Manufacturing: The new service industry?

Manufacturing: The new service industry? Vodafone Power to you At Vodafone, we thrive on conversations with our partners and customers, because that’s how we reveal the insights we use to tailor our solutions to the real needs of businesses; now and into the future. The manufacturing sector is going through radical change right now. And we wanted to examine the role that M2M technology was playing in driving that change. We spoke to Stefan Hubner, Chief Operating Officer from Device Insights GmbH, Barry Finnegan, General Manager of Sensor Systems and Bret McGee, Software Development Manager from Kingspan, as well as Cyril Deschanel, Vodafone’s Head of M2M Northern Europe, to find out what manufacturers should be focusing on at a time of immense trade in a long-established industry. You will find their thoughts illuminating, challenging and sometimes controversial, but hopefully this will enable you to think about your own business and how it can harness the power of the M2M revolution. Enjoy. Welcome The Machine-to-Machine technology revolution is radically changing the manufacturing business model – opening up new opportunities beyond the production line. The manufacturing sector has always been the bellwether of industrial change and its performance is constantly being measured to gauge economic success of decline. Manufacturing was the engine of the first Industrial Revolution in the 1700s, and each new stage of technological and economic development since has been forged in factories and on production lines all over the world. The present stage, what some are calling ‘Industrial Revolution 4.0’, is no different. The way we make the products that fill our world is changing fast. It’s a transformation that is as fundamental as the introduction of the continuous production line back in the 1900s. At the heart of this transformation is Machine-to-Machine (M2M) technology which enables machines of all kinds to talk to lots of other machines over wireless networks using simple and inexpensive sensors. Also known as the ‘Internet of Things’ this rapidly emerging trend has implications for every part of a manufacturer’s operations: from the obvious to the not so obvious. M2M technology is enabling products to be made faster, to higher quality specifications, and more closely aligned to increasingly granular market signals. The supply chain is being made more efficient, as is distribution and the maintenance and flexibility of manufacturing machinery. But what’s really new is the fact that manufacturers can go beyond just making things to servicing them too. They can generate revenue from what they make long after it’s been loaded up and sent out the factory gates. Manufacturing is turning into a service industry. Introduction Abstract for themselves M2M technology is what makes the ‘Internet of Things’ work. The concept is a simple one: machines use sensors to gather data and then transmit them to another machine which then either reacts automatically, or shares the data with a human being who can then make a decision. Increasingly, the machines are making the decisions on their own! “It’s what automation has always been about,” says Bret McGee, “And Automation has long been fundamental to the success of manufacturers. Now we can make the most of intelligent automation.” It’s not a new idea. Back in the 1950s Harvard Business School Professor, James Bright, reported to the U.S Government that the future of automation in manufacturing depended on enabling machines to talk to each other so that efficiencies could be achieved that would drive prices down. He said, “We need to build human skills into machines.” Back then, the technology which could achieve that goal was big, bulky and very expensive. By 1995, Kevin Ashton, one of the founders of the MIT Auto ID Center, described the same imperative and coined the term, ‘Internet of Things’ for the first time.2 But, the sensors were still relatively expensive. Then, in an 18 month period between 2012 and 2013 the critical Radio-Frequency Identification (RFID) chips, which enable machines to talk to each other, tumbled in price and suddenly the new era Bright and Ashton had predicted was feasible. 1 James R, Bright: Automation and Management (1958) 2 Quoted in The Economist Intelligence Unit Report ‘Internet of Things’ Aug 2010 Thinking for themselves “Generic buzzwords, like ‘The Internet of Things’ or ‘The Cloud,’ are marketing speak that gets in the way of good ideas” says Barry Finnegan. “For me, M2M is a huge opportunity for manufacturers to add value to what they make. By enabling connectivity a manufacturer can now extend their relationship with customers and generate revenue from it. That’s the big change.” Thinking for themselves “M2M is a huge opportunity for manufacturers to add value to what they make” Barry Finnegan Another constraining factor, a lack of IP addresses, was swept away with the introduction of the new Internet protocol, IPv6, which, in theory, could allow there to be trillions of individual addresses. Now all the devices we have already, plus the millions currently rolling off the production lines can have their own IP addresses, and, most significantly, so can all the devices we haven’t even invented yet! Soon there will be 50 billion machines talking to each other. That’s the prediction of an expert panel of scientists, researchers and digital innovators brought together by the Pew Research Center.3 By 2025, they say, ‘The Internet of Things’ will be thriving. “Most of our devices will be communicating on our behalf. They will be interacting with the physical and virtual worlds more than interacting with us!”4 “This revolution is changing the very nature of how manufacturers work,” says Cyril Deschanel, “It is enabling production lines to keep rolling because faults get fixed before they cause a problem. It’s speeding up the supply chains so goods can be made in response to even tiny changes in demand or market trends. It’s also enabling products to be tracked far more accurately, cutting down on wastage and making distribution far more efficient. M2M also helps manufacturers comply with increasingly stringent regulations in terms of energy savings and carbon reduction because the data is much easier to gather in real-time.” 3 Pew Research Center: The Internet of Things will Thrive by 2025 Report May 2014 4 Paul Saffo, MD of Design Analytics, quoted in Pew Research Center report May 2014 Thinking for themselves “Most of our devices will be communicating on our behalf. They will be interacting with the physical and virtual worlds more than interacting with us!” Pew Research Center report May 2014 of thinking about making things “The connectivity that drives M2M enables both established and emerging manufacturers to reduce complexity and focus on developing new and good business models, which not only deliver high levels of return on investment in the technology, but enable firms to communicate new services to the end customer,” says Stefan Hubner. The manufacturing business model is changing fast, and in very fundamental ways. The forces that are driving this change are becoming clearer as more and more forward-looking organisations within the sector are beginning to unlock the potential of M2M. “There are machines at every stage of the process,” says Cyril Deschanel, “It’s important that they are intelligent and dynamic and no longer just dumb.” Each element in a production line or a supply chain can now deliver vital data that can be used, in real-time, to increase efficiencies, report and fix faults automatically, and review targets and production levels so that they can be adjusted in response to external influences, such as customer demand, weather conditions or wider market imperatives. The digitisation of the entire manufacturing process delivers an amazingly granular and accurate virtual representation of the entire value chain that brings everything together – from engineering to factor floor and service – so that better decisions can be made by managers. “We can monitor the behaviour of every single machine and ensure that it is performing at its best and is consuming the right levels of energy and water or chemicals, whatever it is the machine needs to do, and this brings the makers of that machine closer to their customers, and means that manufacturers are more in control of what they are making for their own customers. Everyone is better able to serve each other,” says Stefan Hubner. “What we did in our business, which is making devices that monitor oil levels in industrial and domestic tanks, is to think about how we could make our sensors more efficient not just for our customers, but also for ourselves, and, in turn, how we could monetize the relationship we had with each customer far more effectively. That meant thinking in terms of servicing each sensor,” says Barry Finnegan. New ways of thinking about making things New ways of thinking about making things Manufacturing as a Manufacturing as a service industry Manufacturing as a service industry The fundamental shift in the business model that most manufacturers are used to is what’s known as ‘Servitization.’ The product you make is not the end of the process. You can ‘bundle’ services around any product you make. “We just want our devices to work – whether it’s a kettle at home, or a huge production machine in a fast moving factory,” says Cyril Deschanel, “What M2M technology allows you to do is embed sensors and RFID chips into different components, and then generate an intelligent network of machines that are tasked with keeping the piece of equipment productive.” “Our oil sensors are vital to the people who own them. They don’t want their homes being cold in the middle of a snowstorm, or they don’t want the oil that drives their vital equipment running out and leaving them stranded. So, our sensors give them accurate readings all the time,” says Barry Finnegan. “What’s new is the ability to service those sensors remotely and in real-time,” says Bret McGee. “We used to have to maintain dial-up connections and some pretty clumsy equipment which often got unplugged inadvertently by the customer. Now, it’s all done over the air. The sensors are small and robust and they deliver accurate information 24/7. That’s enabled us to offer much wider services to our customers and do it far more efficiently.” Manufacturing as a service industry “I believe that the biggest change that M2M is driving for manufacturers is in their service departments,” says Stefan Hubner, “The end customer for any machine is always worried about keeping the machine productive. M2M enables manufacturers at each stage – people who make production line technology and people who make, for instance, coffee machines for fast-food chains – to offer proactive servicing, or predictive maintenance that keeps everything running perfectly and anticipates problems. Every machine deteriorates through use, so it’s best to get to it before it breaks down rather than after – when the production line has stopped.” The coffee example is a pertinent one. “There are some big chains who don’t buy their coffee machines off the manufacturers at all. The manufacturer, instead, guarantees that the coffee machine will deliver cup after cup, efficiently and perfectly, and the restaurant or hotel chain then pays a small fee per cup served.” That’s a completely new way to think about manufactured products. Some aircraft makers are, for example, offering their planes on an hours-flown basis. They generate revenue so long as the plane keeps flying. “Now, that is a radically different way to think about making products. You make them but you don’t sell them. You sell what they can do – their output and, potentially, if you make them well, keep them serviced, and deliver the data the client wants to enable them do their business better, then you profit,” says Cyril Deschanel. “If you make them [machines] well, keep them serviced, and deliver the data the client wants to enable them do their business better, then you profit!” Cyril Deschanel Good old fashioned Good old fashioned manufacturing Good old fashioned manufacturing “Building a machine in many cases isn’t that complicated anymore,” says Stefan Hubner, “It’s difficult to differentiate yourself just by building a machine differently, and you have huge competition from other emerging markets, where they can just build the same machine that we can build here in Europe or anywhere else. So for me, the most important thing that can differentiate a manufacturer is service and everything around it.” Of course, ‘Servitization’ shouldn’t obscure the other benefits that M2M delivers to manufacturers; they have to make their machines and products efficiently and cost-effectively to start with. “M2M has enabled us to add more functionality to our sensors,” says Bret McGee, “And to do more things than we ever have done before. We can put more telemetry into our products, and access the data from a much wider area and any kind of location far easier than we ever could.” “The sky’s the limit,” says Barry Finnegan, “And working with Vodafone has been very positive. We’ve been able to cut our overheads in terms of production and installation – and our engineers and field-guys are far more productive. Also, we get fewer queries from customers because the information is more accurate and there are less transmission problems.” As well as being able to monitor the condition or operation of each product, the sensors can send back information about the world in which the machine is operating. This is useful in terms of environmental concerns, but it also offers proactive opportunities for the machines themselves. Now, manufacturers can design and product machines that make decisions based on specific environmental conditions: windscreen wipers that activate the moment it starts raining, is an obvious example. The machines can ask for their own upgrades and work autonomously, learning from their surroundings and analysing data to make real-time decisions without reference to a human supervisor. Good old fashioned manufacturing “The machines allow us to learn more about a customer, their pain-points, the way they work, and what they want to achieve. Each customer has to approach M2M as a project rather than just a technology. They need to work out what they want to achieve and M2M can enable devices to enable them to achieve it,” says Stefan Hubner. “Value is shifting in manufacturing,” says Cyril Deschanel, “Old fashioned manufacturing is still at the core – the production of goods – but the value is now not just in the thing itself, it is in the software, and the data the product can send to the cloud, and the service that can be wrapped around the product.” “It all demands a new mind-set,” says Barry Finnegan, “Traditional manufacturing is changing.” Generator Manufacturers are now selling their systems with the Kingspan sensor oil monitoring telemetry which essentially provides them with sticky customers. The supply chain, distribution, tracking of assets and raw materials, can all be automated, with the machines themselves taking charge of the data and responding to it. M2M enables all that happen but, more fundamentally, it enables manufacturers to transform their business models so they can be more agile and better able to compete in global markets. The supply chain, distribution, tracking of assets and raw materials, can all be automated, with the machines themselves taking charge of the data and responding to it. The machines toil while The machines toil while you innovate The machines toil while you innovate “We’ve seen a lot of examples of M2M technology enabling manufacturers from one sector to influence those in another. When machines can talk to machines you get more collaboration at the human level lessons can be learned quicker and from surprising sources,” says Cyril Deschanel, “For instance, GlaxoSmithKline worked with Mclaren Automotive to implement technology from the F1 circuit on the toothpaste production line!” M2M can enable manufacturers to find, adapt and implement innovative ideas from a much broader ecosystem. Vodafone is committed to enabling customers to drive product quality improvements based on the data from machines on the production line. As they send back real-time data decisions can be made about servicing, production changes, and upgrades or firmware patches so that ‘predictive maintenance’ can be offered as standard. This ability then allows manufacturers to create new pricing models, such as generating revenue per cup of coffee or hour of flight and so on. The ability to ‘servitize’ each product means, as we’ve seen, that maintenance can generate revenue and be more profitable. “What M2M delivers is something that’s been termed, ‘situational intelligence’ – the machines are providing you with the data you need to improve your planning and find value in areas you never knew could yield revenue,” stresses Cyril Deschanel. Manufacturers can offload a lot of work to machines – let them talk to each other and toil together – but the end-product is a smarter and more innovative manufacturing team that can diversify business models to stay ahead of global competition. Despite some concerns about issues like privacy or workforce levels, 83% of the experts surveyed by Pew Research Centre in 2014 believed that M2M technology would have a beneficial effect on industry and society over the next decade. “Together we can make the most of that opportunity. We offer the complete solution,” says Cyril Deschanel. What you should be asking for from your M2M supplier? Do they have deep experience in using M2M technology to transform businesses? At Vodafone we have more than 20 years of experience in the field – we’ve been there since the start of the M2M revolution. In fact, we’ve been driving it. We have over 400 dedicated experts ready to put their experience to work for you and your organisation. That means we can plan deployments at local, national and global levels and provide connectivity insights that no other operator can match. Do they have global networks that you can rely on? We operate in 27 countries, work in partnership with mobile networks in 48 more, and have fixed broadband operations in 17 markets. As of March 2014 Vodafone served 434 million mobile customers and 9 million broadband customers. That kind of scale gives our enterprise customers confidence – we have the scope, reach and pricing power to deliver solutions that really make a difference to your business and its bottom-line. Can they support you and make M2M a simple as possible? Complexity is the enemy of agility. In the fast moving manufacturing sector you need to be able to leverage the power of M2M to become faster, smarter and more responsive to both market conditions and customer needs. This is vital in the area of ‘servitization’ – so we give you a single point of contact that delivers the power of hardware, software and service providers working seamlessly together to help you achieve your goals. You also get the benefit of our dedicated Innovation Park team, based in Dusseldorf, to ensure your solution is tailored to your specific needs. Summary Contact details Vodafone is one of the world’s leaders in M2M service delivery. We’ve been working in M2M for over 20 years, and today we provide full support for M2M security solutions, including alarms, CCTV and asset tracking. Our capabilities include: global M2M platform; global M2M-specific SIM cards; a broad portfolio of M2M terminals, application and service enablement development, testing and deployment; network connectivity; and system integration – all from a single supplier, with a single contract. To find out more about how we support M2M security solutions globally, or how our portfolio of wireless communications solutions can support your business, please contact your Vodafone account manager, email [email protected], or visit m2m.vodafone.com So come and talk to Vodafone M2M about your ideas. The earlier you talk to us, the easier it is to find the right solution to fit your needs. Contact details