IoT in Manufacturing: What you Need to Knowby@itrex
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13,974 reads

IoT in Manufacturing: What you Need to Know

by ITRexJune 6th, 2022
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A recent survey by McKinsey reveals that manufacturers who had managed to transition to Industry 4.0 prior to the pandemic felt better equipped to handle the crisis. McKinsey expects the industrial IoT sector to [reach $500 billion by 2025]. Cisco believes this industry will be among the largest beneficiaries of the Internet of Things in manufacturing, as the technology will make a whopping $3.9 trillion impact on this sector. The smart factory concept relies on other technologies, such as [artificial intelligence] (AI), computer vision, big data, and different types of automation.

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A recent survey by McKinsey reveals that manufacturers who had managed to transition to Industry 4.0 prior to the pandemic felt better equipped to handle the crisis. Actually, 94% of the respondents confessed that IoT in manufacturing, along with other technologies, played a key role in keeping their operations up and running during these turbulent times.

The research proves that implementing IoT solutions and services can not only help the industrial sector navigate the post-pandemic crisis but also improve business growth rate by around 25%.

Keep on reading to discover IoT applications in manufacturing and the challenges you could expect if you set your mind on giving your manufacturing facilities an IoT upgrade.

IoT adoption in manufacturing in figures

Digitalization has been gaining popularity in the manufacturing sector over the past few years, and this trend is expected to continue. For example, the smart manufacturing market is forecast to soar from around $250 billion in 2021 to $658 billion by 2029.

The smart factory concept is surely not limited to the Internet of Things. It also relies on other technologies, such as artificial intelligence (AI), computer vision, big data, and different types of automation. But even if we focus solely on IoT, we can see that this technology is promising. McKinsey expects the industrial IoT sector to reach $500 billion by 2025 (up from $290 billion in 2020).

The IIoT global market growth. Source: McKinsey

With an even brighter prognosis for the Internet of Things in manufacturing, Cisco believes this industry will be among the largest beneficiaries of IoT in the near future, as the technology will make a whopping $3.9 trillion impact on this sector.

Economic impact of IoT on different sectors. Source

But what do manufacturers say? According to a recent survey conducted among industrial companies by PwC, 91% of the respondents were investing in digital factories with almost half of the participants expecting ROI after five years, while 3% are hoping for a speedy payback within the first year.

Expected ROI on digital factory investment. Source: [PwC]

Top 6 IoT use cases in manufacturing

IoT transforms the manufacturing sector across three dimensions:

  1. Tracking industrial assets
  2. Ensuring safety
  3. Enabling predictive maintenance
  4. Experimenting with process changes and product designs
  5. Gaining visibility into the manufacturing supply chain
  6. Monitoring remote and outsourced operations

Tracking industrial assets

Information Technology & Innovation Foundation (ITIF) reports that IoT solutions that monitor machine usage can increase manufacturing productivity by up to 25%.

IoT devices aggregate data from factory machinery and transmit it to the cloud for detailed analysis to produce insights into the machine’s usage parameters, such as setup time, idling time, and minor stops, among others. This gives machine operators a detailed view of performance and notifies them of potential issues — for instance if a machine is idle for too long while another machine with a similar functionality is over-utilized.

Moreover, employees can use IoT in manufacturing to quickly locate items in large warehouses. Richard Soley, Executive Director at The Industrial Internet Consortium, highlighted this problem by saying, “The client found that its workers spent 47 percent of their time just looking for the right tools, but with an IIoT solution, the worker could be told that the tool they needed was 10 meters behind them and to the left.”

For real-time asset visibility, you can equip items with RFID or Bluetooth tags. Robert Schmid, Chief Technologist at Deloitte Digital, reported that one of his clients saved $3 million annually on each of their production lines after fitting their equipment with location-tracking sensors.

Ensuring safety

IoT sensors can track working conditions and detect hazardous material leakage. For example, gas sensors can spot toxic fumes, timely notifying a workplace manager who can evacuate employees and minimize damage.

Another IoT in manufacturing use case is safeguarding employees. The US Department of Labor reported 4,764 work-related fatal injuries during 2020 alone. Using wearable devices on the factory floor could help factories address this daunting problem. Wearable devices can gather data on workers’ health status. They can capture people’s biometric data, such as heart rate and body temperature, and detect and report any unusual patterns. This helps shift managers spot workers who are not feeling well and are particularly susceptible to falls and other injuries.

One example of IoT in manufacturing comes from Nation Waste, Inc., a waste recycling company. The firm is acutely aware of the dangers toxic substances and heavy machinery pose to human health. Nation Waste equipped its employees with IBM Watson IoT wearable solutions and fitted sensors around the workplace. This enabled managers to spot any signs of fatigue, dehydration, and exhaustion among employees and act upon this information. This initiative led to 60% reduction in injury-related costs.

Enabling predictive maintenance

Large manufacturers lose around 323 production hours a year due to equipment downtime. If we add up lost revenues and potential financial penalties for missing deadlines, the costs associated with machinery failures can amount to $532,000 per hour for large production plants. Employing IoT in manufacturing can spot equipment malfunctioning at early stages, minimizing downtime, and, according to McKinsey, reducing maintenance costs by around 40%.

IoT sensors fitted on industrial equipment will gather performance-related data, including pressure, vibration, etc. in real-time. This information is transmitted to the gateway or directly to the cloud and combined with the machine’s configuration data, and its usage history to catch any abnormal patterns. Factory floor managers will have access to the analysis and will schedule further inspections and maintenance so that the impact on the production process is minimal.

One example is IoT-enabled truck tires, where sensors gather data on the tires’ utilization to schedule maintenance and replacement, avoiding the situation where the tire blows up during a transportation trip, bringing the vehicle to a halt and delaying the delivery. Volvo equipped its trucks with IoT sensors, which led to a 70% reduction in diagnostic time and a 25% decrease in repair time.

Besides reducing downtime, predictive maintenance increases equipment lifetime, reduces costs, and lowers the risk of accidents. It is a more efficient and safer substitute for traditional maintenance with scheduled inspections, especially since sometimes manufacturing machines are not easily accessible, and it is not safe to be around them.

Experimenting with process changes and product designs

IoT for manufacturing can be deployed together with AI and other technologies to create digital twins of new products and entire factories. A digital twin is a computer model of particular machinery, a process, or the whole factory floor with all its equipment and other assets. It mimics real-world components’ status and interactions. Managers and engineers can use this technology to conduct experiments, test new processes, and observe the consequences before applying the changes in real life.

Digital twins can help simulate new production lines and detect areas that need optimization, plan warehouse designs, run product updates, and optimize existing processes to eliminate inefficiencies. Unilever, a British consumer goods manufacturer, operates eight digital twins of factories located in the US, Europe, and Asia. Coupled with business intelligence, the technology allowed the company to reduce the number of alerts requiring physical presence at the factory by 90% per day.

Manufacturing teams can also use digital twins to experiment with a product. For example, Ford typically develops seven virtual models for every one of its vehicles. Each model covers a different production aspect.

Gaining visibility into the manufacturing supply chain

IoT-driven supply chain management solutions grant manufacturers access to real-time information on the location and condition of individual items, as well as delivery trucks. Stakeholders can also monitor the circumstances of items’ storage and delivery, such as humidity, temperature, etc. With the conventional supply chain, managers could see that items are damaged only after they are delivered. But with IoT smart manufacturing, it became possible to detect any damage or violation of storage recommendations while the item is still in transition and trigger condition adjustments.

For example, think of a pharmaceutical company delivering an order to a distribution center using third-party drivers. Temperature-sensitive items are placed in a container with sensors attached. If the cooling system fails, sensors will detect the temperature rise and immediately notify the pharmaceutical company of storage conditions violations. The company will contact the driver asking them to reset the cooling system, thereby preventing potential medicament spoilage.

One example of such an IoT-powered system is Efento Transport, which ensures safe shipment of vaccines and medicines that require continuous temperature monitoring. Wireless sensors read and transmit temperature data. The system monitors the values and alerts the involved parties if the readings exceed the predefined thresholds.

Manufacturers can also place IoT sensors on factory floors to know which items are being manufactured to avoid placing double orders. For example, Ericsson’s smart factory in Texas positioned this type of asset tracker and saved up to 5% of costs on spare parts purchases.

Monitoring remote and outsourced operations

According to Deloitte, the US manufacturing executives report that nowadays it’s 36% harder to find qualified candidates in the sector, compared to 2018. This lack of local talent and capacities forces manufacturers to diversify the locations of their operations. When acquiring manufacturing facilities in a different city or outsourcing operations to a third party, companies still want to monitor production standards and speed. IoT sensors can send real-time performance data to the headquarters to evaluate production efficiency and factory conditions, and spot equipment malfunctioning without physically traveling to the facility.

For instance, sensors on the roof can detect and report smoke and fire, while IoT-driven cameras at the entrance can monitor employee attendance and report unauthorized access.

One example of remote monitoring comes from a portable sanitation products manufacturer, Armal. The company noticed excess energy consumption on lighting and cooling at its remote production plant. One of the problems was their legacy machinery. Armal hired a consultant who helped the company digitize its equipment and deploy Internet of Things in manufacturing to facilitate real-time monitoring, which resulted in cutting production and energy costs by 30%.

The business impact of IoT solutions on the manufacturing industry

There are many benefits to employing IoT in manufacturing. Here are the most prominent ones:

Reducing costs

IoT can reduce costs in manufacturing in many ways, most notably by enabling predictive maintenance and energy consumption monitoring.

One of the main reasons for lost revenue is unexpected, prolonged equipment downtime. One study shows that such a hindrance can cost large factories up to $260,000 per hour. As we established above, IoT sensors can spot malfunctioning or even equipment overload and alert the manager who can fix this problem instead of waiting until the machine breaks down in the middle of the production process.

Deploying IoT solutions at factories also helps optimize energy consumption. Chengdu Xihui Water Environmental Co., Ltd manufactures and operates wastewater treatment plants. After installing IoT sensors on its equipment, the company could correlate consumption with energy prices and take advantage of off-peak time slots, reducing its energy costs by 10%.

Making informed decisions

IoT sensors positioned around the factory continuously stream real-time data, which is aggregated, analyzed, and projected conveniently on customized dashboards. The leadership team will have all the important timely insights at their fingertips when needed. Without IoT and analytics, there is no way managers would have such a solid understanding of the factory’s needs.

Creating a safe working environment

Work-related injuries are alarmingly common. US-based studies show that one employee is injured on the job every seven seconds. This equates to 540 injuries per hour. Furthermore, manufacturing is one of the top five occupations with the largest number of injuries that cause disabilities.

Employing IoT solutions for manufacturing can help improve these grim statistics. IoT devices can track employees’ health and notify their superiors if they experience fatigue, dehydration, or any other condition that increases the likelihood of making a mistake. Next, sensors can monitor machinery and spot unusual behavior that can lead to accidents. Also, connected devices can monitor the work environment and notify of gas leakage, fire, and other hazards. And if an accident happens, IoT can facilitate the rescue operation by, for example, indicating areas where workers got trapped.

Streamlining the production process

IoT devices can help workers quickly locate items in large warehouses instead of spending hours roaming around. New product lines can be tested virtually with digital twins instead of starting the production and failing. Sensors help monitor the condition of transported goods to avoid spoilage, which would delay production as managers will have to place a new delivery and wait for it. These are only a few examples of how employing IoT in the manufacturing industry can facilitate production.

A recent PwC survey revealed that over 80% of industrial manufacturers managed to increase operational efficiency with the help of connected devices.

Offering post-manufacturing support

In conventional manufacturing settings, vendors lose contact with customers after selling their products. They will not know how their products perform unless customers file a complaint. With IoT in manufacturing, the production crew can gather information about their products after deployment and incorporate corrections into new releases. They can also build loyalty by offering timely and better-informed client support if the equipment malfunctions.

IoT and manufacturing: challenges on the way to implementation


IoT devices are highly vulnerable to security breaches. According to Kaspersky, there were 1.5 billion IoT breaches in the first half of 2021, which is already more than double the number of the whole 2020. Here is how Ondrej Krehel, CEO at Lifars, a New York-based cybersecurity firm, describes IoT security issues, “There is no device in the world that is 100% safe from all outside threats. Any Internet-connected device anywhere is vulnerable to some type of attack. However, considering the interconnectivity of IoT devices, a simple breach could be catastrophic and expose problems to an entire network of devices [across the enterprise], instead of just one.”

The threats Ondrej refers to include:

  • Advanced malicious programs that take control of the industrial environment
  • Botnets and distributed denial of services (DDoS) attacks
  • Data theft
  • Ransomware that can manipulate machinery

When traditional factories deploy IoT in manufacturing, they turn into an IP-based system where every connected device is vulnerable and can endanger the entire network. History offers many gruesome examples of companies suffering from IoT-related security breaches. For instance, Norsk Hydro, a large multinational aluminum manufacturer, fell victim to LockerGora ransomware. The company had to close many of its production plants and move the remaining ones offline. The whole ordeal cost Norsk Hydro around $75 million.

Another unlucky manufacturer is Visser Precision which operates in the defense domain. The company’s infrastructure was penetrated by DoppelPaymer ransomware. When trying to clean up the aftermath of this attack, researchers discovered that hackers openly published sensitive documents, including Visser Precision’s undisclosed agreements with SpaceX and Tesla.

To minimize cyberattack risks, companies eyeing IoT should adopt the “security by design” paradigm. Security teams need to configure connected devices in a way that limits their participation in DDoS and other attacks and makes use of reliable hardware and software components. Device security is not a one-time investment though. Dedicated teams will need to monitor the network to ensure that software is constantly updated to keep up with the emerging threats, and to catch on to early attack signs.

Additionally, it’s important to take care of the data. IoT sensors gather an enormous amount of information. It all must be collected, transmitted, and stored securely without violating confidentiality and privacy.

Large initial investments

Another factor that tends to make manufacturers hesitate is the financial aspect. You need to invest a large sum to set up the Internet of Things in manufacturing, while the return on investment could take years. The expenditure includes hardware, such as sensors, gateways, etc., software, cloud or other storage units, connectivity, and technical support.

You can get a better estimate of the required budget from our recent article on IoT costs.

There is no way to avoid spending when transforming a factory or a warehouse, but there are ways to minimize those expenses. For example, you can rent equipment with built-in sensors. In this case, you don’t have to pay for everything at once, and the vendor will remain involved. They will monitor the equipment and make sure it receives timely updates.

Interoperability issues

Another important concern is how to incorporate all the IoT devices in the company’s infrastructure given the lack of IoT standardization and competing communication protocols. The situation can get even harder if you work within an ecosystem of suppliers, logistics companies, and other participants, and need to be interoperable with them as well.

To bypass this issue, decision makers need to communicate with all the involved partners and remain up to date with the evolving IoT standards. Also, always opt for commonly used IoT communication protocols, as they typically have strong security features and there is a better chance to be interoperable with your partners’ technology.

Integration with legacy systems

Legacy systems also play an important role in hindering integration and factory digitalization. In a manufacturer survey conducted by Forrester Consulting, 53% of low-maturity respondents confessed their legacy systems are not able to communicate with the rest of the assets at all.

It is not always possible to substitute legacy systems with more connectivity-friendly alternatives, but factories can still upgrade these machines with IoT in manufacturing.

One option is to equip isolated machinery with smart sensors that can gather data on the device’s performance and send it to the cloud or a local server. Another, more comprehensive solution, is using a retrofit kit that contains IoT sensors in addition to other capabilities, such as predictive analytics. Some of these kits are produced by vendors for a specific machinery type. Others can work with different legacy systems. Yet another possibility to modernize equipment developed in the pre-IoT era is using a gateway. It will not only connect the legacy asset to the rest of the system but will also offer additional capabilities, such as security.

To sum up

IoT in manufacturing can bring many benefits to your facility and help you navigate the post-pandemic world. Transforming your factory is expensive, but if you stay behind, you might end up parting with even larger sums.

If you are interested in discovering how other technologies revolutionize the industrial sector, check out our recent article on AI in manufacturing.

And if you want to learn more about the Internet of Things, we’ve published a detailed post on IoT architecture and design tips.

Considering transforming your factory with IoT? Get in touch! ITRex team will help you build/buy IoT devices, connect them in a network, and implement custom software, if needed. Even your pre-Internet machinery can participate!

Originally published here.