Every few years, a new information technology arrives on the scene, prompting pundits and industry analysts to proclaim yet another IT revolution that will amaze consumers and change the way we all work and live. It’s gotten difficult to keep up with all this change. The latest revolution to be so hailed is the Internet of Things, in which physical items themselves are connected to the Internet. But this particular technology revolution is a real one — the Internet of Things will indeed change the way we all work and live and business organizations, especially manufacturers, are looking at ways to ride this wave into the future.
Fortunately, for manufacturing firms, software companies are already offering cloud-based ERP solutions that serve as the perfect launching pad for integrating the Internet of Things into their business.
The Internet of Things
Products that used to comprise only mechanical and electrical parts have now transformed into complex, interconnected systems combining hardware, software, microprocessors, sensors and data storage. These so-called “smart” products are the result of a series of rapid improvements in device miniaturization, processing power and wireless connectivity. All of these things are connected to the Internet; hence, the name “Internet of Things.”
While this is being hailed as another information technology revolution, we’ve actually been living with the Internet of Things (IoT) for some time. The most obvious example is the smartphone, whose operating system and apps can automatically update themselves. Our automobiles not only have many subsystems controlled by computers and sensors, but they also have the now familiar in-dash GPS systems that can download the latest maps from the Internet. Everything from baby monitors and home heating and lighting to exercise activity tracking and medical devices share this capability. More “things” are being connected to the Internet every day.
The growing array of smart, connected products bring new functionality, increased reliability and abilities that cross traditional product boundaries. Companies are once again being forced to reevaluate everything they do to meet these challenges. Do they make and sell physical products, are they delivering information or are they doing both? To be successful in this new IoT age, companies must be able to answer these questions.
For manufacturing firms, every step in the supply chain from the shop floor to the distribution center and after-sales service can now be “smart,” with sensors and communication between all departments and all “things” in the extended supply chain. The availability of cloud-based ERP systems is helping these firms make the transition.
History of Information Technology Revolutions
Industry analysts like to talk about the three waves of information technology-driven revolutions. The first of these waves occurred in the 1960s and 70s when centralized automated inventory control systems evolved into materials requirement planning systems. In the 1980s, Manufacturing Resource Planning (MRP) systems arrived to automate order processing, bill paying and computer-aided. Before this era, products were entirely mechanical and business processes were manual, paper- and verbal communication-based. With MRP, productivity increased as large amounts of data could be stored and analyzed for each business activity. MRP systems evolved to the point where many different functions in an enterprise, from marketing and finance to engineering, could be accessed using computer technology.
The second wave of IT revolution arrived with the explosion of the Internet in the 1990s. The Internet allowed different enterprise functions to be more closely coordinated and interconnected with the outside world — suppliers and customers could be reached across the world, allowing companies to integrate their supply chains on a global scale.
The old MRP systems evolved into enterprise resource planning (ERP), which enabled manufacturing firms to achieve a greater degree of resource planning and allowed them to integrate different departmental functions such as quoting, work orders and shop floor management to be linked together using large on-premise computing systems. Many firms are still using their old on-premise ERP systems, but these systems have become increasingly limited, even with the advent of Internet connectivity. These on-premise ERP systems are expensive to implement and maintain and require extensive customizations to remain current.
The Internet of Things is indeed another wave of IT revolution. Finally, the manufactured products themselves have been affected by the technology. Computers are being built into the product itself. Sensors, processors, software and Internet connectivity are now part of the product. Add this capability to the introduction of cloud computing, where data is stored on servers around the globe and accessed from any Internet-capable computing device, you now have a world in which product performance, location, maintenance and status data is stored and analyzed in the cloud, driving incredible improvements in functionality and performance. Those older on-premise ERP systems are being replaced by cloud-based solutions that are not only more powerful, nimble, reliable and adaptable but also less expensive and mobile-ready, allowing instant access to big data from anywhere at any time.
Analysts expect productivity to increase dramatically as a result of these new, smarter products. Businesses will once again have to adapt to remain competitive. They will have to alter their product design, marketing, manufacturing and service as well as incorporate new functions such as security and data analysis into their enterprises.
How Will IoT Affect Manufacturing?
The Internet of Things is expanding the range of functionality and abilities of products and this is forcing companies to take a fresh look at how they do business — from conception and design to manufacturing, operation and service to IT.
Manufacturing firms are at the forefront of this revolution. According to a recent Price Waterhouse Cooper survey, 35 percent of U.S. manufacturers are already enhancing their manufacturing processes by collecting and using data generated by smart sensors. The same survey found that 38 percent of these firms currently build sensors into products to allow customers to collect data and 34 percent of the firms think the adoption of an IoT strategy in their operations is extremely critical.
Other analysts have found similar results. According to a survey sponsored by Business Insider, industrial companies are the early adopters of IoT. The survey found that 18 percent of companies who make industrial machinery already use IoT devices. Nearly one-fifth of major manufacturing companies have already implemented IoT to reduce costs and increase production. It is estimated that manufacturing firms’ investment in IoT will be about $140 billion over the next five years.
Plastics manufacturer Petrobas Zarate in Argentina, for example, added sensors to their factory to monitor temperatures to ensure their product was being created under the most favorable conditions.
The automobile industry has also embraced the Internet of Things. Seventeen percent of automobile companies use IoT devices in the production of their vehicles. Volkswagen recently added a system that tracks all of their parts' supply pipeline so that they know where all parts are located.
While manufacturing is leading the way in implementing IoT into their operations, the transportation, warehousing and information sectors also look to be big investors in IoT systems and devices in the next five years. General Electric uses IoT technology at their Durathon battery factory in Schenectady, N.Y. to collect data about their round-the-clock processes. They installed 10,000 sensors on their assembly line and in every single battery they make so managers know the production status at any time and share the data with other departments.
Business must adapt their operations to this rapidly changing technology. All of the data made available by IoT must be analyzed and shared with a large number of people across the enterprise. Complicating the situation is the fact that different departments need to access only the data that is critical to their function. This is where cloud ERP comes in.
Those on-premise legacy ERP systems in place for decades are unable to deal with the challenges presented by all that data generated by IoT devices. They cannot provide instant access to that data from anywhere in the supply chain. Those systems are expensive to maintain, must be constantly customized and rely on old technology and software.
Cloud-based solutions, on the other hand, offer the ideal solution to the problem. Data is stored in the cloud, not on big, expensive hardware installed in a single location. Internet access means that data can be instantly viewed, analyzed and shared at any time from anywhere, including mobile devices. These are critical advantages to companies who must continue to compete not only in expanding global markets but also in a business environment complicated by the revolutionary technology of the Internet of Things. Firms no longer have to rely on large, expensive and cumbersome IT departments to manage these systems. Cloud ERP software companies build, maintain, configure and customize the solution instead, helping manufacturers reduce costs while increasing productivity.
Getting Specific on How Cloud ERP Helps
The most practical cloud ERP systems are designed for the Salesforce ecosystem, one of the largest and most widely used cloud platforms and run 100 percent within that platform. In addition to supporting integration with IoT devices, the cloud ERP solution supports multiple companies, multiple divisions, and multiple sites, all within a multi-tenant environment on the Salesforce platform.
Cloud-based ERP solutions can support every step in the manufacturing and distribution process, increasing efficiencies, controlling costs and, ultimately, increasing revenue and customer satisfaction. There are ERP modules for sales order management, purchase order management, production engineering, inventory management, lot and serial control, scheduling and capacity planning, shop floor control, material requirements planning (MRP), manufacturing cost control, project control modules and device history information from installed locations (via IoT).
For example, a Multi Division, Multi Site and Multi Company solution supports manufacturing and distribution companies with multiple plants or distribution centers in different locations around the world. Comprehensive inter-division and inter-site functions are available throughout all applications. Multiple divisions can exist within a single company while multiple sites exist within a single division. Forecasting and MRP functions can exist separately for each site or across sites to satisfy inter-site requirements.
The Internet of Things technology revolution has arrived. As the earliest adopters of IoT, manufacturers are faced with enormous strategic and operational challenges. Cloud ERP helps these firms face the future with solutions that help manage, analyze and share the vast amount of data from all those smart, connected IoT devices.
Pat Garrehy is the Founder, President, and CEO for Rootstock Software.