by Gary Mintchell | Jan 20, 2016 | Automation, Internet of Things, Networking, Operations Management
Everyone is in a rush to get an opinion or observation published about the Internet of Things. Evidently it gets lots of page views. Recently other analysts have been publishing thought pieces on IoT in Industry. It appears they have reached the same conclusion that I first broached a couple of years ago. The IoT is not a “thing.” To make any sense of it and use it for any strategy, it must be thought of as an ecosystem encompassing a variety of technologies.
Here is an article that appeared in the Sloan MIT Management Review. Since I am a subscriber, I don’t know if you can see the article at this link.
The writer is Sam Ransbotham is an associate professor of information systems at the Carroll School of Management at Boston College and the MIT Sloan Management Review Guest Editor for the Data and Analytics Big Idea Initiative. He suggests, “The Internet of Things will bring huge changes to the way markets and businesses work — and it could get messy.”
Here is a bromide that I’ve read a thousand times, “Most businesses aren’t ready for the changes to the marketplace that the Internet of Things will bring. But the time to prepare for them is now.”
Actually most business adapt. Some are visionary and will develop new products, processes, and services–and make a lot of money. Others will adapt and survive. Still others will wonder what happened and die. That is the way of business for at least 5,000 years.
Use Case for Internet of Things
“Yes, the potential insights from IoT are enticing. For example, it’s fun to think about the potential personal and even societal benefits from self-driving cars, such as fewer accidents, no problems with parking, more productivity while traveling, car sharing, greater infrastructure efficiency, etc. But perhaps a more profound implication is the data that they can collect. These cars will also be widely distributed “things,” gathering performance data that can help manufacturers diagnose problems, operational data that can help mechanics prevent failures, driver data that can help insurers understand risk, road data that can help cities improve infrastructure, etc. These kinds of insights, we’re ready for.”
But there are a lot more changes coming with the IoT transformation than many people may recognize.
Ransbothem looks into information technology as a model for what will happen in IoT. “About a decade ago, advances in information technology converged to fuel a boom in corporate use of analytics. First, widespread implementation of information systems captured unprecedented amount of data in ways that could be used in isolation or combined. Second, tools and technologies allowed the inexpensive storage and processing. Third, savvy analytical innovators creatively combined these to show everyone else what could be done.”
We have seen all this play out in industrial systems. There remains more to be done, here, though.
He proceeds to look at Internet of Things. “First, the cost and physical size of sensor technology have dropped such that they can be incorporated into most items. Second, widespread communications infrastructure is in place to allow these distributed components to coordinate. Third, once again, savvy innovators are showing the rest of us the possibilities from the data they collect.”
Manufacturing and production are not only poised to exploit these technologies and strategies, they have already been implementing to one degree or another. But his point is valid. IoT needs the ecosystem of sensing devices, networking, communication technology, databases, analytics, and visualization.
Ransbothem identifies four areas of change. Of these, I direct your attention to the last–process changes. I think everything feeds into process changes–not just the processes to make things, but also the information technology, supply chain, and human processes that must not only adapt but thrive with the new information awareness.
- Market Power: IoT should provide a greater amount and a greater value of data, but are companies ready to align their interests in obtaining value from this data with the multiple other companies and end users who create, own, and service the products that originate the data? In the driverless car example, it is easy to see how multiple stakeholders could make use of the data from cars; the same is true for other devices. But it may not be clear who owns what data and how it can be used.
- Complexity: Few organizations are prepared to be hardware and software development companies. But that’s what the Internet of Things will enable. As products are built with embedded sensors, the component mix increases in complexity. As a result, manufacturing systems and supply chains will become more elaborate. Software embedded in products will need to be updateable when the inevitable shortcomings are found.
- Security: If we believe data is valuable, then we need to be ready for people to want to take it from us — why would data be any different than any other precious item? The IoT context intensifies the need for security requirements; for example, sensors or software that allow physical control of the product make attacks easier.
- Process Changes: Many business processes continue to be “pull” oriented. Information is gathered, then analyzed, then decisions are made. This works when change is slow. But with the IoT transition, data will stream in constantly, defying routine reporting and normal working hours. Flooding data from IoT devices will give opportunities for quick reaction, but only if organizations can develop the capacity needed to take advantage of it. Few mainstream large companies are ready for this, much less small- to medium-sized companies that lack the resources of their larger corporate brethren.
The Internet of Things is bringing and will continue to bring advances in how we do business. How well will executives, managers, and engineers execute on this vision? That is key.
by Gary Mintchell | Dec 21, 2015 | Data Management, News, Operations Management
PwC US does some interesting and relevant research for my areas of interest. Here are details of the latest.
After five years of anemic economic recovery, manufacturers continue to add inventory to their books much faster than GDP growth. In order to better manage inventory levels while still ensuring the right part is in the right place at the right time, manufacturers are increasingly relying on advanced information management solutions, according to a survey released by PwC US in collaboration with Manufacturers Alliance for Productivity and Innovation (MAPI).
Further, inventory turns – which indicate whether the supply chain is getting more efficient at moving goods from suppliers to customers – have declined steadily since 2011. PwC and MAPI surveyed senior executives from 75 global manufacturers (with U.S. headquarters) to better understand this decline in inventory performance and polled respondents on the effectiveness and benefits of using advanced inventory data management strategies to reduce inventory.
“Inventory is often considered by manufacturers to be the most valuable category of assets on their books; however, it can tie up large amounts of cash and diminish in value for a host of reasons,” said Stephen Pillsbury, principal in PwC’s U.S. industrial products practice. “As a result, it has become common practice for manufacturers to minimize inventory as much as possible without hurting customer service levels. While they continue to focus on managing inventory, they seem to have reached a point of diminishing returns and are now turning to advanced information management solutions to further reduce their inventory.”
Benefits of Effective Information Management
When it comes to enabling agility, responsiveness and operating flexibility, 37 percent of respondents reported that their core ERP system was either not very effective or ineffective. Conversely, the other respondents with effective ERP systems were quite bullish on the usefulness of their supply chain visibility (SCV) systems when it comes to replacing inventory and costs with actionable and timely data.
Interestingly, companies with ineffective ERP systems experienced an average annual margin erosion of 3.5 percent while those with effective systems in place experienced an average growth of 2 percent. Companies with both effective ERP and SCV systems had even higher margins at 2.4 percent. Put another way, we found a clear connection between strong margin performance and effective ERP implementations.
In regards to inventory turns, almost half of those surveyed said their supply chain system was effective or very effective while one third said their system was not very effective or ineffective at replacing inventory and costs with actionable and timely data. When comparing the two groups, the companies with effective SVC systems outperformed the ineffective ones by 30 percent.
“Information management systems matter because they get the right information to the right place at the right time in order to improve effectiveness,” said Cam Mackey, SVP, Operations and Partnerships, MAPI. “To that end, many companies have invested a great deal of time and money implementing ERP and SVC systems. Together, these platforms can provide manufacturers with detailed information including orders, lead times, stock quantities and locations. Effectively integrating these information systems enables manufacturers to do a better job of synchronizing supplier deliveries with production schedules and customer orders, resulting in improved customer service and less overall inventory.”
Improving Supply Chain Management
In an effort to improve supply chain management, many companies are embracing SCV systems – enabling companies to track and manage raw materials, work-in-process, and finished goods across the extended supply chain. When fully implemented, they provide extensive demand, planning, supply and inventory information throughout the supply chain, enabling users to optimally balance customer service levels with costs to serve. Of those surveyed, 70 percent reported having a SCV system in place.
As effective systems drive better margin growth and higher turns, companies are still experiencing inventory growth and supply chain issues. When asked about the factors having the biggest impact on supply chain visibility, uncertainty of supplier deliveries and unpredictable customer demand were among the responses most cited. While SCV systems are intended to link customer demand to production schedules and supplier orders/deliveries, respondents continue to cite problems with forecast accuracy.
Respondents also addressed their ability to maintain optimal inventory levels, listing lack of discipline in operating processes and practices, a high degree of product complexity or number of stock keeping units (SKUs), and poor forecasts from marketing/sales as having significant impact.
Many of the factors listed above are driven by management disciplines, not information systems. The management discipline that most strongly addresses these factors is integrated materials management (IMM), commonly enabled through sales, inventory, and operations planning. This discipline is focused on synchronizing sales forecasts with delivery commitments and material supplies and involves all of a company’s key functional stakeholders. According to Mackey, “While systems matter, the bottom line is that effective supply chain visibility all comes down to management discipline.”
“The single biggest driver of excess inventory and unreliable delivery performance is inadequate material management practices. While SCV systems can greatly enhance IMM they cannot replace disciplined review and approval by critical management stakeholders. To make this task easier and more effective requires buy-in and coordination across key functions in the organization – even with the best technology in the world, it still comes back to management discipline,” Pillsbury said.
For more information, download the report here: Inventory Performance Today: Why is it Declining?
