IoT Analytics performs research and analysis from its base in Germany and with affiliated people globally. I have an affiliation with them. Through Microsoft, I discovered this 59-page IoT Signals Report – Manufacturing Spotlight (August 2022), published by Microsoft and Intel, with research conducted by IoT Analytics. As part of this research, IoT Analytics surveyed 500 decision-makers working in discrete, hybrid, or process manufacturing in April and May 2022 and conducted in-depth interviews with a subset of them.
One of the findings from the research tells us 72% of manufacturers have partially or fully implemented a smart factory strategy today. Similarly, nearly two-thirds (65%) are in various stages of implementing their IoT strategy. Although the pandemic, looming recession, inflation, and global supply chain issues have been prevalent topics in the last year(s), manufacturers are determined to fast-track their digital transformation projects in the next three years.
- When evaluating the success of a smart factory, operational KPIs are important for manufacturers in all regions and industries and across all company sizes.
- Companies are ambitious to improve supply chain, safety, and sustainability KPIs in the next three years.
Why it matters
- For manufacturers: The data provide an opportunity to benchmark against industry peers.
- For technology vendors: Aligning services and products offered with the KPIs that manufacturers prioritize is important.
1. Most important operational KPI: Increase in OEE
All the top five manufacturing KPIs are related to operational goals. Across all regions and industries, respondents are highly focused on improving operational performance, including overall equipment effectiveness (OEE), labor efficiency, and output. The increase in OEE is the most important manufacturing KPI for measuring the success of their smart factory strategies. This KPI is seen as either important or very important by 86% of manufacturers.
2. Most important supply chain KPI: Increase supply chain resiliency
The increase in supply chain resiliency is regarded as important or very important for 73% of manufacturers. The global supply chain issues that were sparked by pandemic lockdowns and (trade) wars have put this manufacturing KPI in the spotlight of many factories. On average, the ambition of manufacturers is to increase supply chain resiliency by 28% in the next three years. Decision-makers see implementing new IoT based technology as a smart way to safeguard themselves from global turbulences.
3. Most important safety KPI: Decrease in reported safety incidents
A decrease in reported safety incidents is regarded by 67% of manufacturers as an important manufacturing KPI in measuring the success of their smart factory strategy. And decision-makers want to act on it. The average ambition of manufacturers is to improve the KPI by 30% in the next three years. Safer employees are happier and more productive employees—not only during the current environment of labor shortage but also otherwise.
4. Most important marketing and sales KPI: Increase in revenue
For 69% of manufacturers, the increase in revenue is an important manufacturing KPI to measure the success of their smart factory strategy. The introduction of new IoT-based technologies does not only affect the operations themselves but also indirectly affects the revenue. Customers expect vendors in discrete and process industries to deliver high-quality, highly customized products on time.
5. Most important sustainability KPI: Reduction of waste
Nearly two-thirds (63%) of manufacturers see the reduction of waste as an integral part of their smart factory transformation. Although sustainability improvements are not the main driver of smart factory strategies, manufacturers are devoting more attention to the topic and often see it as complementary to the existing operational KPIs. Respondents ranked “decrease in waste” as the manufacturing KPI with the second-highest overall ambition and “carbon footprint reduction” as the fastest-accelerating manufacturing KPI. This indicates that respondents recognize the opportunity for tangible improvements and are likely to boost the importance of sustainability KPIs in the coming years. Moreover, improving a sustainability KPI often correlates with improving an operational KPI and vice versa. For example, a reduction in energy usage or waste may lead to a reduction in costs, while an increase in process efficiency may lead to lower energy use and a better carbon footprint.