Smart Factory Survey Signals Manufacturing Sector Growth

The Internet of Things (IoT) is rapidly changing the world around us by transforming a huge range of physical objects through digital intelligence. The transformative power of IoT is revolutionizing the way companies do business—helping them become faster, smarter, safer, and more efficient.

IoT Signals is a series of impactful thought leadership content curated by Microsoft to inform about the latest developments and technology trends in the IoT world. In the latest edition, Microsoft, Intel, and IoT Analytics have developed an IoT Signals report focused exclusively on manufacturing. IoT Analytics surveyed 500 decision makers working in discrete, hybrid, or process manufacturing and conducted in-depth interviews with a subset of them. The goal of the latest IoT Signals report was to uncover fresh learnings and insights about the current and future state of IoT technology in manufacturing companies’ plans for digital transformation. Specifically, the report focussed on manufacturing operations and smart products.

Manufacturers must respond to four major trends Trends relating to consumer and company behavior are having a profound impact on manufacturing operations:

Customization: Many consumers are no longer satisfied with mass-produced designs and products. For example, in response to fast-changing social media trends, consumers want products that meet their personal specifications—and they want these customized items delivered quickly.

Regionalization: Globalization is reversing as trade tensions, geopolitical conflicts, and the COVID-19 pandemic have heightened the risks associated with complex supply chains. Where possible, companies want to source inputs and manufacture products close to their consumers.

Digital Differentiation: Traditionally, digital skills resided in a manufacturer’s IT department. Various trends including remote work, rising labor costs, and the increasing use of shop-floor automation have elevated digital skills from supporting capabilities to a source of competitive advantage.

Sustainability: For many consumers, climate change is now a reality. Motivated by extreme weather, organized activist movements, and government regulations and incentives, a growing number of consumers prefer to purchase climate-conscious products and brands with a low or decreasing carbon footprint. Sustainability also drives value from an operations perspective. For example, the recent surge in energy costs around the world is motivating organizations to invest in renewable energy.

How The Smart Factory Helps Manufacturers Adapt

The Smart Factory helps manufacturers adapt to these trends. Agility and modularity make it easier to customize products, and supply chain resilience facilitates regionalization. A digital-first culture empowers workers, while sustainable operations help in achieving climate goals
and other important targets relating to well-being or sustainable communities.

In a Smart Factory, winning companies use agile and modular setups to produce customized products rapidly and economically. This flexibility is essential for meeting consumer demand and producing at a smaller scale in regional facilities.

Report Key Findings

Manufacturers are accelerating their Smart Factory efforts post-COVID-19

Nearly three-quarters of the respondents (72%) have scaled from the proof-of-concept (PoC) stage and are in various stages of implementing their Smart Factory strategy. Their improvement ambition for the next three years is 66% higher than the level of improvement they have already achieved in the previous three years.

Operational improvement remains the biggest goal

Four out of five manufacturers consider overall equipment effectiveness (OEE) to be the most KPI to measure the success of their Smart Factory strategy. They expect the biggest improvements in the next three years to occur in cybersecurity, sustainability, and quality.

Investments are shifting to industrial automation based process control

Quality control and condition-based maintenance have been the focus of most Smart Factory projects to date. The need for greater agility and modularity is leading manufacturers to shift their investment focus in the next three years toward industrial automation based process control (e.g., investments into industrial gateways connected to the cloud and software-based PLCs). They plan to increase these investments by 29%.

Challenges to scaling Smart Factory initiatives are changing

Manufacturers have overcome previous challenges related to getting data from assets and interfacing with cloud infrastructure. Today, half of the respondents face challenges in developing new software applications. Eight out of 10 of the respondents report having at least one very important skill gap, with the biggest relating to data science, AI, and cybersecurity.

IT–OT convergence is happening

With 76% of manufacturing assets now connected, many workloads, as well as applications, are moving away from on-premises infrastructure to public and private cloud deployments, especially the latter. Software-as-a-Service is becoming the dominant type of deployment. At the same time, IT tools such as containers are making their way onto edge hardware and into factories.

Strong investments in Smart Products are expected

Manufacturers not only optimize their own operations but also, in many cases, realize new revenue streams from smart connected IoT products sold to customers. Those that already sell Smart Products expect their share to increase from 33% today to 47% by 2025, with a heavy focus on value-added services such as remote support or predictive maintenance.

The full report is available to be downloaded

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