As the Internet of Things continues to grow and influence a greater number of businesses, we take an in-depth look at the practical uses for IoT, explain the potential benefits for organisations and suggest how technology may dramatically change business in this country (and others) in the future
The Internet of Things (IoT) is defined by the UN’s global agency for information and communication, the ITU, as ‘a global infrastructure enabling advanced services by interconnecting things based on existing and evolving technologies’. Put simply, things talking to other things via wireless technology.
Much of what people may have read about IoT will have focused on fridges telling you when you are running low on milk and other consumer applications, but there is a much wider, and potentially paradigm-shifting use for IoT technology going on that will change the way that UK manufacturers operate.
The Industrial Internet of Things (IIoT) is a concept known by a number of different names – Industry 4.0, ‘factory of the future’, the fourth industrial revolution – but they all centre around the same principles. How businesses, and particularly manufacturers, use IoT technology to change or improve the way they operate. Research by Oxford Economics suggests that this technology applies to industries that account for 62% of the G20’s GDP, so there is clearly scope for a seismic shift in the industrial sector over the next 10 years as IIoT adoption grows.
“At its simplest level, it revolves around how machines interact with each other and how we know what’s going on within those machines through data,” says Alex von Schirmeister, Chief Innovation Officer, RS. “This has been made possible partly through technological developments in communications, where we’ve seen low-power devices that can send data using very small amounts of energy.
“There have also been incredible advances in data storage,” he adds. “If you are going to generate a terabyte of data every day, you need to be able to store and use that data.”
The term Industrie 4.0 originates from a German project on which the government and manufacturing industry worked together to develop and grow IIoT technology in the manufacturing environment. The result has seen some businesses, including engineering giant Siemens, lead the way in the use of IIoT in the manufacturing process.
In the UK, companies haven’t been quite as quick on the uptake so far and, according to the EEF’s Senior Policy Adviser Chris Richards, the same sort of approach is not suited to British businesses: “My view is that manufacturers in the UK are on the cusp of embracing this technology,” he says. “We’re close to a tipping point where there will be widespread experimentation with IIoT technology, but I don’t think a German-style co-ordinated initiative would work.
“The crucial thing is that British businesses are starting to become aware of the benefits and want to know more,” he adds. “It’s not a process that’s going to be ‘done to’ manufacturers – you won’t see the government creating one single strategic plan with industry players. Instead, it will be down to key decision-makers in each organisation understanding how the technology can benefit their business and then investing in it at a level they are comfortable with.”
Making the most of IIoT
According to Gartner, there were 6.4 billion things connected to IIoT in 2016, which is up 30% on 2015. But this is still the tip of the iceberg with that figure set to reach 20.8 billion by 2020 and with growth continuing onwards exponentially beyond that.
Yet despite these impressive figures there is further research that suggests many business leaders are cautious when it comes to committing to IIoT technology. A survey by Accenture showed that although 84% of C-suite executives saw the opportunity for their organisations to create new income streams from IoT technology, 73% of companies have not made any concrete investment in it.
These statistics come as no surprise to von Schirmeister, who has witnessed some hesitation from business leaders. “My experience is that there are still conservative attitudes when it comes to IIoT,” says von Schirmeister. “The reason for this often comes down to concerns over data security. Many organisations need reassurance that the data generated from IIoT devices will be fully protected. In some cases this is based on an organisation’s own needs, but in others it is influenced by national legislation around data storage and privacy.
“In countries such as China, where there is less legislation than in Europe, there is a lot of ground-breaking work being done on IIoT, which may well fuel development and understanding in other countries.”
The other barrier is, of course, cost. Moving to a full IIoT set-up requires a significant initial investment. von Schirmeister is convinced that there are huge benefits to making that investment, however, and the biggest is the potential for cost-savings and efficiencies. “To put it bluntly, if you don’t make a large cost-saving, then there is no point in doing it,” says von Schirmeister. “That is why Siemens and many others have invested so heavily in the technology.”
Richards has seen similar caution in the UK market. “We’ve been holding focus groups with our members and it appears that businesses are keen to dip their toe in the water with IIoT technology,” he explains. “They are willing to trial new sensors, optimise some production lines, but they want to start small, analyse the value that the technology is bringing to their business and then invest further if it works.
“From our point of view, the EEF is keen for as many manufacturers to do this as possible – we want them to share some of their experience and findings so that we can all learn from each other.”
So what sort of returns does IIoT offer for your investment? “As these networked devices are introduced there should be a greater amount of automation in production, which will increase productivity and efficiency through reduced downtime, quicker completion of complex tasks and more energy-optimised processes,” says Richards. “For example, the ‘Batch Size 1’ concept allows manufacturers to produce large quantities of highly customised products in the same time it takes to produce generic ones. This is possible through autonomous robots and multipurpose production lines, which enable you to add customisation without having to stop production.”
“The other big benefit will come in the supply chain,” adds Richards. “You can have an integrated end-to-end process. By choosing suppliers that can plug into your technology, you can create an automated system that allows data to flow much more quickly between manufacturer and supplier, which will lead to greater efficiency and overall cost savings.”
The key here is collaboration – it’s important that businesses choose suppliers that can work with their IIoT technology, and actually help to optimise it so that greater efficiencies can be made to the system. “The ideal set-up is that your machines know when they need replacement parts, they order these autonomously in advance and the maintenance is done at a point where there is the least impact on production,” says Richards.
The other significant benefit of IIoT, according to Von Schirmeister, is that alongside cost-savings, manufacturers can use data generated to improve the quality of their work. This is not something that you would traditionally expect, since cutting costs usually suggests a dip in quality, but with a well-actioned IIoT strategy you can potentially do both.
“On a macro level, the big data that IIoT creates, when analysed, can point businesses towards bigger strategic moves,” says Von Schirmeister. “This could include reorganising production across the board or changing working patterns, which will create further efficiencies on a much grander scale.”
Case study: Siemens
Global engineering giant Siemens is rightly held up as one of the best examples of a company making use of Industrial Internet of Things (IIoT) technology. For a company that makes the technology to allow other manufacturers to adopt IoT functionality, it was important for the firm to practice what it preaches. The Siemens manufacturing facility in Amberg, Germany, is known as ‘the factory of the future’ and has won multiple awards for its advanced product automation, optimisation and integration with the company’s IT.
Built in 1989, the Siemens factory has long been held up as a template for other companies to follow, but it’s only now that the sector may be approaching a tipping point as IIoT investment ramps up.
“The transition is beginning to happen in the UK,” says Paul Hingley, Business Manager Data Services CMR Cloud and Plant Security Services at Siemens UK and Ireland. “It comes down partly to manufacturers taking the leap and investing in their plant, but it is also down to having the right cloud platform for the data to sit.”
This is an area that Siemens is highly invested in, as it believes that as more companies move to IIoT, the importance of hosting, storing, analysing and interpreting the data created becomes paramount. For the past two years Siemens has been developing an industrial cloud platform, which it recently launched under the name MindSphere.
“We created a platform where the open architecture, open ecosystem and open APIs allow companies to connect via the cloud platform and utilise the data that is being generated from IIoT products,” explains Hingley. “By 2020 we want all the data being generated from IIoT devices to sit in a secure cloud platform where it can be analysed and presented to manufacturers as information.”
This data, says Ian Poulett, Industrial Communications and Identification, Siemens UK and Ireland, is the key to unlocking the benefits of IIoT. “By putting the technology in place, you will gain access to proactive and reactive analytics in your plant,” he says. “You can clearly see where improvements can be made and it’s also possible to ‘see’ the changes you want to make virtually before you actually do them so that you can see the effect they will have on the process.”
Getting to the point where most manufacturers in the UK are fully integrated with IIoT will require significant investment from companies. “It’s partly about physical connectivity – you need to connect all of your machines wirelessly,” says Poulett. “At our Congleton plant here in the UK we have deployed a new wireless system, which means there are no hard-wired connections in the manufacturing products whatsoever. Having this sort of network is the enabler of the Industrial Internet of Things because you have the ability to generate data.
“However, this is an issue that many manufacturers are facing – their existing infrastructure is often not ready for the transition towards IIoT,” Poulett adds. “Every manufacturer in the UK should be planning how they are going to get the infrastructure they need to take advantage of the many benefits of IoT technology.”
Hingley points to a recent example of these benefits in practice where Siemens worked with a major airport in south-east England. “This airport found that it was spending around £60,000 a week in lost or delayed baggage because its automated baggage carts kept malfunctioning,” he recalls. “Analysing the tracking data within those carts allowed us to identify which carts, and even which wheels, were failing. This has meant that they can now take carts in for pre-emptive repair work and in the six months since this has been introduced they have had no incurred costs from delays or lost baggage due to cart malfunctions.”
While the upfront investment involved in IIoT is a challenge for many organisations, Siemens is predicting a significant move towards the technology over the next five years. “We believe that the pace of IIoT adoption will really pick up in 2018, now that the appropriate cloud infrastructure is in place and manufacturers start to see rivals investing in the technology,” says Poulett. “Quite simply, anyone who is burying their head in the sand on this subject is going to be left behind.”
Both von Schirmeister and Richards report that it is relatively rare for manufacturers to make significant upfront investments in IIoT technology that will revolutionise their business. Instead, companies are opting for a test and learn approach, which von Schirmeister believes is sensible. “One of the drawbacks to IIoT is that there isn’t an ‘off the shelf’ model,” he explains. “The equipment is all available, but it’s up to organisations to decide the level of connectivity they want, how to use it and the amount of investment. As such, there is added complexity at the beginning, which is off-putting for many businesses. Not only do they need to make an upfront investment, but they also need to understand the technology and how it will help their operations.”
Instead, businesses are experimenting with small pieces of IIoT technology to gauge the value of investing in it. “Schneider Electric is a customer of ours that has a very interesting building in the Netherlands, which uses IIoT technology to be completely environmentally friendly,” says von Schirmeister. “The system knows how many people are in each area of the office or meeting rooms and controls the level of lighting, which makes it extremely efficient. Over the course of a year, this sort of system can save significant amounts on overheads. It’s also helping Schneider to hit green targets, which is both good in terms of CSR, but also financially due to potential penalties for excessive CO2 emissions.”
“Many business leaders need benefits to be shown to them before they will invest, so it may be a case of saying, ‘We have seven floors in our building, let’s use IIoT on one of those and see if it saves us money and people like it,’” adds von Schirmeister. “Once they achieve this, there will be a much greater appetite to roll out the technology to other floors and to test other areas where IIoT could benefit the organisation.”
There is an incentive for organisations to push investment as far as they can, however – the chance to get ahead of their competition. “The early adopters will see the benefits and gain a competitive advantage over rivals,” states von Schirmeister. “This will force those competitors to invest to catch up, which will eventually lead to much greater adoption of IIoT overall. In some cases, it will be relatively new companies, which are building factories now that will be in a position to use IIoT technology since it’s easier to start from scratch rather than retro-fitting existing operations.”
As far as Richards and the EEF is concerned, however, the main goal is to put IIoT on business agenda, regardless of what level of investment companies are willing to make. “The important thing right now is that the topic is on the minds of UK business leaders so that when they sit down to write their strategic plans for the short to medium term, they have included investment in IIoT.”
The future of IIoT
There are numerous predictions about how IIoT will impact manufacturing around the world and how it may change the nature of the industry. What most experts are sure of is that companies that adopt IIoT will see financial rewards for their investment. A report on professional community Wikibon suggests that businesses will spend around $500bn on IIoT by 2020, but this technology will create value of $1.28tn.
How this investment and value are spread among manufacturers will not be equal, however, with the pace of IIoT adoption varying greatly between businesses. “There will be some companies who have particularly forward-thinking leadership who will invest heavily in IIoT and aim to fully adopt the technology over the next five to 10 years,” says Richards. “But for most it will be a gradual process of increasing their use of technology and learning as they go.
“You are also likely to see the more innovative organisations looking at creating new business models, specifically lease arrangements where the manufacturer retains ownership of the product,” adds Richards. “The reason for this is that the company will be able to embed technology in their products, which can feed back data in real time so that they can learn from how the product is performing, how it can be improved in the future and if it needs maintenance.”
While experts can debate the potential of this sort of model, it is impossible at this stage to predict the exact outcome of IIoT and its influence on the manufacturing sector. Just as taxi companies and short-term holiday accommodation have been disrupted by Uber and Airbnb, the manufacturing sector must wait to see what sort of disruption will be caused by digital connectivity. Richards is, though, clear on one thing – doing nothing is not an option: “The best thing is to be aware of technology, invest in it at a level that suits your organisation, learn from the experience of others and be prepared for whatever develops.”
von Schirmeister agrees: “At RS we are supporting customers with IIoT in two ways – first by providing the latest technology to connect devices, and second by providing a platform, in the shape of Design Spark, for engineers and other experts to share knowledge and innovate.
“I see the future of IIoT and IoT in general as an inevitable growth to the point where the technology becomes ubiquitous – similar to mobile phones, wireless internet and other technology that we take for granted. The idea of virtually any product or device talking to other products or devices will simply become the norm.”