More than a cost saving: Use IoT to drive revenue
Demonstrate leadership to reap the return on investments and efficiency gains.
The Industrial Internet of Things (IoT ) continues to be regarded as a cost saving mechanism and that investments in cost containment are being prioritized ahead of new revenue generation strategies. Although progress has been made with companies collecting IoT data and its use in both asset management and equipment monitoring, many companies are taking tentative steps toward adoption.
IoT has played a role in manufacturing for some time. Networked programmable logic controllers (PLC) are used to automate industrial processes and data from supervisory control and data acquisition (SCADA) systems have achieved greater management visibility on the plant floor. All of this depends on data from connected devices, resulting in an increasingly autonomous manufacturing environment.
But few companies are realizing the instant revenue generation potential that comes as a result of deploying IoT deeper into the business. Data from connected devices transforms and leans out a business by triggering events and transactions such as inventory re-orders, maintenance work orders and customer orders. This increased efficiency is an opportunity to leapfrog competitors by significantly shortening timelines, enhancing the customer experience or creating new product and service lines that deliver new revenue.
Using IoT for cost reduction is a conservative strategy. Digital transformation is forward-looking and creative – the aim should be to generate a new business model. Real transformation necessitates visionary leadership combined with the technology and skill sets to execute the vision.
A 2018 Bain & Co. study revealed prospective adopters feel vendors have failed to limit the most significant barriers to IoT adoption. These include security, ease of integration with existing IT and operational technology systems, and unclear returns on investment. The research suggests customers have lengthened time lines for reaching scale and are planning less extensive IoT implementations by 2020 than they were in 2016.
With the broad range of PLC and SCADA systems, it’s difficult to combine and consolidate these systems in a logical way with enterprise resource planning (ERP) software. A substantial gap remains between connected devices and the transactional software used to run a business, and IoT can quickly become too complex with systems integrators mapping multiple systems together. ERP software will increasingly need to provide streamlined approaches to overcome this challenge or it will be a constraint for companies intending to adopt transformational business models built around IoT data.
There are both logistical and technical barriers that prevent IoT and ERP from talking to each other. IoT typically creates data in a continuous stream. A sensor may send a record of conditions in a piece of equipment or component to a plant historian or SCADA system at any given time. ERP requires data that describes a defined business event. That event may be an exception to ideal operations conditions, a duty cycle of a piece of equipment – but it’s finite and has a specific business meaning.
Project teams must define what data ERP should collect to determine how an IoT discovery tool can convert the ‘stream-of-consciousness’ data into something that informs ERP of business events and operations. This may include a particular piece of equipment that requires service, the need for a technician to visit a customer site, or that a production line should be slowed down to avoid quality issues.
It could be that we see two flurries of IoT investment moving forward. The first will focus on enabling more thorough and strategic data collection, the second on making more complete use of data. Data collected from equipment may at first identify issues, but in the future it could drive an automated field service value chain where the equipment sends its own work orders. Companies would be able to charge for productivity and outcomes – duty cycles, products manufactured and hours of operation – instead of a discrete product.
Successfully unlocking the productivity and ROI gains IoT brings will come down to ambition for connecting real-time data from connected devices. ERP systems will need to create seamless, manageable pathways for IoT data to reach the core business systems where it will have the greatest impact. Only this way will IoT and ERP truly talk to each other and achieve benefits beyond cost prevention.
Rick Veague is chief technical officer for IFS, North America, a global enterprise software vendor with Canadian offices in Mississauga, Ont. and Ottawa. Visit https://www.ifsworld.com/ca.