Forbes: ‘Machines As A Service’: Industry 4.0 Powers OEM Aftermarket Revenue Growth

By | Blog

Original equipment manufacturers (OEMs) are no strangers to boom or bust sales cycles. Traditionally, they’re either ramping up production to meet demand or seeking ways to slash costs when sales are down.

But Industry 4.0, or the Industrial Internet of Things (IIoT), is enabling new sales models that generate more consistent revenue streams for OEMs. There are considerable benefits for forward-thinking manufacturers that transition from selling a product to offering, “machines as a service.” Rather than relying on a one-time sale, they’re charging customers based on machine use and service.

Machines as a service can revolutionize the way OEMs design, sell and service products. It will be a win-win for OEMs and their customers, as both partners benefit from increased predictability.

Selling uptime as a differentiator

It’s a business model that’s becoming more prominent across a wide range of industrial products, including Rolls-Royce’s aircraft and marine engines. The U.K. company is an example of a manufacturer that’s leveraged IoT to turn a high-value asset into a continuous source of revenue.

Rolls-Royce offers “power-by-the-hour” service agreements that allow customers to pay a fixed rate per hour of operation rather than purchasing the engine outright. The company assumes responsibility for ongoing maintenance and provides predictive maintenance services based on insights from their IoT-enabled engines that wirelessly send machine data to four Rolls-Royce centers for monitoring.

Now compare that service model to the more common fail-and-fix approaches in which OEMs sell the equipment outright and only provide service when a machine breaks down. OEMs that adopt machines as a service differentiate themselves from competitors by guaranteeing 100% uptime and only charging for actual usage.


Forbes: ‘What’s At Stake In The Race To Industry 4.0?’

By | Blog, Featured Post

As Industry 4.0 gains momentum in the manufacturing world, executives are calculating the risk-reward ratio of becoming early adopters of this technology. Some are considering the cost, in money and time, against the potential gains. Others are determining whether they should wait until their competition shows definitive proof of the benefits before striking out into the largely unknown territory. Still, others, stung by the over-blown promises of overly complex and costly earlier technologies, are simply wary. All of them are working to figure out what exactly is at stake in leading or lagging behind the Fourth Industrial Revolution.

To put it simply, the answer is that the future of your business is at stake. But most executives will see that answer as too simple or abstract, if not too glib.

To truly understand the risks and rewards of being among your industry’s leaders during this transformation, bring the debate down to earth. Consider one of the fundamental issues you deal with every day: the cost of poor quality and the cost of downtime.

Reducing the cost of poor quality and downtime

The daily battles that manufacturers wage to make better products and keep machines running figure prominently in Industry 4.0. Driving down the cost associated with these basic elements of manufacturing are among the most critical challenges a manufacturer must address — and for good reason.

The true cost of poor quality — the sum of the costs from repair, rework, scrap, service calls, warranty claims and write-offs from obsolete finished goods — can range between 5 and 30% of a manufacturing company’s total revenues, with the range for a majority of companies falling between 10 and 20%.

And that’s not counting the costs associated with lost customers.

This profit leakage is a staggering amount for an individual company, alone. When you calculate how it compounds through the supply chain, impacting the bottom line and ultimately the customer, the value of fixing the problem becomes clear.

Likewise, the cost of downtime reduces profitability in a variety of ways too numerous to detail here: lost production and capacity, higher labor cost per unit and inventory costs and added stress on employees and machines. When the machines are down, everyone’s attention is diverted from growing the business, whether it’s responding to new opportunities or innovating new products and services.

Though variable industry to industry, one survey places the cost of one minute of downtime in the automotive industry at an average of $22,000 per minute. If you can reduce your downtime costs to a fraction of that, the benefits to the bottom line alone will be substantial.

Read more on Forbes

How IIoT Brings You Closer to Customers

By | Blog

The manufacturers gaining the competitive edge on product quality and customer satisfaction appear to be those that adopt smart-manufacturing technologies, including the Industrial Internet of Things (IIoT). Why is IIoT such a key differentiator in today’s economy? It lies in the ability to monitor, correct and optimize operational issues in real time.

A headline in Chief Executive Magazine recently posed the question: “Who’s Pushing U.S. Manufacturing Forward?”

“Accelerating the rebound in U.S. factories depends on what they make and how they make it, not just where,” wrote Chief Executive contributor Dale Buss.

It’s a statement that rings especially true today. Talk of trade wars, changing consumer demands and continuing workforce shortages mean U.S. manufacturers must place a greater emphasis on quality, innovation, and efficiency to remain competitive.

Dependence on low-cost sourcing won’t win the game anymore.

Many manufacturers have relied on outsourcing to remain competitive. But this model isn’t quite as effective as it once was. For one, wages are increasing in many low-cost countries, such as China. Also, consumer demands for faster delivery and more customized products mean manufacturers can’t afford long lead times, supply chain disruptions or quality issues.

The winners appear to be manufacturers that adopt smart-manufacturing technologies, including the Industrial Internet of Things (IIoT). Why is IIoT such a key differentiator in today’s economy? It lies in the ability to monitor, correct and optimize operational issues in real time. If you make things efficiently at home there’s no reason to source materials halfway around the world. And that means you can serve customers faster and be agile enough to meet their demands for more customized products or just-in-time deliveries.

The key is finding IIoT systems that provide the in-depth analytics you need to make immediate decisions to correct variations in quality or increase throughput. Sensor-based data systems are nothing new. IIoT has become a catchphrase for any manufacturer that deploys a sensor to its equipment or production line to receive critical performance data over the Internet.

But truly effective IIoT includes dashboards, alerts and statistical analysis to correct problems as they happen and adjust production to meet changing customer requirements. Many IIoT systems still deliver information to traditional spreadsheets, such as Excel, which requires manual manipulation to begin root-cause analysis.

In fact, according to Deloitte’s “Global Cost Survey Report,” digital solutions, such as data analytics, are the most effective ways to drive cost savings. Analytics and automation empower “companies to analyze mountains of data and identify key costs savings opportunities. These technologies will help increase efficiency and effectiveness — evolving new platforms and driving cost improvement across the entire enterprise,” according to Deloitte.

Chief Executive Magazine recognized rapid prototyping manufacturer Protolabs as a company that’s “pushing U.S. manufacturing forward.”   The St. Paul, Minnesota, company helps manufacturers respond to customer demands faster with services such as 3-D printing. Company President and CEO Victoria Holt noted that about half of companies’ annual revenues are from products they launched within the last three years. In other words: product lifecycles are getting shorter.

“To be able to address that, we’ve got to be taking advantage of manufacturing technologies and Manufacturing 4.0, or we won’t be able to compete,” Holt told Chief Executive.

How Industry 4.0 Will Change Product Quality

By | Blog

One of the strongest contributors to the sustainable growth of a company is how well it can retain its customers. With customer acquisition costs ranging from a couple dollars to hundreds of dollars, it’s especially important for businesses to maximize the lifetime value they get from each customer. Thus, retention should be a business’ main focus when tackling long-term growth. Sustainable growth calls for an emphasis on customer satisfaction, and therefore, high product quality.

For companies that ship physical goods to their customers, product quality depends highly on their manufacturer partners. Poor product quality results in low customer satisfaction, refunds and returns, dissolved partnerships with distributors, and an overall nightmare for manufacturers. How do manufacturers swiftly detect and prevent product quality failure in their factories? This is where Industry 4.0 technology comes in.

In present-day manufacturing, plant managers experience challenges in detecting where production failure is taking place and may spend days or even weeks tracking down exactly which line is underperforming. One underperforming machine in a factory could result in hundreds of defective units and tension between manufacturers and customers.

Industry 4.0 advancement is meant to help manufacturers prevent product quality failure wherever possible. With the combination of articulate, data tracking IoT devices, analytics platforms, and cloud computing, plant managers, engineers, and supervisors can attain actionable and specific information about what’s happening in their factory at any given time.

How? Let’s talk about how Industry 4.0 technology helps prevent things like this from happening at your factory.

IoT – Real-Time Data Gathering

The backbone of Industry 4.0 technology consists of the IoT devices that are constantly gathering data from the machines and sensors they’re installed on. Most of these devices are installed in machines on a production line, where they will gather a multitude of data points such as time, speed, temperature, rates of production, product ID numbers, etc.

These data points are constantly gathered and sent to a secure, cloud database, housing every aggregate piece of information collected from that machine, in perpetuity. Since the value of data appreciates as more of it is gathered, using 3rd party services such as Oden, which stores unlimited data indefinitely, is a valuable investment that will help manufacturers compare and analyze production over longer periods of time.

Analytics – Clear & Actionable Data Insights

Industry 4.0 technology is providing a new wave of clearer and more concise data analytics platforms to complement its big data counterpart. Data is useless without the correct analytics tools to process that data, detect trends, and draw actionable insights from.

For example, if a plant manager needed to track where there a production line failure occurred, they could use an analytics platform to understand why it failed. Using Oden’s platform, manufacturers can track the exact time a particular faulty product was run, which machine is responsible for the particular failure, and all the performance metrics associated with that machine.

In the past, it could take plants hours, days, or even weeks to aggregate all the necessary information to track production line failure. Assuming plant employees are using a user-friendly platform like Oden’s, they can shorten this production line analysis time to mere minutes.

Cloud Computing – Flexible Monitoring

Since Industry 4.0 depends heavily on the power and scale of cloud computing, the technology allows every person in a factory (not just the managers or engineers) to have data at their fingertips. Data will no longer need to be stored locally in a factory’s network, with rising costs. It is already commonplace for advanced manufacturers to have access to their factory’s information, wherever they would like, through cloud storage.

In addition to the “big players” in a factory, employees down the authority ladder can also be granted limited access to information relevant and necessary to their particular daily tasks and job. This democratized data will give team members the ability to make actionable and swift decisions in response to real-time stimuli. The typical “top-down” methodology of information will soon become outdated as Industry 4.0 technology becomes mainstream.

To a manufacturer, maintaining product quality means everything. Your reputation depends on it! Often times it could be one of the biggest challenges as a manufacturer. Luckily, different technologies, like the ones listed above will change the way entire factories are managed. The best part is that this smart factory technology isn’t something that factory owners hope becomes mainstream in the next decade– it’s already possible to integrate this technology today. Oden’s IIoT platform offers everything discussed in this blog. Don’t wait to start collecting data today.

Big Data

What Is The Cost of Quality in Manufacturing?

By | Blog

At the end of the day, nothing matters more than customer satisfaction. Fundamentally, this sounds quite simple; make the customer happy, and all is well. Keeping customers happy and loyal to your brand, however, is not as easy as it sounds. There are many factors that influence a customer’s experience. Things like proper packaging, attentive customer service, and product quality are important when trying to keep customer satisfaction high. The production of high-quality products is arguably the most important part of this process, but it isn’t cheap. On the other hand, the costs incurred from having a low-quality product can be much more expensive.

The Cost of an Underperforming Product

Keeping product quality high can be an expensive expenditure to deal with. Replacing or repairing a broken machine is costly, and few people would say that it’s not necessary. Ultimately, as a manufacturer, if your products are sub-par, you are guaranteed to lose customers. That is far more expensive. When it comes to losing the lifetime value of a customer because they’re unhappy, there is no question about it; avoid it at all costs.

Repair and replacement costs are pretty much unavoidable, and that is why it is important to focus on effective ways to go about incurring these costs. Every year, manufacturers waste money replacing and repairing machines before squeezing out every ounce of value from the machine. This underutilization of resources isn’t a financial problem as much as it is an information problem. The Internet of Things (IoT) and data analytics technology allow manufacturers to optimize the usage of their machines and save money in the long-run.

Wasted Time Detecting Bottlenecks

The most valuable commodity, by far, is time. The amount of time that plant managers spend on either searching for bottlenecks or suffering from having them at all is staggering. Without IoT devices to gather ongoing and accurate data on machines, technicians are forced to make more assumptions with less data. This increases the chance of unnecessary repairs and ultimately wastes time. It’s important for plant managers to identify the source of a given productivity problem once they know it exists.

Rather than spending days or even weeks spot checking their individual machines to find the productivity constraint, a manager’s time would be much better spent actually dealing with the problem. Having access to data via IoT devices empowers plant managers to get a better look at what’s really going on in their factories and to solve problems that are facing their organization faster.


The Opportunity Cost of the Compound Benefit

Costs that are often overlooked are opportunity costs. Having access to big data and data gathering devices helps with these costs and because of this is an appreciable commodity. It is a long-term investment that will definitely appreciate in value. Just like most successful investments, investing early on gives you the benefit of compound interest. Manufacturers can benefit immensely by focusing primarily on data gathering mechanisms.

In the increasingly complex world, data is just another tool in a business leader’s toolbox that can be used to facilitate sufficient and accurate decisions. Information gathered today will allow manufacturers to make decisions tomorrow. While other manufacturers struggle to digitize and build a smart factory, early adopters will begin benefitting from the compound interest. Becoming an early adopter of IoT technology doesn’t have to be difficult or obscenely expensive either. If done with the right service, being an early adopter could be a phone call and consultation away.


The Cost of Wasted Material

Material waste from poorly maintained machine is another heavily overlooked cost for manufacturers. Each year, manufacturers who fail to keep strict track of whether or not their production lines are on spec lose enormous amounts of money. This can be likened to printing 100,000 copies of a flyer with an obscene typo on it; it’s embarrassing, wasteful, and expensive. Miniscule quality issues like this can easily be avoided through better tracking practices or by implementing data analytics technology.

Overall, it’s quite clear that spending money on quality isn’t only productive, but it’s also absolutely necessary. However, that doesn’t only mean manufacturers should repair and replace their machines when needed; there is a technology component to this. Investing in technology that will put manufacturers ahead of their competitors in the long-run is a must. Don’t get left behind in the dust of your industry’s early adopters and digitize soon!