplace,” Yavar says, “and it’s opening up new areas of commerce for them as well.”