There are Four Key Benefits, McKinsey Says, but Data Integration will be the Key to Results

There is obviously as a lot of hype in the market relative to the Internet of Things (IoT) and its potential to create visibility, enable new products and services, and a whole lot more.

Much of the news is largely hot air. However, consultants Vineet Gupta and Rainer Ulrich of McKinsey recently wrote an insightful article on how IoT might best be used to improve manufacturing performance.

The key is to use data from IoT to drive continuous improvement, the authors say.

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"What differentiates benchmark organizations like Danaher or Toyota is their ability to improve those operations continually, at a pace their competitors struggle to match," Gupta and Ulrich write.

Within that context, they see four main areas where IoT can impact manufacturers, as summarized below.

Connectivity: Traditional production systems embody a collection of separate tools bound together loosely by the rules governing their application, Gupta and Ulrigh write.

Usually, these rules are at best defined only on a paper document or a corporate intranet site. In the future, however, such links will be much tighter and more automated, and "fast digital connections will allow the whole system to operate as a seamless, cohesive whole."

Such integration will change production systems in two ways. First, performance measurement and management will be based on precise data. Sensors will monitor the entire production process, from the inspection of incoming materials through manufacturing to final inspection and shipping.

Companies will store the output of those sensors in a single, central "data lake" together with a host of additional data from other internal and external sources.

All these streams of data will combine to set the production system's targets and measure its performance continually, so the staff will be able to see, at a glance, if the system is performing as it should.

Second, connectivity will support better fact-based decision making. Access to comprehensive, up-to-date production information, together with a complete historical picture, will take the guesswork out of changes and improvement activities. Root cause problem solving will be easier, staff use advanced analytical techniques to identify the changed operating conditions that precede quality issues or equipment failures. Furthermore, stored information about similar issues solved elsewhere will help identify appropriate solutions.

Speed: Today's production systems are necessarily retrospective. Manual measurement and management mean that most opportunities for improvement cannot be identified until a shift ends and the numbers come in, Gupta and Ulrich say.

However, with the introduction of comprehensive, real-time data collection and analysis, production systems can become significantly more responsive. Deviations from standards can immediately be flagged for action. The root causes of those deviations can therefore be identified more quickly, as will potential countermeasures. The entire improvement cycle will accelerate.

IoT technologies will also speed improvements in the production system itself, for instance, by automatically identifying performance gaps among plants or updating processes throughout the company whenever new best practices are identified.

Accessibility: Back-end data storage isn't the only thing that will be unified in the production systems of the future - so will access. Staff at every level of the organization will get the tools and data they need through a single application or portal. That portal will be the organization's window into the system's dynamic elements - especially minute-by-minute performance data - as well as more static parts, such as standards, improvement tools, and historical data.

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These smart portals will simplify and accelerate the operation of the production system. If it identifies a deviation on a production line, for example, it will be able to alert the team leader, show current and historical data on that specific process, and offer appropriate root-cause problem-solving tools, together with a library of solutions applied elsewhere.

The production-system portal will also be accessible beyond the organization's boundaries, allowing suppliers to track consumption and quality issues in materials, for example, or external experts to review current and historical performance to find improvement opportunities. Using on-line support and predictive analytical tools, manufacturers of equipment will increasingly operate, monitor, and maintain it remotely. The portal will even allow companies to benchmark their own performance automatically against that of others.

Anchoring: One of the most powerful effects of IoT and digital technologies Gupta and Ulrich foresee will be to anchor the production system into the organization's psyche. This will overcome the most critical challenge many companies struggle with today: sustaining change, so that the organization improves continually.

That anchoring effect, they believe, will be achieved in several ways. First, the unified data, interface, and tool set will not only help enforce the adoption of standards but also ensure that the right way of doing things is the easiest way. Staff won't need to improvise production plans or override machine settings if the optimum settings are just a button click away.

Second, future production systems will help the organization to collaborate more effectively. An end-to-end view of performance will break down barriers among functions and ensure that decisions reflect the interests of the business as a whole.

Finally, future production systems will make performance far more visible: when the whole leadership can see the direct link between operational performance and profitability, for example, the production system will no longer be considered the concern solely of the COO. Digital dashboards on computers, mobile devices, and even smartwatches will show staff in every function and at every level exactly how the organization is performing, as well as the precise value of the contribution of their businesses, plants, or production cells. The result will be genuine transparency—not just about where the value is being created, but also about how.

That's all pretty good, SCDigest says.

But data integration will be the key to success, Gupta and Ulruch say.

"This will mean taking the tools and capabilities that now work on individual production lines or assets and extending them to the entire enterprise and then its entire supply chain," the two write. "For companies that succeed, the reward will be greater efficiency, rich new insights, and dramatic, continual improvement in performance."

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