In the overall Internet of Things (IoT) market, industrial applications have gained the most traction, as traditional systems are in need of automation to collect data and prevent downtime in systems. In the manufacturing sector, applications such as asset monitoring and supply chain or logistics are being implemented globally, as manufacturers seek improved operations and data collection. Connecting older machines would require investments in the millions. Most manufacturers amortize these machines over many years. As the majority of manufacturers are small, with fewer than 500 employees, investment in redesigning factories or purchasing connected machines is not an option. However, these manufacturers are looking for low-cost solutions to collect data from machines and automating the process to reduce downtime and unplanned maintenance. Keeping these factors in mind, this study aims to understand customer motivations and purchasing behavior for IoT solutions in the manufacturing sector.
The manufacturing industry has been very receptive to implementing smart IoT solutions to improve productivity and reduce waste. Between April and June 2017, Frost & Sullivan conducted an end-user survey to understand the motivations behind implementing these solutions and types of technology that customers were looking to procure. This study is a culmination of these efforts to better understand the customers in manufacturing and provide insights to vendors and service providers looking to sell IoT solutions to this industry. The survey covered 150 respondents in North America over process and discrete manufacturing, and includes breakdown by small, medium and large manufacturers. One key finding is that Smart IoT solutions are perceived mainly as a way to achieve operational efficiency, effectiveness, and overall competitiveness. About 1 out of 2 companies is driven by a desire to be on the cutting edge of manufacturing technologies and to be more responsive to market conditions.
Table of Contents
Executive SummarySummary of Key FindingsKey Findings by Company TypeKey Findings by Company SizeGrowth Opportunities for Solution Providers Developing Smart IoT Solutions in ManufacturingResearch Objectives and MethodologyResearch ObjectivesResearch MethodologyThe Growth and Cost Profile of Organizations4 Out of 10 Companies Reported Achieving ‘Above Average’ Growth in the Last 3 YearsA Large Proportion of Medium and Large Companies Report Achieving Above Average Growth in the Last 3 YearsMajority of he Companies Report that their Overall Operating Cost Structure is on Par with the Industry AverageThere is More Variance in he Cost Structure of Large Organizations, with 16% Having Lower Costs and 20% Higher CostsChallenging Areas of Manufacturing OperationsQuality Control, Supply Chain Management, Materials Management, Inventory Management, and Logistics and Transportation are the Most Challenging Areas within Manufacturing OperationsQuality Control is he Most Challenging Area for Discrete Manufacturing Companies. Process Manufacturing Organizations Struggle More with Supply Chain ManagementQuality Control is More Challenging to Small Companies, While Supply Chain Management is More Challenging to Large Companies Most Companies Implement Training Programs To Overcome Challenges In Manufacturing OperationsWhile Small and Medium Companies Implement Training Programs to Address Challenges, Large Companies Use Technology to Streamline ProcessesFamiliarity with Smart IoT Solutions for ManufacturingOne Out of Three Respondents is Very Familiar with Smart IoT Solutions for ManufacturingAbout 1 Out of 2 Respondents from Large Companies is Very Familiar with Smart IoT Solutions for ManufacturingOverall Familiarity with Smart IoT Solutions for Manufacturing is Higher Among Discrete Manufacturing CompaniesOverall Familiarity with Smart IoT Solutions for Manufacturing is About the Same Across the Company Size CategoriesProcess Manufacturing Companies Seem to Have Slightly More Challenges in Understanding Smart IoT Solutions (Variability of Understanding Across Business Units and Gaps in Understanding)A Higher Proportion of Large Companies Find Understanding Smart IoT Solutions (Variability of Understanding Across Business Units and Gaps in Understanding) a ChallengeMore Companies Get Information on Emerging Manufacturing Technologies and Processes within their Industry from Industry Conferences, and Technology and Trade PublicationsA Higher Proportion of Large Companies Use the Knowledge of Employees (Internal Experts) to Understand Emerging Manufacturing Technologies and Processes within their IndustryDrivers for Deployment of Smart IoT Solutions in OrganizationThe Majority of Companies Believe that Smart IoT Solutions Can Help Drive Operational Efficiencies and Effectiveness, and Improve their CompetitivenessExpectation that Smart IoT Solution can Help Drive Operational Efficiencies and Effectiveness and Improve Competitiveness is Slightly Higher Among Large CompaniesThe Need to be on he Cutting Edge of Manufacturing Technology and the Need to Improve Responsiveness are Key Reasons for Implementing IoT SolutionsSome Difference in Reasons to Adopt can be Observed (Mostly Directional Due to Small Sample Sizes)Deployment of Smart IoT Solutions in an OrganizationAbout One-third of he Companies have Already Deployed Smart IoT Solutions for Manufacturing OperationsThe Level of Deployment of Smart IoT Solution for Manufacturing Operations is Significantly Higher Among Large CompaniesSmart IoT Solutions, on Average, have been Used for 2 to 3 YearsThere are no Significant Differences in the Duration of Smart IoT Use Across Company Sizes (Due to Small Sample Size)More Companies Have Implemented Supply Chain Tracking and Equipment and Machinery Management SolutionsSecurity and Surveillance Solutions More Widely Implemented Among Medium-size Companies (Directional Due to Small Sample Size)There are Just Slight Differences in the Types of Solutions Being Considered for Implementation in the Next 12 to 24 MonthsIntegrated Mobile Workforce Management is the Most Sought-after IoT Solution by Medium-size CompaniesProduction Floor, Inventory Management are the Areas that Most Commonly Implement Smart IoT SolutionsAsset Management and Compliance are Areas with Relatively Common Implementation of Smart IoT Solutions Among Small Companies, Whereas Medium Use IoT in Personnel and Plant Safety AreasMajority of Smart IoT Aspects are Managed In-house or Through Outsourced Vendors/ConsultantsA Higher Proportion of Large Companies Manage Smart IoT Solutions in House1 Out of 5 Companies is Likely to Implement Smart IoT Solutions in the Next 2 YearsThe Likelihood of Implementing Smart IoT Solutions Increases with the Size of the CompanySupply Chain Management, Inventory Management and Quality Control are the Priority Areas for IoT/ Smart Manufacturing TechnologiesPriority Areas in Implementing IoT Solutions are Similar Among Small and Medium Companies. Large Companies Indicates Relatively More Often the Priority of Asset Management, and Logistics and TransportationPost-Implementation ObjectivesThe Top Objectives that Companies re Likely to Pursue Over the Next 5 Years are Driving Product/Service Quality and Reducing Overall Manufacturing CostsImproving Supply Chain Management ill e Pursued by Higher Proportion of Large CompaniesA Majority of the Companies have ot Fully Realized their Post-implementation Objectives/OutcomesSmall Companies are Slightly More Optimistic About the Realization of ObjectivesMost Process Manufacturing Companies are Still in the Early Stage of Implementation (Too Early to Meet Objectives). Lack of Adequate Resources to Train Employees on IoT is a Key Reason Why Discrete Manufacturing Companies are Unable to Meet ObjectivesLarge Companies Indicate that hey Still at an Early Stage of Implementation. 1 Out of 2 Medium-size Companies Experiences Push-back from External ConstituentsOn Average, Companies Expecting Cost Savings of 15% to 20% from the Deployment of Smart IoT Solutions. The Level of Cost Savings Achieved is a Couple of Percentage Points Lower than ExpectedSmall Companies Expect Slightly Higher Cost Savings from the Deployment of Smart IoT SolutionsLevel of Satisfaction with Currently Deployed Smart IoT SolutionsAbout 30% of he Companies are Very Satisfied with heir Smart IoT SolutionSmall Companies are Significantly More Satisfied with heir Smart IoT SolutionAbout of 30% Respondents are Very Satisfied with their Smart IoT Solution Vendor. the Share f those Satisfied is Higher Among Process Manufacturing CompaniesA Significant Number of Small Companies Indicated that hey are Very Satisfied with heir Smart IoT Solution ProviderAll Respondents Agree that Lower Cost and Post-implementation Support are the Two Most Valuable Assistance that Vendors Could ProvideExpected Assistance Types is Generally Consistent Across Company SizesConcerns Regarding Smart IoT SolutionsSelecting the Most Suitable Solution and Upfront Costs are the Most Important Challenges to the Adoption of Smart IoT SolutionsChoosing the Most Suitable Solution is he Priority of Small Companies, While Medium-size Companies Consider Software, Implementation Costs, and Security ConcernsUncertainty About RoI and Other Operational Priorities are the Most Important Reasons that Hinder the Implementation of Smart IoT SolutionsLack of Operational Expertise in IT is Highlighted By Separation Between IT and OT Priorities in IoT DeploymentsThe Last Word—Expected trends in Smart IoT Solutions for ManufacturingOpinion is Divided When it Comes to Increase or Decrease in Spending Over the Next 2 YearsA Smaller Portion of Large Companies Expect their Overall Manufacturing Operations Budget to Decrease A Majority of the Companies Expect to Increase their Overall Spending on Smart IoT Solutions Over the Next 2 YearsAll Companies Expect a Change In Spending on Smart IoT Solutions Over the Next 12 to 24 MonthsSupply Chain and Inventory Management are the Areas Most Likely to Benefit from he Implementation of Smart IoTMedium-size Companies are More Likely to Benefit from Budgetary Planning nd ForecastingAppendix—DemographicsAverage Annual Revenue of Companies s About $1.5 BillionIT Employees Made Up Half of he Sample Size; Nearly Half of Them Hold Managerial PositionsOver Half of the Respondents from Small and Medium Companies Were from he IT DepartmentExperience in Manufacturing Operation Management is Slightly Higher in Process Manufacturing Companies; 36% of the Respondents Have an Experience of 15 Years or MoreLarger Companies Have a Higher Share of Employees with More Experience in Manufacturing Operations ManagementLegal DisclaimerThe Frost & Sullivan StoryThe Frost & Sullivan StoryValue Proposition: Future of Your Company & CareerGlobal PerspectiveIndustry Convergence360º Research PerspectiveImplementation ExcellenceOur Blue Ocean Strategy