What is Smart Manufacturing and Why do you need it?

7 min read
Oct 17, 2023
Smart Manufacturing is the integration of business, physical, and digital processes across the entire value chain


What is smart manufacturing?

Simplified definition of Smart Manufacturing

Smart manufacturing is a cutting-edge approach that brings together individuals, procedures, systems, tools, and cultures within a company, fostering collaboration, flexibility, and competitiveness. By establishing electronic connections across all processes and systems, it creates a comprehensive digital network that spans the entire business.

The foremost goal of smart manufacturing is to make data from all areas of a business accessible in real-time, providing a single holistic view. It also streamlines operations, reduces inefficiencies, and helps break down insular departmental viewpoints.

Smart manufacturing is a revolutionary shift that allows businesses to offer what their customers want & when they want it while maintaining a healthy bottom line. The result? A win-win scenario where companies not only survive but thrive in an increasingly competitive landscape. Smart manufacturing is the compass guiding industries toward the future.

To read more about the history and aims of smart manufacturing, click here

What are the Fundamental Components of Smart Manufacturing?

The operations technology (OT) Layer

Smart manufacturing leverages various levels of connectivity and a multitude of software programs to seamlessly connect all departments, including production, operations, finance, sales, marketing, and the entire value chain.

In the realm of smart factories, cutting-edge technology is seamlessly integrated onto the factory floor, optimizing production processes, and enhancing troubleshooting and maintenance procedures. This includes the implementation of automation software, intelligent algorithms like machine learning and computer vision, as well as the utilization of machines such as robots and cobots.

Simultaneously, valuable data is collected from the smart shop or factory floor through embedded sensors, PLCs, or barcodes. Advanced software is then employed to integrate, analyze, and effectively communicate the results in easily comprehensible formats to dashboards throughout the entire business.

The Informational Technology (IT) Layer 

The IT layer serves as the hub for executive-level activities, encompassing information gathering, analysis, and communication. Within this layer, powerful software systems like Enterprise Resource Planning (ERP), Product Lifecycle Management (PLM), and Supply Chain Planning (SCP) are employed to streamline operations and enhance decision-making processes.

Today, the IT layer is experiencing a rapid shift towards cloud adoption, as most technology companies are prioritizing a cloud-first strategy. The IT layer serves as the System of Record (SOR) for many manufacturing organizations, with master data spread across various applications within this layer.

Why smart manufacturing?

To gain a competitive edge, manufacturers must go beyond product-centric innovation. They must embrace innovative business models that allow them to create and capture value in novel ways. Removing Data Silo's and connecting the IT & OT Layer serves as the cornerstone for manufacturers before business model changes are initiated.

Integrating multiple Enterprise systems to remove data silo's


Removing the Silos 

Previously, there has been a clear separation between the OT layer of the shop floor and process control, as well as within the IT layer. This segregation has resulted in isolated pockets of information, creating silos that hinder effective communication and collaboration.

In a fully smart business, the barriers of information silos are shattered. The infusion of digital "intelligence" - encompassing data communication and analysis - is seamlessly integrated at every level, spanning from the shop floor to top-level administration. This dynamic integration fosters swift and real-time communication among all departments and throughout the entire value chain.

Consequently, a cohesive network of information flow emerges within the manufacturing firm, establishing a singular source of "truth" that permeates the entire business. No area operates in isolation; instead, this interconnected web of information is aptly referred to as "digital threads".

MOM — The Essential Link to connect IT and OT

Many manufacturers are currently managing their OT (Operational Technology) and IT (Information Technology) systems separately. These systems have served their purposes but operating in isolation limits the potential for true innovation. This is where a Manufacturing Operations Management (MOM) system steps in, acting as a vital bridge connecting the two worlds.

Traditional or homegrown Manufacturing Execution Systems (MES) have made attempts to bridge this IT-OT gap. However, they often come with limitations that hinder the transformation to a truly smart manufacturing company. While MES systems have played a role in optimizing processes, they may not fully unleash the potential for innovation and efficiency.

In contrast, a modern MOM system goes beyond the constraints of MES. It empowers manufacturers to make their factories smarter, more agile, and ready to adapt to changing demands. By seamlessly integrating IT and OT, MOM systems pave the way for comprehensive and sustainable advancements in manufacturing operations.

For learn more about Manufacturing Operations Management, see (link).

Technologies behind Smart Manufacturing       

These are the cutting-edge technologies that drive the concept of a smart factory in the present day:

  • 3D printing
  • Connected robotics
  • Cloud computing
  • Artificial intelligence (AI):
  • The Internet of Things (IoT):
  • Cobots
  • 5G
  • Data lakehouse solutions
  • AI/machine learning–based analytics
  • Digital twins
  • Augmented reality
  • Blockchain

In the fast-paced world of smart manufacturing, new technologies are constantly emerging. When selecting smart manufacturing products, it's crucial to consider if they have a composable architecture, one that is flexible and adaptable rather than rigid. A smart factory is designed with expandable and adaptable technologies that can seamlessly incorporate new applications at any time.

This concept is akin to the framework of a smartphone, which is built to accommodate an ever-growing number of applications. Just as a smartphone can expand its functionality with new apps, a smart factory can continuously evolve and improve with the integration of innovative technologies.

The Benefits of Smart Manufacturing

In this era of rapid changes, manufacturers are constantly facing new challenges. Smart manufacturing provides them with the capability to not only meet the demands of today but also adapt to the demands of the future. It introduces a new level of flexibility into their business structures and operations. While the full value of smart manufacturing is realized after a transformation of the business model, it offers immediate benefits that our customers have experienced firsthand.

Optimizing Operations: A Common Place to Start

Manufacturers often find optimizing operations has the greatest initial potential and appeal.

Based on our research, the greatest potential for value creation in the factory setting will be optimizing operations in manufacturing — making the various day-to-day management of assets and people more efficient,” says a McKinsey report on the IoT value (link)

Some specific operational improvements smart manufacturing offers include the following:

  1. Better shop floor management and real-time floor visibility
  2. Greater visibility and control over the supply chain
  3. Faster and cheaper product development
  4. Increased business resiliency and better-informed higher-level business decisions
  5. Faster responsiveness to customer requirements and desires, better quality control, more accurate forecasting of delivery dates and a shorter time to market.

Reaching a Single Truth

To unlock the maximum short-term operational benefits and prepare for business-wide advantages, it's essential to bridge the OT/IT gap with a MOM system. These nifty decision support tools empower everyone to work with the same real-time data and the ultimate source of truth.

By fostering digital connectedness throughout the entire business, from operations to high-level management, a business can easily adapt to present and future changes, ensuring long-term competitiveness.

Moving Forward: What’s the Best Way?



Where to Start?

Manufacturers in all industries are convinced “smart” methods will give them the ability to keep up with rapid economic and industry changes.

The common question is: where to start?

Exploring the theory of constraints model to identify and automate the bottleneck is one way to do it. The theory of constraints model has worked well for manufacturers where demand is constant.

In cases, where demand uncertainties have increased, batch sizes have reduced and production complexity has increased, here are a few Industries specific examples providing the initial implementation outcomes that manufacturers can consider:

Automotive Manufacturing Implementation

While OEM's may have traceability to avoid recalls as their highest ranking benefit for Automotive Tier I & II there are even better starting points for smart manufacturing.

Currently for automotive Tier I and II manufacturers, the highest-ranking benefits are monitoring production and quality, adding automation, and improving data analytics.

To delve deeper into the automotive industry, we have a comprehensive report from our trusted partner that provides valuable insights and information. Feel free to explore the report to gain a better understanding of the industry and its advancements.

Medical Equipment & Pharmaceutical Manufacturing Implementation 

Large Medical equipment manufacturers already have many enterprise systems due to FDA 21 CFR 11 Compliance but work in silos today. For Medical device manufacturers, while compliance remains mission critical during execution, the highest-ranking initial benefits are capacity utilization and inventory turns.

According to Deloitte, MedTech manufacturers can benefit the most from focusing on five key areas in their supply chain: inventory management, logistics and distribution, device maintenance, product development, and warehouse operations.

Implementation for Small and Medium-sized Manufacturing Businesses (SMB)

Even small and medium-sized manufacturing businesses can reap the benefits of smart methods. Introducing these innovative approaches can lead to significant return on investment (ROI) for SMBs. While these businesses may face practical constraints such as limited internal resources and budgets, prioritization during adoption can lower the barriers to entry and kickstart their journey towards Industry 4.0. Let's take a look at a couple of examples of how manufacturers have embraced smart methods:

One well-respected bicycle manufacturer realized that their existing way of working was hindering their growth. However, after investing in digital tools, they were able to effectively manage twice the amount of work with the same team. To learn more about their success story, click here.

Another manufacturer, specializing in timber products, implemented new Advanced Planning and Scheduling (APS) software. By integrating it with their existing Enterprise Resource Planning (ERP) system and shop floor data collection systems, they experienced a 10% increase in sales and improved profitability through enhanced visibility and resource utilization accuracy. Find out more about their journey here.

Making the Implementation Process Manageable

Figuring out the first few steps and navigating them need not be overwhelming. You should consider consulting with outside experts, drawing up a long-term road map to avoid wasting early efforts — and starting small.

Curious about where to begin with your factory or shop floor? Why not start by taking advantage of our complimentary digital maturity assessment to gain valuable insights and guidance here.

Short of time and need to act quickly? Book a meeting with our team here.

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