From the SAP forum: The 3 perspectives you need for digital manufacturing success

Long-term strategic planning is necessary, but don't neglect immediate opportunities, McKinsey partner says

By Christine LaFave Grace, managing editor

If talk about the industrial internet of things (IIoT) prompts deer-in-the-headlights looks at your plant, you're not alone (for now). "Companies struggle with where to focus" when it comes to digitally connecting their machines, their people, and all other points in their enterprise, said Richard Kelly, partner at business management consultancy McKinsey & Co., at SAP's fifth annual manufacturing industries forum in suburban Chicago on Tuesday. 

Lingering questions about "where do we go from here?" may help explain why only 36% of manufacturers recently surveyed by McKinsey reported having made good or substantial progress in implementing IoT/Industry 4.0 applications and strategies in the past year. Kelly said he sees clients grappling with several of the same questions: Who on the plant team should "own" IoT initiatives – the CIO, the COO, someone else? Does my manufacturing organization have the talent needed to assess the data that technologies such as condition-monitoring sensors generate? 

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Whatever a company's starting point with an IoT initiative, Kelly suggested, it's critical for the organization to take the time to identify goals across multiple time horizons to maximize chances for sustained success.

Specifically, manufacturers should adopt a three-stage perspective that focuses on achieving short-term victories – these will help justify additional investments of resources in an initiative – as well as building an architecture that will support the business long-term.

Digital performance management is a good jumping-off point, Kelly said. With minimal investments of resources (thanks to decreasing prices for sensors and simpler, rapidly deployable monitoring and management solutions), companies can realize as much as 20% to 50% improvement in overall equipment effectiveness (OEE) via digital performance management, he said.

Part of scoring short-term wins such as improved machine uptime and OEE, according to Kelly, is asking, "What can we do with the data we have now?" Knowing what's happening with all of your machines in real time is foundational to becoming a digital manufacturing enterprise, Kelly indicated, calling digital performance management the "gateway to digital manufacturing."

Once you have a handle on how your machines are performing, you can begin to look at how to use data to more efficiently and effectively manage energy use and throughput. Additionally, when your existing assets are optimized, you can better identify opportunities for strategic deployment of next-level automation, such as advanced robotics.

There is huge value to be generated in the near term, Kelly said, which is why his company cautions clients against getting stuck working on a five-year vision at the expense of making some immediate changes. Still, manufacturers need to recognize that a push to capture value from the IoT "has to be linked in to a rewiring of business processes," Kelly cautioned.

That reality leads to step 2, he said, which involves working with outside organizations as part of larger efforts to advance the industry as a whole. "Trying to solve (a problem) in a silo is very, very challenging," said Kelly. That's why it's worthwhile to consider participating in external collaborations and consortia, according to Kelly – these offer the chance to draw on and build from a broad industrial knowledge base. It also can help companies better understand their skills gaps and how they can address these.

"The companies pushing forward are starting to think very proactively on the human capital side," he said.

Inside the plant, step 2 also involves deciding what new tech capabilities and structures will be needed to help make longer-term competitive goals a reality, Kelly said. That ties in with step 3, which Kelly referred to as "the breakthrough strategy." Companies should spend 20% of their time thinking about "the next horizon," he said, and assessing what new business models will be enabled by digital technologies.

What after-market services will your business be able to offer, he asked, as selling "service" (i.e. uptime and precision maintenance) becomes a bigger value generator than selling products themselves? What do you really need to make; how much do you need to have on hand; and how will this affect your global network?

"This is not a phenomenon that is limited to the four walls of a plant," Kelly said.

It was a point driven home in an address later in the morning from Alan Cseresznyak, CIO of forklift manufacturer Toyota Material Handling North America and senior VP of administration for Toyota Material Handling U.S.A. Cseresznyak noted, "Uptime is more important to our customers than the actual cost of the forklift."

"We want to get to the point where our mechanic is arriving to fix your forklift before it breaks down," Cseresznyak said. 

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