The internet of things (IoT) is poised to usher in the next wave of innovation in the cycle, which started with the industrial revolution of the 18th century. Just as the industrial revolution empowered companies to create enormous wealth by harnessing the energy from steam to mechanising production, IoT enables firms to transform their businesses by leveraging data from machines and turning them into insights and action.
SME sector: Creating an ecosystem
Today, digital technologies are unleashing change on a scale and pace not seen before – disrupting industries, redistributing wealth and creating new winners and losers. A critical part of having a more equitable, sustainable division of the value created by these forces will be the role of SMEs in an economy and how they can leverage these technologies to drive the benefits of growth to a broader section of the population.
The ‘Make in India’ initiative aims to boost the contribution of the manufacturing sector from 15% to 25% of GDP by 2022. While a lot of the focus is on attracting FDI and the jobs that it promises for the Indian workforce, the role of the SME sector in creating an ecosystem, building world-class capabilities and competing in new markets is critical.
By employment impact, manufacturing is the industry that is most affected by automation. As per a paper by Daron Acemoglu of M.I.T. and Pascual Restrepo of Boston University, for every robot per thousand workers, up to six workers lost their jobs. Given that even China, which had pulled millions of people out of poverty by taking advantage of labour arbitrage, is investing heavily in robots for manufacturing, it is critical that Indian SMEs look to build new capabilities to thrive in this new economy and look beyond labour costs as their primary competitive advantage.
Digital transformation initiatives
There are three broad areas which manufacturers need to look at as part of their IoT & broader digital transformation initiatives. These include:
Connected plant: Improving the operational efficiency of physical plant assets, workers and associated processes resulting in improved asset utilisation, reduced operating and maintenance costs, while improving uptime and production
Connected enterprise: Improving the operational efficiency of an enterprise resulting in higher productivity of employees, lower cost of IT infrastructure and optimised supply chain performance
Connected customer: Improving the effectiveness of marketing, sales and support of products and creation of new business models to increase revenue
Priorities for the SME sector
While IoT offers a full range of possibilities of the palette above, SMEs need to focus on specific priorities, as follows:
Connected manufacturing: Manufacturers can integrate the shop floor data with enterprise data and apply analytical models to improve efficiency, utilisation and reduce process defects. An auto component leader has enhanced operational efficiency, reduced energy costs and improved capacity utilisation by collecting real-time data of various parameters across production machines.
Connected assets: Manufacturers can leverage IoT and advanced analytics to improve monetisation of their installed base by collecting data about machine performance, customer behaviour, environmental conditions to understand their customers’ needs and providing new services to address them. A leading construction equipment manufacturer connects with its machines in the field and remotely monitors the real-time health and performance of its assets on the ground and delivers value to its dealers and end customers.
Connected supply chain: Connectivity, IoT and collaborative platforms drive real-time end-to-end visibility, information exchange with suppliers & customers and agile decision making, thereby reducing risk from disruptions. As real world objects are getting embedded with sensors, the flow of goods and information is converging. This gives organisations granular visibility on location, availability and expected delivery times on the supply side while capturing customer trends and keeping delivery promises on the demand side enabling leaner, more agile and more responsive supply chains.
Connected product & service: Today, after a manufacturer’s product reaches the end user, the manufacturer has no idea on how the customer is using the product, where it is being used, its current state and so on. However, once a product begins to return data to the manufacturer, new services such as remote diagnostics, proactive maintenance, usage-based insurance, fraud detection and product upgrades can be enabled. SMEs including tool manufacturers are collecting data from their tools, which can be used to schedule predictive maintenance or tool changes, which helps avoid tool breakdowns and reduce setup times. There are several ways in which IoT can change the way one runs their service business. Pre-emptive service triggers actions, based on evidence of the impending failure of equipment in the field. IoT also enables companies to use real-time information of equipment health and predictive analytics to bring the right technician and the right part at the right time to the customer or use remote diagnostics and fix to improve productivity.
In conclusion, it is fair to say that IoT can enable a whole range of options including business model plays and SMEs would do well to focus on driving internal efficiencies through connected manufacturing, staying connected with their customers and products, growing their service revenues and improving supply chain visibility.