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The Role of IoT in the Digital Transformation of Manufacturing

August 31, 2022 Digital Workplace
Siobhan Fagan
By Siobhan Fagan

Manufacturing has been at the forefront of innovation for decades. The sector is among those that stand to benefit the most from technological advancements. From reduced costs and increased efficiencies, to new product developments and enhanced quality — there's a ton of benefits to unpack for manufacturing companies. 

The rapid evolution of the manufacturing industry in recent years is often referred to as Manufacturing 4.0 — or Industry 4.0 — a term used describe the interconnectivity of manufacturing and new technologies, such as automation, ML, AI and IoT.

Microsoft surveyed 500 decision makers working on digital transformation initiatives across North America, Europe and Asia Pacific to uncover how manufacturers are deploying new and emerging technologies to achieve business goals. 

The August 2022 report, IoT Signals: Manufacturing Spotlight, included amongst its findings:

  • A great push to develop smart factories.
  • Improving efficiency remains a top goal.
  • Investments are shifting to industrial-automation-based process control.
  • Scaling smart initiatives is a major problem.
  • IT-OT convergence is happening across the entire industry.
  • Manufacturers plan to double down on investments in smart connected IoT.

The Transformation of Manufacturing

Many so-called new technologies have in truth been around a long time in manufacturing. Think 3D printing, which has been around the sector for nearly 40 years. Yet, the accelerated pace of progress — Manufacturing 4.0 — has come into greater focus over the past two years.

Among its many impacts, the COVID-19 pandemic has driven the manufacturing industry to reimagine digital transformation, said Syam Madanapalli, director of IoT Solutions at Plano, Texas-based NTT DATA Services. The sector is now looking at digital for business resiliency, optimization of the supply chain and manufacturing process, and enablement of a hybrid workplace environment.

Stakeholders, investors and customers are also looking for more sustainable products. The industrial internet of things (IIoT) is at the center of the solutions for these challenges and is driving the next generation of digital transformation from Industry 4.0 to Society 5.0. While IT-OT (information technology-operational technology) convergence is the focus for Industry 4.0, Society 5.0 focuses on the convergence of the physical and cyber worlds, as well as solving social, environmental and economic problems.

But the shortage of specific skillsets is a primary challenge for the manufacturing industry to drive digital transformation with a return on value. Connectivity, edge computing, security, digital twins, privacy management and contextual AI are the key components of any IoT-based digital transformation, and with these skillsets in high demand, manufacturing firms are competing for limited resources.

Many manufacturers started their digital transformation journey to gain real-time visibility into shop-floor operations to improve productivity and quality, but they've since expanded the scope of their objectives to include sustainability, enabling a hybrid workplace, improving EX, strengthening supply chains and enhancing CX — among others.

“Delivering short benefits and the ability to scale successful projects are the keys to sustaining digital transformation projects,” Madanapalli said.

Related Article: IT Investment Remains Resilient Despite Economic Pressures

The Role of IoT in Digital Transformation

The value of digital transformation and the use of IoT technologies has been established in the manufacturing industries for some time, said Frank Goldblatt, an IT business solutions specialist at New York City-based SYSCOM GLOBAL. The result, he said, is considerable investments in the IoT on factory floors and along supply chains.

“A network of internet-connected devices, all collecting data and reporting to each other, is a vital foundation for digital transformation,” Goldblatt said.

Digital transformation consists of four stages:

  1. Collect data
  2. Automate data
  3. Visualize data
  4. Make predictions

An IoT network of internet-enabled devices supercharges the collection and automation stages. It is one thing to walk around a factory floor and manually note which machines and tools need maintenance, but the fastest, most accurate person can't compete with IoT.

Once the company understands the data it needs to collect, the next step is to automate the process. Trends are found by collecting several data points over time and comparing them against one another. Once again, IoT wins this race against the human mind.

By automating the process with internet-enabled devices that can report various metrics to a system that analyzes and visualizes the data for the end user, manufacturers can have their entire operation telling them when, where and how to fix issues. And with time and consistency, IoT-enabled operations can tell manufacturers about potential future issues and how to address them before they even happen.

Related Article: What's Driving Growth in the IoT Market?

The Digital Transformation Process

According to C.R. Venkatesh, founder and CEO of New York City-based Dot Com Infoway, IoT is the cornerstone upon which success in digital transformation hinges, catalyzing a chain of smart and more efficient data-fueled insights and more connected manufacturing processes.

Venkatesh laid out six principal steps in the digital transformation process for manufacturers:

1. Building interconnected smart facilities

Manufacturers are moving toward a smart workflow, where technology such as machine learning, big data analytics and RPA are supporting an IoT-connected smart factory network. The digitalization of data is cutting boundaries between departments and processes, while the concept of digital twins is improving uptime for present production lines and eliminating product development bottlenecks.

2. Automation investment

Digital transformation is rewiring how manufacturers are implementing IoT technologies into their workflows. While in the past, resources were channelled more toward ensuring a network that safeguards quality and oversees maintenance, today, they are taking out the risk altogether. There is a change in investment habits with more financial efforts going toward automating process control by way of IoT and artificial intelligence.

3. Outsourcing IoT and skills

Digital transformation and IoT, like any disruption, bring a surge in demand for new skillsets that mostly revolve around cybersecurity, AI and data science. The current shortage of talent is impeding the growth of smart factory projects, restricting IoT and technology rollouts to a departmental or limited scale. Manufacturers are getting around this problem by outsourcing their IoT needs.

4. Operational enhancement

While there are many KPIs available when determining the success of a smart factory strategy, for manufacturers, Overall Equipment Effectiveness (OEE) is the single most important factor when assessing the performance of their strategies. Digital transformation strategies are fine-tuning to zero in on smart IoT solutions designed to sharpen operational processes and, more specifically, factory equipment.

5. Decentralization of processes

Manufacturing is experiencing a new phase in its evolution, as digitalization pushes processes to globally connected platforms such as cloud IoT solutions, which are affording the bridge between OT and IT. Now, two traditionally disparate physical and virtual realms are coming together to create a unified factory environment.

6. Funding for smart products

Digital transformation and IoT are bringing to the fore new avenues of income for manufacturers. They are opening opportunities for product growth, thanks significantly to the power of machine learning and big data analytics.

Related Article: How the Industrial IoT Is Making the Workplace More Productive

6 Steps to Unlocking Value

While IoT roll-out can be complex and time-consuming, the benefits are clear. Vaclav Vincalek, a Vancouver, British Columbia, Canada-based CTO and business consultant, said to use digital transformation to create value for businesses, there are six important steps:

  1. Define your business goals: Know what you want to achieve with the IoT deployment so that you can think about how to use it and the risks/solutions involved.
  2. Identify relevant data sources: From internal to external data, it's critical to ensure that enough high-quality data will be available once operational.
  3. Choose platforms and partners: Given the complexity involved in implementations, the best practice is to outsource some elements to providers with experience in similar projects. The key is to look for providers that offer interoperability so different systems/software will not need to be completely reworked if something changes down the road.
  4. Implementation: Without careful management, even small-scale deployments risk going haywire very quickly. Having robust project management tools is a crucial part of a smooth-running project.
  5. Establish feedback loops: As an integral component of both pre- and post-production stages, feedback helps teams validate hypotheses and monitor results effectively over time.
  6. Manage expectations: Not every initiative is driven by a desire to increase profits or sales figures. There are instances where the goal is purely reputational.

It may seem like digital transformation is a given, but for many, it remains a concept that has yet to materialize. While the process should not be rushed, it is imperative for companies, particularly in the manufacturing space, to push transformation to the top of the agenda, as it will define an organization's ability to compete in the future.


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