Important Smart Factory KPIs

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.

In short

  • 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.

VC Slowdown Happening Faster for AI Startups

In Q2, VC investment in AI fell by 44%, while overall funding fell by 25%.

One of my few trusted news sites is Morning Brew newsletter and its companion Emerging Tech Brew.

Writer Hayden Field recently posted an article looking at venture investment in Artificial Intelligence. My inbox has swelled with AI this and AI that for some time now. Marketers evidently feel this is a magic word to drive sales while showing the world their company is cool with the latest tech. Of course, Artificial Intelligence (often called neither artificial or intelligent) has been around for decades. Much of the manufacturing software you’ve used for years has AI embedded. So, I’m not surprised at this.

Total VC deal count worldwide has maintained momentum from last year’s record highs, but so far in 2022, “deal value has declined rather significantly across all stages,” according to a PitchBook report—and AI funding in particular is falling faster than the market.

By the numbers:

In Q2 2022, global AI funding plummeted by more than 44% year over year, from $33.6 billion to $18.8 billion, per Pitchbook data shared with Emerging Tech Brew. Over the same period, overall global VC funding fell by 25%, from $176 billion to $131.7 billion. On a quarterly basis, global VC funding for AI and machine learning was down more than 26% between Q2 and Q1, a slightly larger margin than the 20% drop for global VC as a whole.

Same old tech story, how to turn hype to profits.

For years, many VCs believed AI companies would figure out the path to profitability down the road, Shahin Farshchi, a partner at Lux Capital, told us. Today, investors want to see founders give more thought to how, exactly, they’ll build a sustainable business model around AI.

Honeywell Cybersecurity Research Reveals 52% of Threats Target Removable Media

I am not a cybersecurity expert. But I get to read many reports, news, and research. Media attention focuses on Internet-based attacks. Social engineering through people still seems to be the best way to break in. Now there is current research validating the threats that come through removable media. Your policies, procedures, training in this area remain one of the most crucial walls of protection you can have.

According to a report released August 16, 2022 by Honeywell, the threat of USB-borne malware continues to be a serious concern. Data from the 2022 Honeywell Industrial Cybersecurity USB Threat Report indicates that 52% of threats were specifically designed to utilize removable media, up from 32% the previous year and more than double the 19% reported in the 2020 study, clearly indicating that the threats designed to use removable media have reached a dangerously high level.

Now in its fourth year, the Honeywell Industrial Cybersecurity USB Threat Report shows a clear trend: cybersecurity threats continue to be more prominent and more potent. According to the report, threats designed to establish remote access capabilities remained steady at 51%, while the number of threats designed specifically to target industrial control systems increased slightly year over year, up from 30% to 32%. At the same time, the malware was more capable of causing a disruption to industrial control systems, climbing to 81% compared to 79% the previous year.

The current report was based on aggregated cybersecurity threat data from hundreds of industrial facilities globally during a 12-month period. Along with USB attacks, the research highlights that Trojans remain a top concern because of their potential to cause severe disruption to industrial infrastructure, comprising 76% of the malware detected.

“This year’s report indicates that adversaries are deliberately leveraging removable media as an initial attack vector to establish remote connectivity, exfiltrate data, and establish command and control,” said Jeff Zindel, vice president and general manager, Honeywell Connected Enterprise Cybersecurity. “It’s now painfully clear that USB removable media are being used to penetrate industrial/OT environments, and that organizations must adopt formal programs to defend against this type of threat to avoid costly disruptions.”

For the fourth year in a row, the threats attempting to enter industrial/OT environments have continued to increase in sophistication and frequency with USB-borne malware clearly being leveraged as part of larger cyberattack campaigns. Hackers are taking advantage of USB removable media to circumvent network defenses and bypass the air gaps upon which many of these facilities depend upon for protection. Continued diligence is necessary to defend against the growing USB threat and strong USB security controls are highly recommended.

Honeywell’s Secure Media Exchange (SMX) is designed to provide advanced threat detection for critical infrastructure by monitoring, better protecting and logging use of removable media throughout industrial facilities. The Honeywell Forge Cybersecurity Suite is designed to monitor for vulnerabilities such as open ports and the presence of USB security controls to strengthen endpoint and network security, while also providing better cybersecurity compliance.

Industrial Manufacturing M&A Stable Despite Market Headwinds

PwC sends industrial manufacturing market updates periodically. They focus on business level merger and acquisition activity. They report industrial manufacturing M&A was strong in the first half of 2022 but slower than in 2021, which was driven by pent-up demand.

Average deal value decreased over 30% in the first half of 2022 from the second half of 2021. Activity in the first half of 2022 was  focused less on transformational megadeals (transactions exceeding $1 billion in deal value) and more on smaller, targeted acquisitions and divestitures. This was driven by buyers building out platforms and filling in strategic market gaps, sellers divesting non-core divisions or assets and broad concerns of US regulatory scrutiny.

Recognizing concerns such as inflation and war in Europe, they continue, companies, however, face ongoing market headwinds of economic and geopolitical uncertainty, including record-high inflation, which will likely continue to influence the M&A landscape into the second half of 2022. 

The future looks interesting for those who are prepared.

While some expect the global economy is headed for a near-term slowdown, underlying economic fundamentals remain strong. Private equity firms with dry powder and corporations with significant cash balances are expected to drive significant M&A activity. This, coupled with a large number of carve-out divestitures being contemplated, provide supply for potential transactions. 

A few nuggets of advice:

  • A targeted focus may be necessary to manage headwinds from global and economic uncertainty.
  • Given global forces are likely to continue to drive uncertainty into M&A processes, private equity and strategic buyers alike should critically evaluate individual transactions in a targeted and strategic manner. 
  • Sellers may find setting a realistic projection plan and addressing these market risks to be a moving target. They may instead find assessing upside and downside risks to the projection plan to be a more successful approach for discussions with potential buyers. 
  • Buyers, on the other hand, may then have the challenge of securing lending for a transaction in uncertain global market conditions. M&A success may depend on using a focused approach to acquisitions, including factoring in downside market risks.

Innovating for the Future: Four Trends from Hannover Messe

I met Çağlayan Arkan, Vice President, Global Strategy and Sales Lead, Manufacturing and Supply Chain at Microsoft, a few years ago. Checking through Microsoft press information recently, I came across his blog reporting from Hannover in May. Here are four trends he picked up.

He begins by citing Microsoft partners at the event: ABB, Ansys, Accenture, Avanade, AVEVA, Blue Yonder, Cognite, C3.ai, ICONICS,o9 Solutions, PwC, PROS, PTC, Rockwell Automation, Sight Machine, Tata Consultancy Services, and Tulip Interfaces.

1. Empowering a diverse frontline manufacturing workforce. According to Microsoft’s Work Trend Index, 63% of manufacturing frontline employees are excited about, and ready for, the job opportunities technology creates. Microsoft continually releases products designed to empower workers at all levels.

Everyone who makes a computing and visualization device is working on this trend. And many (most?) build upon one Microsoft technology or another. Twenty years ago Microsoft spokespeople explained how the company’s products were a foundation for others to build applications atop. That concept exists still today.

2. Fueling the next generation of factories with the industrial metaverse. Microsoft Cloud for Manufacturing serves as the foundation for the “industrial metaverse,” which converges physical and digital worlds to bring the factory of the future to life through advanced technologies including IoT, AI, digital twins, mixed reality and autonomous systems.

Are you as tired of “metaverse” as I? However, augmented reality devices exist. I’ve tried on a variety at trade shows. I don’t think this is a technology in search of an application. There are use cases. As soon as they become easier to use, they’ll be everywhere.

3. Designing more resilient supply chains. Dynamics 365 enhances end-to-end supply chain visibility, enables flexible real-time planning and optimizes and automates fulfillment by seamlessly coordinating business processes to mitigate constraints. With Microsoft Teams embedded within the Dynamics 365 supply chain portfolio, collaborating to achieve consensus with internal team members and external partners is more streamlined, and can happen in near real-time.

Everyone who has any brush with news sources over the past couple of years knows about supply chain. And how they can’t get things they desire because of disruptions in the supply chain. Microsoft has products to mitigate problems.

4. Accelerating the manufacturing sustainability journey. Within manufacturing we have a tremendous opportunity to use the power of technology to achieve environmental, social and governance (ESG) goals, improve sustainability and deliver long-term value for customers. Microsoft Cloud for Sustainability, available June 1, empowers manufacturers to accelerate their sustainability journey with solutions that unify data and enable comprehensive, integrated and increasingly automated sustainability management.

Sustainability is on every company’s radar. Need we say more?

The New GE, and the New GE, and the New GE

The space seldom goes in for breaking news. Or repeating the same news ad nauseam like the TV folks do. You’ve probably already seen the news of the names of the final breakup of the GE company. Here are a few of my thoughts.

I tease the marketing aspect of the announcement. But I guess they must do it, not for us but for Wall Street. 

Jack Welch was never my hero. His jump into financial businesses took the company’s eye off the target. His entertainment acquisitions had to be just to feed the ego of someone who liked visibility with stars. The main businesses kept chugging along despite all that and his financial shuffling.

Executives couldn’t find a buyer for Digital on its own. It will continue to be a solid supporter of the electrical and energy business. For some of you also a valued supplier.

I like focused businesses. These three new companies should do well.

Linda Boff, CMO GE, posted on LinkedIn, “Today is a historic day for GE as we announce the brand names of the future companies GE will create through its planned separation into three industry-leading, global, investment-grade public companies.” Well, she is marketing, so she had to throw in those extra adjectives.

I worked for a company some 20 years ago that proudly unveiled a new logo. It took a two-page memo to explain the image and the typeface and color and why it took a team a year to come up with it. Probably the reason that I only lasted a couple of years in a marketing role—I think that if you have to explain it, it isn’t good.

So, the name of the company I will be most interested in must be explained…

Boff continued, “We have spent the last six months engaged in a thorough and thoughtful process to understand the intrinsic value of the GE brand. Through thousands of conversations with global customers, employees, and others, it became clear that the GE name and our century-plus old monogram represent a legacy of innovation, symbol of trust, pride for our team, and a talent magnet for future leaders. It is a brand that resonates and opens doors the world over and is respected, indeed loved, by so many.”

It took six months to figure out that GE is a known and respected brand name?

She unveils the key statement—finally, “And so it is with immense pride that I introduce you to the next generation of GE – GE HealthCare, GE Vernova, and GE Aerospace.”

OK, HealthCare and Aerospace are explanatory. Those companies are customers for many of you. Vernova? (The auto correct wouldn’t let me type it.) It’s GE Energy plus GE Digital. Or, as the press release puts it, GE’s portfolio of energy businesses, including GE Renewable Energy, GE Power, GE Digital, and GE Energy Financial Services, to come together as GE Vernova.

GE Chairman and CEO Larry Culp said, “Leveraging GE’s multi-billion-dollar global brand gives us a competitive advantage in our end markets, allowing these businesses to win in the future.”

In early 2024, GE plans to execute the tax-free spin-off of GE Vernova, GE’s portfolio of energy businesses, which together with its customers provides one-third of the world’s electricity and is focused on accelerating the path to reliable, affordable, and sustainable energy. The new name is a combination of “ver,” derived from “verde” and “verdant” to signal the greens and blues of the Earth, and “nova,” from the Latin “novus,” or “new,” reflecting a new and innovative era of lower carbon energy that GE Vernova will help deliver. These attributes also are reflected in GE Vernova’s new “evergreen” brand color. With an installed base of more than 7,000 gas turbines and 400 GW of renewable energy equipment, GE Vernova’s Monogram will serve as a reminder of the company’s lasting commitments to deliver quality, partnership, and ingenuity to its customers.

Following these planned spin-offs, GE will be an aviation-focused company called GE Aerospace.