In this fourth article, Alan Griffiths of Cambashi explores the main business reasons why companies buy and implement IIoT and what effect this is having on them and their industries.
As explained in an earlier article, ‘What’s new about the Industrial IoT?’ most of the technology used in IoT solutions has been around for some time. A recent trend driving its growth is commercial – the reduced cost of sensors and the affordability of cloud computing. But 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 we 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 for any investment in business systems or technology, there are two main reasons to invest in IoT:
This 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. Watch this video interview in which Falko Lameter, CIO Kaeser Kompressoren, discusses an initiative to use real time analytics from sensors on its 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. The cloud platform they use is Microsoft Azure, which provides the analytics engine. By monitoring their compressors in the field, Fusheng achieve valuable data analysis and predictive maintenance. This has improved down-time, reduced ‘Mean Time to Repair’ and improved energy efficiency, by fixing poorly-operating compressors.
Case study 1 – Fusheng Air Compressors
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
- Improved down-time by 25%
- Improved Mean Time to Repair (‘MTTR’) by 15%
- Improved energy efficiency, by fixing poorly-operating compressors (before they fail).
- The ADLINK IoT Gateway (from Intel) provides:
- Hardware security
- Data filtering
- The Microsoft Azure Cloud (‘GoService’) provides:
- Predictive Maintenance
- Data analysis.
The advantage of going for efficiency savings, is that it is low-risk. Problems or areas for improvement can always be identified, and an incremental solution can be implemented as shown in the examples above. But the danger in focussing on efficiency is when it becomes a ‘race to the bottom’; cutting costs will save you money; cutting your customers’ costs will help you stay competitive. But an IoT vision can offer more…
2. Competitive advantage
This means doing something new to steal a lead on your competitors, such as:
- A new (‘disruptive’) business opportunity.
- A new payment model, making it easier for a customer to buy.
- Enhancing an existing product or service to attract new customers or more revenue.
- And on the other side of the coin, 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. Here are two examples of companies disrupting their industries;
Peterson saw the opportunity to add a new recycling line to its forestry equipment business. Last year, Matt Prenevost, Remote Monitoring IoT Manager at Peterson, began the company’s digital transformation, focusing on IoT technology, a first in their industry. Microsoft Azure IoT was retrofitted to active machines and built into new ones. 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 2 – Peterson – disrupting the forestry business
Peterson was a small, family-owned company that saw a need for a specialized piece
of equipment in the forestry industry and designed a solution. Since then, the company has grown to include a recycling division. Last year, Matt Prenevost, Remote Monitoring IoT Manager at Peterson, began leading the company’s digital transformation journey, focusing on technology that had yet to be used in the industry: IoT.
Azure IoT was retrofitted to active machines and built into new ones. Operators and techs can monitor performance metrics, anticipate when a particular piece is going to fail, and have that part delivered before there’s ever an issue.
“In the early days, the only way you’d know if something was wrong was when you received a phone call,” Matt says. The company’s control systems consisted of relays and point-to-point wiring, that later evolved into PLC-type controls. “It was common for our customers to buy a machine but not know how to set it up or run it most efficiently,” Matt remembers. Getting customers up and running, and dealing with issues was a time-consuming, manual process.
With the implementation of Azure IoT, the new “Peterson+,” program allows Matt and the Peterson team to walk customers through problems, and even anticipate issues before they happen.
Techs can update operating code or apply safety updates remotely rather than sending someone out from the factory so customers can get up and running in a fraction of the time. The upgrade means Peterson’s machines are smarter, customer satisfaction is higher, and their investment is protected. It also gives Peterson direct interactions with the people using their machines, along with a huge influx of data that they use to continually improve their products and the customer experience.
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; this 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 customization of product performance and personalization 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 “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. IoF2020 will help shape public policy and drive the agriculture business towards an open and connected ecosystem.
Case study 3 – CNH Industrial N.V. – Transformation for IoT
CNH Industrial is a participant in the Internet of Food & Farm 2020 (IoF2020), a European consortium whose goal is to foster the large-scale adoption of Internet of Things (IoT) technologies in the European farming and food value chain. The project, launched on January 1st 2017, emerges from the “Alliance of Internet of Things Innovation (AIOTI)” initiative, established by the European Commission.
IoF2020 brings together 71 partners from 16 countries and is coordinated by Wageningen University & Research Centre (the Netherlands).
The theme of smart and connected objects is of growing interest in agriculture; take-up, however, remains relatively low in Europe. The role of IoF2020 is to highlight the challenges facing the agricultural sector and to look for solutions which can facilitate its expansion.
To this end, the project will focus on 19 use cases throughout Europe. 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.
Antonio Marzia, Head of Data Analytics and Services at CNH Industrial explains the strategy. “We, at CNH Industrial, believe that the ability to provide value-added services focused on improving farm management and overall productivity will be pivotal for the future of agriculture. This is why we have a dedicated team specializing in new technologies, which is strongly involved in different research projects to promote innovation and sustainability in agriculture throughout Europe.”
Internally, CNH transformed its organisation to make smart connected products an integral part of the portfolio of customer offerings and give greater visibility into and management of the total cost of ownership of the machines. CNH Industrial established a new business unit – Precision Solutions & Telematics – to provide performance-enhancing technologies for the company’s different product segments, which include agriculture, construction and commercial vehicles.
Externally, the IoT capability was used to drive transformation to optimize resources and outcomes for customers.
However you decide 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 where to start, Maciej Kranz, 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 uptime by pre-empting failures.
The business impact on a company using IoT will depend firstly 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.