IoT Brings Great Potential, But Increases Risk For Manufacturers

The Internet of Things is rapidly making its mark on manufacturing, but there are risks involved. We spoke with Erika Melander, Manufacturing Industry Lead at Travelers, to dive into those risks and explain what manufacturers can do to protect themselves.

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Erika MelanderErika Melander

The Internet of Things (IoT) is rapidly making its mark on manufacturing, bringing with it the potential for improved safety, lower costs, increased convenience and enhanced products. However, with all of this opportunity for improvement across the industry comes the potential for increased risk.

We spoke with Erika Melander, Manufacturing Industry Lead at Travelers, to dive deeper into these risks and understand what manufacturers can do to protect themselves as they take advantage of the benefits IoT offers.

Manufacturing Business Technology: What are some of the factors driving adoption of IoT in manufacturing?

Erika Melander: Several factors are driving the use of IoT in manufacturing. These include safety, convenience, efficiency and transparency. For instance, IoT can help automate and remotely manage repetitive tasks, improving worker safety and freeing employees up for other tasks. Industrial equipment can self-assess performance and signal the need for routine maintenance or repair. 

Manufacturing Business Technology: How are manufacturers applying IoT technologies to their operations?

Erika MelanderThere are many applications for IoT in manufacturing operations, and three great examples of how it has helped companies are equipment maintenance, workforce safety and the overall production process, including inventory and supply chain management.

IoT has also helped with equipment maintenance. Sensors installed into industrial machines can stream data points such as heat, vibration and oil viscosity, which, when filtered through analytical software, can give maintenance crews better insight into when a machine needs their attention. 

When it comes to safety, some devices can help prevent injury or death by detecting activity of both humans and machines, while others can identify malfunctions of the equipment itself to turn it off before an accident happens. Robots can also handle repetitive and potentially hazardous tasks, which can decrease the frequency of worker injury claims. 

We’ve seen that IoT can also significantly help manufacturers correlate production benchmarks with historical staffing levels, enabling them to forecast hiring needs more accurately to bring them closer to the goal of production workforce automation. Real-time automation and process integration across the supply chain can help manufacturers respond more quickly to consumer demand.

Manufacturing Business Technology: What are the biggest IoT-related risks to manufacturers?

Erika MelanderThere are many different ways in which IoT can impact a manufacturer’s finished goods, property, workplace safety and cybersecurity. Here are the top four risks:

  1. Manufacturing defect: IoT technology has the potential to introduce unintended defects into manufactured products, resulting in products that do not function as customers expect. Automation and integration do not necessarily translate into perfection.
  2. Property: Property risks refer to the risk of physical damage to, or loss of use of, buildings, business personal property and loss of business income and extra expense. Integrating IoT technology improperly into operations could damage a manufacturer’s surrounding equipment, building, raw materials or finished goods.
  3. Workplace safety: IoT machines, equipment and devices that don’t perform as they should in a manufacturing environment can lead to employee injuries. In addition, not all pieces of equipment come with sensors. If they do, the safety guards are sometimes overridden by employees in an attempt to complete a specific task more quickly.
  4. Cyber: Cyber risks are the most commonly thought of risk with any technology and can be understood in terms of threats to confidentiality, integrity or availability of information systems and data. IoT devices increase the overall exposure of a company’s network to cyber risk by increasing the number of possible vulnerabilities that can be exploited.

Manufacturing Business Technology: Can you provide an example or two of what could go wrong?

Erika MelanderHere is a hypothetical situation: A stamping press is connected to an integrated production line where sensors are used to synchronize the placement of raw metal into the press. The stamping press, conveyor and material-handling robot are made by different manufacturers. The settings for the robot are adjusted remotely by the manufacturer, improving its energy consumption but throwing off the synchronization with the stamping machine. The operator of the press, unaware that any changes have been made, inserts his hand into the press area to remove a part just as the robot inserts a metal blank, causing a hand injury. This is just one example that illustrates the kind of risks associated with IoT technology if proper security practices and equipment compatibility arenot built into IoT systems up front.

Manufacturing Business Technology: What can manufacturers do to protect themselves from IoT-related risks?

Erika MelanderThere are several steps manufacturers can consider to minimize their exposure to IoT-related risks. First, reinforce cybersecurity by maintaining an inventory of all IoT network devices and segregating IoT-related network traffic from the rest of the corporate network. Change default passwords and implement IoT patch management so that patches are applied as needed. Manage user access on a regular basis to ensure that only the correct individuals have access to systems.

Second, consider appropriate quality and risk management systems. Assess potential hazards at different points in the production lines and perform extensive testing.

Third, evaluate company contract practices, considering specific contract provisions including limitation of liability; damage caps; disclaimer/limitation of warranties; integration and contractual risk transfer; and defense/indemnity provisions.

Finally, investigate insurance options for each category of risk. It’s important to work with an insurance company that offers the right coverages and has the resources to help mitigate risk and respond if something does go wrong. 

By putting safety features, data protection measures, effective risk management and good design decisions into place, manufacturers can reduce their exposure to some of the IoT-related risks we see today while still enjoying the benefits these advanced technologies can offer.

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