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Connecting Manufacturing, Products, and Assets

Exclusive Q&A on IoT Disruption of the Supply Chain with SAP’s Thomas Ohnemus and Richard Howells

by Thomas Ohnemus and Richard Howells, VP of Marketing, Digital Supply Chain, SAP | SAPinsider, Volume 17, Issue 3

August 4, 2016

The Internet of Things (IoT) grows more pervasive with every passing day. Data from smart appliances is now everywhere in the consumer world — and the manufacturing world is quickly following. SAPinsider recently sat down with Richard Howells, Global Vice President, Extended Supply Chain at SAP, and Thomas Ohnemus, Vice President, Solution Marketing at SAP, for an exclusive interview on how IoT can help businesses derive value from connected products, assets, and manufacturing. Discover key insights into how the pervasiveness of IoT is transforming the world of manufacturing and logistics, and how organizations can take part in this transformation.  

Q: How should the enterprise think about the potential of smart products and the Internet of Things (IoT) for business?

Richard Howells: The digital disruption that is pervasive in the consumer world is driven in large part by demand for an improved customer experience and personalized products. This is now impacting the enterprise as well. Disruptive technologies, including 3D printing, robotics, and IoT, are causing both consumer and industrial manufacturers to reengineer traditional manufacturing processes in response. Making connected devices and smart products only scratches the surface, though.

The bigger business challenge is in deciding how to turn the data that connected assets — machines and devices across the enterprise — provide into valuable information that can improve business processes and change business models. How does it add value? Maybe it’s transitioning from making products to selling a service, such as an industrial manufacturer that transitions from selling physical air compressors to instead selling compressed air as a service. Or maybe it’s becoming a lot size of one manufacturer to offer customized vehicles as opposed to an assembly line of three or four models.

Thomas Ohnemus: Another important thing to remember when deciding how to harness the value of IoT is that smart products are in fact becoming smarter. They provide value to the manufacturer — not just to the consumer — long after they’ve left the show floor.

Today, whether you realize it or not, every car has smart components. And soon enough cars will be connected to other cars. The majority of innovation in the car industry right now is in software improvements, not in the engine or physical design. Real-time insights into connected products can help make the product more intelligent over its lifespan and for future iterations of the product. This has a material impact not just on manufacturing, but also on engineering. It also creates the challenge of managing a growing network of connected products and assets. IoT isn’t merely about building a smart product; it’s about harnessing insight throughout an entire network of connected products to serve a modern, agile digital enterprise.

Q: How are organizations embracing this potential to reshape their business models?

Ohnemus: There is so much untapped potential. Companies recognize that there really aren’t any restrictions for how a network of connected assets can solve even the most vexing business problems. For example, innovation in the delivery business has been static for decades; other than faster delivery times, shipping companies pick up at location A and deliver to location B. But one company in this space is investing heavily in 3D printing technology, so it is out to change this dynamic by transitioning to a “last-mile” model. The company saw the potential for disruption and met it head-on by becoming a manufacturer of digital products, reshaping some long-held notions about what it means to provide a delivery service.

Howells: It’s not just companies that are using these new technologies to solve a business challenge and stay ahead of the curve. The challenge for one European seaport — which moves roughly 140 million tons of cargo each year — was how to cope with an anticipated throughput increase in a fixed space. The answer was to use sensor data and IoT technologies to optimize the movements of every truck, train, and cargo ship entering and leaving the port. By turning real-time data into intricate activity patterns, logistics teams can take time-saving measures such as rerouting a truck to avoid an open drawbridge, for example, or steering a truck to an open bay to avoid idling trucks waiting in a long queue.

Opportunities to save time and money by leveraging connected assets to become more efficient are endless. This is a very real example of an organization using these tools to achieve a business result — it is not technology for technology’s sake. Leveraging the throughput or performance of a connected device isn’t new, but using it to solve a business problem and implement different business models is how IoT has evolved. Organizations are coming to terms with the fact that IoT is an enabler of solutions that can help solve a business problem.

Q: What challenges does embracing an IoT mindset present for companies that are transitioning to a digital framework?

Howells: First, the challenges won’t be limited to the trailblazers. With an expected 50 billion connected devices by 2020, a lot of companies are going to be asking this question. Becoming a digitized business results in a host of downstream implications. For a business that now relies on machine uptime, the availability of that machine becomes paramount. How can you best employ sensors to predict with relative certainty that machine’s failure? Say you’re operating a fleet of refrigerated trucks, each with hundreds of sensors. How do you manage the complexity of thousands of pieces of real-time data concerning weather, fuel consumption, traffic, and a host of other variables? Analyzing the performance of these assets, sending instructions back to the fleet, triggering repairs, leveraging geo-fencing and location tracking — doing all of these things in real time to make informed, intelligent decisions is necessary to optimize a network of connected assets throughout the life cycle of the products.

Ohnemus: Traditionally, the challenge for manufacturers has been to create documentation of how to use and maintain a product. As products become more intelligent and more customized, this challenge intensifies: How do you provide up-to-the-minute, individualized documentation for a product that changes after the point of purchase? The challenge for product designers and engineers is to harness new machine intelligence into subsequent models. How does the fact that engine parts can now coordinate with other engine parts change design? Real-time insight into a product’s performance after it has left the shop floor is an opportunity that engineers have never had before, so the challenge comes from tying the physical product description with the software and electronic pieces, managing all of this information, and providing documentation of a live product.

Q: How does SAP help simplify the management of a diverse network of connected products?

Ohnemus: I mentioned the challenge of documentation for individualized products. With the idea of a live product, the thought was to take all of the related product information — such as a fluid product description, materials, engineering and manufacturing data, and a service bill of material — and put all of this into a holistic digital representation in the cloud, which is customer-specific and updated in real time throughout the life of a product, and includes how a specific product relates to other assets in a connected network. And this technology exists in the form of SAP Asset Intelligence Network, a central hub with which you can manage an entire network of connected products.

Having a continuously updated digital avatar adds value in design and engineering by providing updated documentation changes, but the real value is actually derived when the product is in use or is being updated. All of the data produced by the product is easily stored and visible in the network. A company can decide what data is important to act on and then analyze its product portfolio in real time to better predict how a particular asset will behave.

Howells: The options for deriving additional value from SAP Predictive Maintenance expand significantly in the context of SAP Asset Intelligence Network. Imagine the practical benefits for a vehicle manufacturer that can push out a notice for an automatic repair that can be completed with a software update without making the customer actually service the vehicle. Sensors that can detect potential for machine failure and take proactive steps to mitigate this potential for disruption before it happens can be vitally important to a company that depends on uninterrupted uptime. Through a connection with SAP Asset Intelligence Network, which also provides real-time visibility into the supplier network, a company can make more intelligent decisions about when to service a part, for example.

Q: Is the information collected and stored in SAP Asset Intelligence Network bilateral, meaning you’re not just managing connected assets that have already left the shop floor but managing how those products are built for a future release as well?

Ohnemus: The concept of the live product begins with research and development (R&D) and, of course, also includes the entire manufacturing process. In the R&D state, innovation and improvements in software and sensor technology ensure that products get smarter even after they’re in the hands of the end consumer. This is a systems engineering concept, whereby the physical product’s description — such as its materials and its complex structures — is managed in concert with all of the electronic and software components. A greater transparency into product performance throughout the life of the product provides manufacturers with real-time insight that enables them to react to the latest market demands. On the shop floor, intelligent machines can coordinate to create a seamless production line, and this efficiency leads to fast adjustments for customized components. In the end-to-end production chain, use of intelligent machinery leads to much more flexibility and transparency from the top floor to the shop floor.

Howells: The true value of holistic management of connected assets is to solve a business problem, so the more information you can make sense of, the more opportunities you have to return this value. A company that can service a vehicle with a software update without taking the car off the road will be thrilled, but the manufacturer will be even more thrilled. Having received real-time performance updates, the manufacturer can use this detail to make a real-time adjustment to the next production line. And this is on top of providing a superior customer experience.

Connected products and connected assets are everywhere you look. Harnessing the power of IoT to drive new business processes and new business models is already paying dividends for forward-looking companies that understand that efficient management of a connected device network is a differentiator.

An email has been sent to:


Thomas Ohnemus
Thomas Ohnemus

Vice President of Solution Marketing, IoT and Digital Supply Chain

Richard Howells
Richard Howells

VP of Marketing, Digital Supply Chain, SAP

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