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19-21 July 2022
Melbourne Convention & Exhibition Centre

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21 May 2018

5 reasons why companies don’t invest in IIoT supply chains (and why they should)

The industrial internet of things (IIoT) is a hot topic in manufacturing and supply chain management, promising real-time visibility of the entire supply chain through a vast network of advanced sensors, thereby supplying invaluable insights that can be used to optimise processes and workflows across the business. IIoT is being used to synchronise material flow to reduce in-stock inventory, automate the optimisation of order fulfilment and inventory replenishment, and make trailer loading and unloading faster and more efficient. And that’s just a few of the possibilities!

Yet, according to a 2017 IIoT report by BPI Network entitled “The Impact of Connectedness on Competitiveness”, while 90% of respondents said IIoT is an area of strategic focus for their organisation, only 9% said their industry has begun widespread adoption. So what’s holding companies back from capitalising on an IIoT-powered supply chain?

We look at 5 of the most common reasons businesses don’t invest in IIoT for their supply chains.

“We’re not sure what successful IIoT implementation looks like for our business”

One of the biggest obstacles stopping leaders from capitalising on an IIoT-powered supply chain is themselves – or, more specifically, their lack of a clear vision for what successful IIoT implementation looks like. As Chris Locher, Vice President of Software Development at The Nerdery, put it:

The tidal wave that is connectedness and IIoT is building rapidly and it is unavoidable. Companies see massive opportunities to increase efficiency, gather data in new ways and pivot into new business models. The challenge of the IIoT revolution is that it is accompanied by a great deal of white noise and confusion. How will companies capture those opportunities? How do companies avoid the risk of failing at an IIoT initiative? How do you find employees with the skills to do it? The sheer scale and implications of IIoT can lead to information overload, create analysis paralysis, and confusion for business leaders.

According to the BPI Network report, only 7% of companies claim to have a clear vision and implementation strategy for IIoT.

So where should leaders start? Insight US President Steve Dodenhoff suggests starting with the data. “The numbers don’t lie,” he says. “The numbers don’t tell you the answer, but the numbers tell you where to start looking. You have to take a data-driven view to come up with a hypothesis of what you’re trying to solve. Innovative teams can work quickly to test and learn.”

It’s also important not to try to take on too much at once, especially in the beginning – instead, start with small, focused efforts. PwC suggests identifying equipment that is already instrumented and generating data, and piloting IIoT projects that can use this untapped data.

“Our employees don’t want to implement IIoT”

There are many reasons why employees might be resistant to the implementation of IIoT. The necessary convergence of IT and OT can cause friction on both sides of the divide, as IT and operations departments, who have traditionally been completely separate, are now forced to bridge the divide, and share objectives and budgets.

Those on the factory or warehouse floor may also feel threatened by the onset of IIoT, which would mean quality control and workflow processes that were previously done by the employees are suddenly taken over by sensors and machines, requiring employees to get used to a whole new way of working.

But IIoT is there to help employees by shedding light on things that may not otherwise be visible. Consider, for example, a railway transit system: about 80% of the time, experienced locomotive engineers can pinpoint the reasons for train breakdowns, estimates Ruud Wetzels, data analytics manager for PwC Netherlands. But they’re vexed by the other 20%. “Even for very experienced engineers, it’s not possible to see the complex interactions across hundreds of machines or subsystems,” he says.

Management can also help to change employees’ mindsets by assuring them they are not obsolete in the connected supply chain, and reaffirming their value to the company by providing training.

“We don’t have the skills to implement IIoT”

According to the BPI Network report, 31% of executives said their organisation faces a “major skill gap” in their IoT readiness, with only 7% believing they have most of the skills in place. “Global businesses clearly are working to put the needed skills in place to address the opportunity of connected, intelligent products and machines, but those talents are in short supply,” said Dave Murray, head of thought leadership for the BPI Network.

Businesses should therefore look to acquire the necessary skills, which may include machine learning and artificial intelligence. As IIoT is all about data, data analytics and visualisation skills are also key.

While companies should of course be looking to fill IIoT skills gaps as quickly as possible, they should not simply put IIoT implementation on hold in the meantime. Instead, companies should look towards outside help, and find a trusted IoT partner who can guide you towards successful implementation. “We can expect for the time being that system integrators, consulting and software engineering firms with the right skills in connectivity, sensor technology, data analytics and complex integration will benefit from the race to keep pace with IoT enablement,” said Murray.

“Implementing IIoT is too expensive”

According to a 2017 McKinsey report, the average factory today is 25 years old, with machinery that is going on 9 years old. At these sorts of plants, it can seem like bringing legacy equipment into the future is just far too difficult.

But it may not be as costly as you think. As new technologies and competitors enter the market, costs naturally decrease, so the initial capital investment may in fact be much more palatable than first thought. The cost of sensors has also decreased dramatically over the past several years – and what is IIoT really but a giant network of sensors?

When implemented successfully, IIoT should also produce a very healthy ROI. For example, Emerson found that companies that are top-quartile performers typically have more than 80% of their production equipment monitored for vibration analysis, compared to just 35% for third-quartile companies. They also found that companies that depend on condition-based, planned maintenance have fewer equipment emergencies, resulting in 14% less downtime and 71% lower maintenance cost.

“I’m worried about investing in technology that might soon be obsolete”

With the rate at which technology progresses these days, one could be forgiven for being somewhat wary about whether IIoT is really all it’s cracked up to be. After all, won’t anything you implement be obsolete in a year or two anyway?

But, as PwC advises, businesses can protect their factories and supply chains against such obsolescence by using modular architecture and application programming interfaces (APIs) to create flexibility in processes and capabilities, so operations can change without major disruptions.

Besides, the danger of being left in the dust is simply too great. As Daniel Newman, Principal Analyst of Futurum Research and CEO of Broadsuite Media Group put it in his article “IoT challenges in the connected supply chain”, “[F]rom my viewpoint, the greater risk is lagging behind in what will surely be an unprecedented period in supply chain management. We’re talking no more barcodes. No more manual inspections. No more lost cargo, overripe produce, machine downtime or parts delays. We’re talking the most efficient manufacturing and connected supply chain this world has ever seen.” Do you really want to miss out on all those benefits?

If you want to learn about the latest in IIoT, and what it might mean for your supply chain, don’t miss out on CeMAT Australia 2018, the leading trade fair for materials handling, intralogistics and supply chain management. 


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