A new IFS study indicates that a lack of integration between the internet of things (IoT) and enterprise resource planning (ERP) systems negatively impacts the readiness of North American industrial companies in their digital transformation. A key finding revealed that only 16 percent of industrial companies use IoT data in ERP software.
Companies across many industries are moving forward with their digital transformation for many reasons, which includes benefits in resource optimization, improved business processes, and lower costs. But like the industrial sector they are finding that their legacy systems are causing a roadblock in their move to more intelligent systems.
The IFS survey of 200 IoT decision makers found that most industrial companies have a disconnect between data from connected devices and strategic decision making and operations. This limits the digital transformation potential of IoT, according to IFS.
The study also looked at how well ERP, enterprise asset management (EAM) and field service management (FSM) software prepares industrial companies for digital transformation and to consume IoT data within their enterprise software.
If industrial manufacturers get it right, it will translate into big operational, cost and revenue benefits for them, and big business for providers.
IoT in the manufacturing sector, particularly in operations and the supply chain process, is expected to drive significant growth over the next several years. IoT in manufacturing is forecast to exceed $150 billion by 2024, according to a new report from Global Market Insights.
“The technology has a huge potential to enhance the visibility in industrial operations by gaining insights to every step of the production and supply chain process in real time,” said Global Market Insights.
“The virtual tracking of the firm assets, operations, processes, products and other resources enables businesses to have complete visibility resulting in streamlined process and optimizing the industrial demand and supply,” according to the market research firm. “Rising demand for improvising the operational efficiency followed by reduction in costs associated with various manufacturing processes is expected to propel the IoT in manufacturing market growth.”
However, a hurdle many companies face during their digital transformation is outdated enterprise software and systems that don’t allow them to readily consume IoT data to improve their business processes and intelligence. Although more than 63 percent of IFS survey respondents said their enterprise software prepared them well for digital transformation, over one-third of respondents said it didn’t prepare them very well or was an impediment.
“Are your planning and maintenance systems robust enough to make real time decisions using IoT-sourced data? Many are facing the reality of having to answer ‘no,’” said Rick Veague, IFS chief technology officer for North America, in a statement. “We have seen examples of companies coming to us because their incumbent software is not able to administer and use IoT data to achieve the gains they want to realize.”
“The greater potential for IoT in these settings, however, is business growth. In order to realize this benefit, companies must not only think more creatively about IoT, but be able to use IoT data in the context of their business, which likely means tighter integration with applications like ERP,” Veague said in the study.
Survey respondents were segmented into IoT and digital transformation leaders and laggards. The study finds that digital transformation is tied closely with IoT with 88 percent of digital transformation leaders also qualifying as IoT leaders. In addition, digital transformation leaders were found to use more complete IoT data than the laggards and nearly three times as likely to use IoT data for corporate business intelligence to monitor performance against service level agreements.
The majority of digital transformation leaders said that their enterprise software prepared them “very well” or “somewhat well” to consume IoT data. Interestingly, the study finds that a digital transformation leader status correlated with more advanced IoT use cases compared with company size or IoT leader status.
The study also found that direct communications between enterprise systems such as ERP, EAM and field service management software and censored devices is needed to achieve more advanced use cases for IoT.
“Study data shows this technology is required to connect IoT with strategic data from around their organization,” said Steve Andrew, IFS vice president of marketing for North America, in a statement. “This in turn lets businesses use IoT not just for cost avoidance strategies like condition-based maintenance, but to add new or enhanced product or service lines, increase enterprise agility and realize the growth and revenue benefits of digital transformation.”
The benefits go beyond operational improvements and maintenance cost avoidance, according to Ralph Rio, vice president of enterprise software at ARC Advisory Group. “It increases uptime that provides additional capacity for increased revenue. It also avoids unplanned downtime that interrupts production schedules causing missed shipment dates and customer satisfaction issues. When married to demand and scheduling systems in ERP, IoT becomes a revenue-enhancement tool improving the top line.”
An IndustryWeek/Emerson survey of industrial manufacturers concurs. The survey found that most believe industrial IoT will help them improve their operations and profitability by 10 percent or more. However, they face three key challenges - company culture (47 percent), a lack of clear business strategy (41 percent) and knowing which technology will deliver measurable improvement (34 percent).
“Early Industrial IoT successes demonstrate that manufacturers can achieve operational improvements that significantly impact the bottom line, but this survey shows that adapting to advancing technology is a significant challenge,” said Mike Train, executive president of Emerson Automation Solutions, in a statement.
“The small percentage of companies that have already developed clear business plans for Industrial IoT are positioning themselves to realize tremendous competitive advantages,” he continued. “We encourage everyone else to consider two critical first steps: start small and invest in applications that enable a clear business case.”