(5 min read)
Cloud computing is a critical requirement for Industry 4.0. Without it, the digital transformation of a company would be simply unthinkable. This is how our Vice President for Industry Transformation in the US, Brian Everett, sees it, and, by now, so do most medium-sized manufacturing companies. In the following post, Brian describes his perspective and explains why a hybrid cloud strategy is the best solution for him in the field of smart manufacturing.
We are in an industrial age characterized by major digital developments such as 3D printing and interconnected products supplemented with artificial intelligence. From semiconductor technology and electronics to automotive and heavy machinery, digital manufacturing processes make up a significant part of industrial production these days. New technologies and sophisticated equipment are increasingly being integrated into the manufacturing process to bring about products in an optimized manner. And with computer-aided design (CAD) and computer-aided engineering (CAE) integration, the product innovation and design processes are brought ever closer to a comprehensive ‘design to operate’ paradigm.
This urgency of the digital change in the manufacturing industry is currently being fueled through two channels: 1) by end customers who want products that are high-quality, personalized, interactive, and immediately available, and 2) the ability to operate in a nimble fashion and not being ‘geographically bound’ due to optimized supply and demand chains. This increasing competition demands a continual fight to differentiate a company’s product and service offerings and preventing the slip into product commoditization.
Cloud Computing as a Key Technology for Industry 4.0
Looking at the manufacturing industry and, in particular, at medium-sized companies, the underlying IT infrastructure typically exhibits a disparate legacy system environment with much of it being maintained ‘on premise’. In order to successfully complete the digital transformation and be able to participate in Industry 4.0, a completely centralized IT infrastructure provides considerable obstacles. Why? Because the ‘manufacturing facility of the future’ no longer operates as a stand-alone facility at a single location, but rather as a distributed, networked manufacturing business scalability toward the integration of additional legal entities, e. g. in the case of mergers and acquisitions (M&As).
As such, more and more cloud-based products exist for manufacturing processes that were originally handled within the four walls of the manufacturing facility. What’s more, the optimal way to process and evaluate the growing amounts of data that come with increasing automation are through smart, cloud-based products. Thus, I am one hundred percent behind the statement: Without cloud computing, there is simply no Industry 4.0!
Let me give you an example of what the integration of factory and shop floor into a cloud computing environment can look like in concrete terms: machine read-outs can be integrated into the SAP systems in such a way that data is provided in sub-minute, down to the second intervals (if required) and be constantly analyzed by cloud-based applications. This way, the monitoring of the overall system effectiveness (OEE) allows for the automatic generation of maintenance orders as soon as equipment is performing (or even just trending) outside specified tolerance limits. Furthermore, this information can be used in future analysis, thereby enabling a factory to move from a reactive to a proactive, predictive operating model. This is just one of many ways to effectively increase the quality and profitability of production processes with cloud solutions.
Smart Manufacturing is Gaining Ground Among SMEs
If you ask me where the manufacturing SMEs stand right now, I can say from my experience: digital change definitely has arrived. Certainly, manufacturing sub-segments such as semiconductor technology and high-tech electronics (where there are numerous digital service offerings available) are embracing the move to cloud at a more rapid pace than, say, manufacturing of heavy machinery. But they are all on the way toward digital transformation and most of them already have systems deployed and up in the cloud. Often these cloud-based solutions companies have deployed are flexible, subscriptive applications that enable them to have tailored solution offerings consumed in a financially viable, op-ex based approach.
Of course, artificial intelligence (AI) or machine learning (ML) are not yet completely pervasive in medium-sized manufacturing companies. Yet they are increasingly pursued by customers in this market segment as there is often a compelling return on investment. Some of the common topics of discussion we are engaging with our clients include the use of automated guided vehicles (AGV) or remote diagnostics using drones. These discussions augment our previous experiences of implementing projects around process automation for receivables and payables in financial accounting. As an example, companies can make use of OCR (Optical Character Recognition) to help automate invoice payables processing. A supplier’s invoice is sent to a specific email address where the document can be electronically scanned and automatically entered into the SAP system through OCR-related technology. If this supplier eventually changes the invoice (such as updating their logo or changing their business street address), machine learning enables this necessary updating so that the invoice can be successfully imported and processed. As a result, operational efficiency is achieved as accounts payable departments are focused on analysis and processing exception-based issues as opposed to processing all transactions.
The Way Forward: Addressing Challenges in the Manufacturing Industry in Light of a Global Pandemic
In our conversations with medium-sized manufacturing companies, there are three major challenges that need to be addressed in the next three to five years in order to be a successful, digitally transformed corporation:
1) Supply Chain
Especially in the current pandemic-shaped time, there are delays in shipping in a wide variety of industry segments and rescheduling is often necessary. Companies have to ask themselves: How do we source our goods now? How do we position our products? And how do we get them to the end customer effectively? My answer to this is a cloud-based, integrated business planning that enables inventory optimization and supply chain planning across the entire organization, not just for a specific production site.
2) Product Commoditization
The pandemic has also caused strong shifts in demand; for example, here in the US there has been great demand for basic products in the building sector (due in part to many personal home improvement project pursuits). The prices have increased from the resultant demand and manufacturing companies are confronted with high margin pressure as they cannot simply pass on the increased costs. They are now asking: How can we hedge our raw material prices and keep our costs under control? This development shows how important it is to equip your products in such a way that they offer real added value that goes far beyond ‘commoditization’.
The entire manufacturing process has changed, and more sophisticated products require a new way of interacting with manufacturing processes. New product development requires a great deal to be thought out and modeled in advance. This has an impact on the people involved and require different skill sets and traits to be able to develop, design, manufacture, and deliver the product to market. Many companies have a gravitation to focus on the tactical business operations; yet it is important to not lose sight of employees and improvement of their craft. It is about much more than setting up and configuring a system: good results depend on successful management and successful people within the organization. Digital transformation and hybrid cloud environments are only enabled and sustained by a workforce that is properly equipped and armed with the proper technical acumen.
Hybrid Cloud for Smart Manufacturing
To meet all these challenges, companies need a partner who can support them in managing and maintaining their system infrastructure and who at the same time offers them a cloud-based environment for the integration and management of applications outside the SAP world. Manufacturing companies, with their sometimes very specific requirements, must also be able to use proprietary software smoothly without having to worry about the underlying infrastructure with its interconnectivity and security aspects. In my experience, the hybrid cloud is the only approach that really makes sense here. This model alone offers the agility required to increase a company’s efficiency and ability to innovate without sacrificing quality and security.
When choosing a partner, it is advisable to rely on experience, because the approach to implementing AI or ML, for example, is fundamentally different from the deployment of conventional ERP solutions. You have to think with much more foresight and leverage the foundation for agile, iterative developments in its implementation. Small and medium-sized companies in particular can benefit from proprietary solutions that itelligence provides as industry specific solution extensions of SAP applications. This includes RPA (Robotic Process Automation) and UiPath , which add extra value to the market without leaving heavy footprints.
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