The Rise of the Smart Factory


In today’s hyper-connected world, customers are looking for smarter products and services that can meet their ever-evolving demands. In order for manufacturers to meet these changing demands and needs, business models, business processes have to change, machinery and equipment and how we go about doing our jobs has to change. No manufacturer will be around much longer if they don’t truly put the customer first and adapt to continually fluctuating market and end-user requirements.

A growing number of industrial manufacturers are responding by creating “smart factories” and intelligent supply chains using cloud technology. While digitalization on the shop floor and in the supply chain is not new, what is new is the way production and logistics are intelligently connected to employees, customers, and suppliers in the cloud. Recent industry reports predict the smart factory market to reach $74.8 billion by 2022, with the discrete industry expecting to hold the largest share of the smart factory market by 2020.

The Benefits

Smart factories and intelligent supply chains are all driving operational efficiencies, as well as financial improvements, across the board. Now, all stakeholders are operating off the same timely, accurate data sets, resulting in an abundance of benefits. Some of the leading benefits are increased customer loyalty, improved competitive differentiation, predictive maintenance (which drives increased uptime and improves overall equipment effectiveness), on-time delivery performance, increased quality and near-perfect safety records.

While the benefits are abundant, the most important ones to highlight are increased customer loyalty and improved competitive differentiation. Predictive maintenance, which drives increased uptime and improves overall equipment effectiveness, is another great example of how innovation drives supply chain growth. Smart factory benefits such as better on-time delivery performance, higher quality and near-perfect safety records are all common today, but that wasn’t necessarily the case even a few years ago.

Taking the Leap

We are in the middle of an unprecedented era of business innovation. Cloud technology is rapidly ascending from breakthrough idea to commercial scale, driving digitalization strategies that are creating tremendous value for industrial manufacturers and their customers. All manufacturers need to do is take the leap. While it can be a daunting undertaking, successful implementation can be summarized easily:

* To fully capitalize on the benefits afforded by automation, organizations must be able to use the cloud to connect their system with data that stems from where demand is created. Only by connecting manufacturing processes to a system of record can the business keep production humming while also optimizing inventory levels, ensuring regulatory compliance and traceability standards, while minimizing operational costs.

* A two-tier enterprise resource planning (ERP) strategy creates greater efficiencies in material planning, supplier management and reduces logistics cost. Order management is handled by an ERP solution, while production control and ERP integration can be run by a manufacturing execution solution. The seamless vertical integration of these two systems eliminates the need for line controllers, and at the same time ensures high flexibility with regard to order changes, variant combinations and process modifications. This bidirectional data exchange can occur within seconds and be distributed across all stakeholders in the cloud.

The Future

Not only will smart factories continue to utilize the cloud to address changing customer demand, but they will also help usher in the next generation of manufacturing employees. According to a report from the Manufacturing Institute and Deloitte, some 2 million manufacturing jobs will remain unfilled by 2025, less than 10 years from now.

The emergence of IoT and the convergence of information technology and operations technology is forcing manufacturers to retool their workforces. This is where the “next generation” or millennials come in. Companies should ask themselves what exactly is required of the next generation to adapt to smart factories and succeed.

Georg Kube is the global head of SAP’s industry business unit for the industrial machinery and components industry. He is responsible for defining industry-relevant solutions based on SAP’s complete portfolio of products and technologies, bringing them to market, and driving business in the regional units. Georg joined SAP in 2007 and has since held a number of management positions within industry marketing and solution management. 

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