When looking for tools to begin or improve automation, small and medium-sized manufacturers (SMMs) have many of the same constraints and needs as the billion-dollar companies—capital, personnel, and competing resources within the company. The difference is that smaller players typically don’t have a large or dedicated IT department. Cloud computing and software as a service (SaaS) are game changers—making enterprise-grade automation software accessible and affordable for SMMs.
“IT is typically not their strategic strong suit,” said John McEleney, co-founder of Onshape and now a corporate strategy advisor with PTC Inc., which acquired Onshape in 2019. “Most of them have invested in capital equipment as opposed to broad-based IT. That’s why they are running old versions of software on old desktop computers.”
SMMs are often reluctant to adopt software and other new technologies for three main reasons: concern in being able to achieve return on investment (ROI); a barrier in expertise when undergoing technology transformation; and immaturity of existing systems and data platforms. This is according to Lindsey Berckman, a principal at Deloitte Consulting LLP and smart manufacturing leader in Deloitte’s industrial manufacturing sector.
“There is a great deal of software aimed at mid-market,” Berckman said. “The challenge is how to down select amongst a crowded field of offerings and maximize your software investments to build an integrated platform versus a series of disconnected point solutions. Examples of fragmented offerings that need to be critically evaluated for integration, comprehensiveness, and continual innovation include vision systems, warehouse management solutions, workflow applications, and others.”
In the meantime, Berckman added, while SMMs have limited budgets, they still need to compete with large, richly resourced manufacturing businesses and deal with an automation playing field traditionally stacked against them. She said SMMs “are suffering from a talent shortage not only in the core operations roles, but also to hire and retain technical and analytical talent.”
Cloud computing includes things such as SaaS, as well as infrastructure and platform as services. Cloud computing’s flexibility, cost efficiency, and scalability make it ideal for SMMs and give them access to the same software as major manufacturers.
“Cloud is having a tremendous impact,” said Rahul Garg, vice president of industrial machinery and small and mid-size programs at Siemens Digital Industries Software. “By taking advantage of a cloud solution, they don’t have to invest in core infrastructure. Cloud makes it very easy for them to access the technology, making it readily available. It’s easy in terms of cost, easy in terms of maintenance. They don’t have to have IT infrastructure.”
As manufacturers move IT to the cloud, there is more of a demand to outsource IT. That’s according to Rob Brice, founder and CTO of El Dorado Hills, Calif.-based RFgen Software, a division of DataMax Software Group Inc. “Four years ago, we didn’t have any requests to host and manage these solutions for our customers. Because internal IT is being reduced in every industry, the remaining people need support. Now they’re looking for a partnership with companies like ours.”
RFgen has responded to that need. “We had to build an entire hosting division, bring on staff, train them up and bring on additional people in additional time zones since so many of these companies are multinational. We needed to be able to provide that person on the ground in Europe, in Asia,” said Brice.
According to McEleney, SMMs do not want to go through a long hardware implementation and retraining cycle.
“They don’t want an ROI of five or six years,” McEleney said. “They’re looking for ROI in 18 months to two years. With a cloud solution, they’re lowering that upfront investment, overall deployment costs and time of deployment. It’s far easier to maintain and far easier for people to get upgraded.”
Because the money for cloud SaaS comes from operating expense budgets instead of capital expense budgets, and because a SaaS solution bills based on the number of users, ROI is much faster than with a CapEx upgrade, where the manufacturer has a large capital outlay up front no matter the number of users.
“As you add users, you start paying for more users,” Garg said. “From a cost perspective, that makes (SaaS) very compelling. Typically, these companies can start seeing benefits very quickly. They don’t want to spend months to create the perfect system for them. They would rather have the perfect system delivered to them.”
Once a SaaS system is online, smaller companies don’t have to worry about keeping front- and back-end systems updated and maintained, according to Garg. Smaller, first-time customers are typically looking first for front-of-the-house solutions that can impact customer sales processes, then service and maintenance.
The average IT savings for businesses moving to the cloud is 15%, but for SMMs the savings can be as much as 36%, according to the Big Cloud Data Technology Report 2021 by Hosting Tribunal and Tata Communications.
Companies with higher digital maturity have shown greater resilience, Berckman said, as have those that accelerated digitization during the pandemic. Deloitte’s 2023 Manufacturing Outlook report found these companies were able to pivot quicker and adapt to supply chain challenges more seamlessly due to increased visibility, among other advantages.
Baseline features to look for when selecting software, according to Berckman, include:
It’s critical to know the pain points that software is intended to solve. Often, companies have no idea what their lack of automation is costing them.
“Most managers know where the issues are, but without hard data and realistic ROI numbers it is difficult to get buy in on the tough decisions that sometimes need to be made to implement positive corrections,” said Jim Finnerty, product manager, ShopFloorConnect, for Wintriss Controls Group LLC.
As an example, one automotive parts manufacturer’s downtime reports indicated that its coil-fed stamping presses were experiencing a combined average of 60 hours per week of downtime for raw material replenishment. The average cost of downtime on these presses is about $200 per hour. Until ShopFloorConnect was installed, this downtime went largely unnoticed because coil changes are part of the standard operating procedure when running these types of machines, according to Wintriss.
ShopFloorConnect indicated that the downtime was three times greater than what the user expected based on previous time studies because the previous time studies did not account for the time that the machine operator had to spend locating material and operating a crane to position the coil for replenishment, Finnerty said.
Based on this information, the manufacturer was able to justify hiring a junior setup person to monitor the area (using ShopFloorConnect’s Factory Viewer function) to identify the machines that were due for a coil change, then locate the material and stage it so that the operator could quickly replenish the machine when the old coil ran out.
The result was a downtime reduction of 66%. The manufacturer traded 40 hours of labor at $28 per hour for 40 hours of uptime worth $200 per hour, Finnerty said.
With a non-cloud software that is updated once a year, manufacturers and users both have to keep up with those annual updates and upgrades. This is especially challenging, considering not all customers upgrade to the most recent version.
“You have this factorial problem of trying to support all these permutations,” McEleney said. “Any new bug that comes up, you have to find the fix and then make it work for all versions of 2019, 2020, etc., testing with each. A huge chunk of resources is dedicated to making sure past releases are current.”
Onshape, which releases new versions every three weeks, avoids such problems. For example, when version 160 is released, the update is automatically sent to users, requiring no downtime and ensuring the software is never out of date.
“Then everyone in the world is on version 160,” McEleney said. “There’s only one version. If there’s a problem, we go on 160 and make the bug fix.”
A new trend is emerging where companies go beyond supplier relationships and form consultant/partnership arrangements.
“A lot of mid-sized manufacturers don’t have someone just looking at operational efficiency and ways to reduce costs and improve the bottom line,” Brice said. “Companies like ours, we have tons of consultants in this area and we understand the benefits of automation. We can partner with smaller companies. They may say, ‘We want to do these five transactions or processes.’ Usually, we’re able to help them do that as phase one, then define a phase two and gain additional value to their business.”
While larger manufacturers are often looking at standardization across multiple plants, SMMs are trying to maximize efficiency per plant.
“They’re trying to drive their competitive edge,” Brice said. “They need to be efficient with capital. Labor and inventory are huge components of their cost base. Automation helps them do more with less. What adds a lot of value for our customer is the idea of continuity and availability.”
The three biggest needs, according to Finnerty, are:
“Manufacturers can get started down the path to a true smart factory at any level of their networks—value creation can begin with and scale from a single asset and use an agile approach to iterate and grow,” Berckman said. “It can be more effective to start small, test out concepts in a manageable environment and then be more effective once lessons have been learned. Once a ‘win’ is achieved, the solution can scale to additional assets, production lines, and factories, thus creating a potential exponential value creation opportunity.”
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