Transforming a factory into a smart facility can be accomplished more quickly and cost-effectively than many executives realize, reported Harvard Business Review (HBR).
When most people think about a smart factory, they picture a "manufacturing execution system" or MES that takes more than a year and millions of dollars to set up. But here's the good news: you don't have to be as wealthy as Elon Musk to enjoy the advantages of smart manufacturing.
Embracing the Power of Data
One common misconception is the overwhelming focus on high-tech solutions. During HBR’s visits to manufacturing sites over the past five years, they've discovered that many manufacturers are sitting on a goldmine of untapped data. Whether it's labor hours, scrap tracking through RFID, or real-time utility insights via Internet of Things (IoT) sensors, readily available data can be as impactful as advanced robotics, and at a fraction of the cost.
A Democratized Digital Realm
This transformative journey is well-suited for mid-sized companies. In a recent survey conducted by AlixPartners, 55% of companies with revenues under $500 million a year felt overwhelmed by the pace of technological change. The democratization of digital tools, fueled by cloud computing platforms, has made cutting-edge capabilities accessible to businesses of all sizes. Even sensors and cameras are now within reach for companies on a budget.
Strategic Planning for Smart Success
The key to success is strategic planning. It begins by identifying business issues and diving deep into the factory's profit and loss (P&L) statement. Focus on key performance indicators (KPIs) impacting profitability, including overall equipment effectiveness, machine utilization, productivity, and throughput.
An Example
Consider the example of a commercial bakery in the northeastern United States generating annual revenue of $200 million. By addressing three core business issues - reducing waste, optimizing labor costs, and minimizing energy consumption - they can achieve annual savings of $1.5 million, increasing EBITDA by 4.8%.
One source of waste is baked goods that don’t meet weight requirements. By installing digital scales and sensors on existing manufacturing lines, they can reduce scrap by 25%.
A homemade labor visibility and utilization dashboard reveals labor inefficiencies, leading to a 50% reduction in overtime. IoT sensors optimized utility consumption, resulting in a 5% reduction in annual utility spending.
Best Practices for Success
HRB’s experience with manufacturers has revealed four best practices for affordable and successful smart factory projects:
Focus on the P&L: Keep the plant's profit and loss (P&L) at the forefront. Pragmatic thinking is essential for success on the factory floor.
Identify All Cost Drivers: Smart factories should address all cost drivers, which extend across various company departments, such as ingredients, packaging, labor, overhead, and utilities.
Leverage Existing Assets: Adding digital capabilities to existing machinery can yield the most benefits at a lower cost, in less time, and with fewer issues.
Empower Manufacturing Leaders: Seasoned executives who combine manufacturing expertise with digital proficiency are invaluable for smart factory projects.
Looking Forward
The smart factory evolution is not just for the giants; it's a transformative journey that's more accessible and cost-effective, reshaping the manufacturing landscape for companies of all sizes.
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