Manufacturing Essentials: What Is Smart Manufacturing?

By: Adam Carpenter - Guest Contributor on February 16, 2023
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Small- and midsize-business (SMB) owners need ways to increase efficiency while reducing costs, especially in the manufacturing sector

With the costs of shipping and raw materials going up, the pressure to send overhead expenses in the opposite direction is more powerful than ever. But what practical steps can you take to make this a reality? 

Enter smart manufacturing, a data-based approach that can optimize your manufacturing processes. Below, we'll cover what smart manufacturing is, the benefits it brings, what businesses should consider it, and how to prepare your business for smart manufacturing.

What is smart manufacturing?

A smart manufacturing system uses sensors, robots, and other technologies to automate parts of the production process. Smart manufacturing systems are typically used for highly specialized tasks that require precise control over temperature, pressure, or position. These systems can be expensive, but they also offer many benefits, such as reduced labor costs and increased productivity.

Smart manufacturing focuses on taking data from machines and sensors and using it to optimize operations. Manufacturers also use it to boost safety and prevent downtime by developing more effective programs for maintaining their equipment.

Once you have tools in place for collecting data, you can transition to a smart system by analyzing the information and looking for ways to improve operations.

As a simple example, suppose you use a few mobile lifts on your factory floor and in your warehouse. They put parts and products in position for installation, help retrieve components, and get them to the right stations. Some of your lifts move faster and maneuver better than others.

You could use smart manufacturing principles to:

  1. Collect data about the speed of each lift as it goes from its point of origin to its destination.

  2. Gauge how the weight of the object being carried impacts the speed at which the lift moves.

  3. Use this data to decide which lifts can boost speed without creating safety issues.

For example, you may decide to use faster lifts for longer trips across your entire plant instead of moving inventory around your warehouse. This could save considerable time in the manufacturing process, enabling you to produce more without investing in new equipment.

What are the benefits of smart manufacturing?

Smart manufacturing improves operational excellence, paves the way for innovation, and enables flexibility while mitigating risk.

1. Improves operational excellence

Improving operational excellence involves a multitiered series of steps, all of which are easier via smart manufacturing. For many SMBs, operational excellence comes from:

  • Lowering costs

  • Reducing downtime

  • Bringing defects or losses to or near zero

For most organizations, this is the most crucial factor when building a case to invest in smart manufacturing*.

To illustrate how this works, suppose a small factory needs to pause operations every now and then to perform maintenance on one or more machines. There’s no telling exactly when they will have to do this or how long it will take, and production time for affected products shoots up.

For years, the factory has simply been rolling the cost of this downtime into its products, passing it on to the customer. But with smart manufacturing, there’s a better way.

With smart manufacturing, the factory can collect data regarding the operational health of each machine that needs upkeep. This could include how certain parts wear down over time or the speed at which lubricants and other fluids deplete. 

This data can then be fed into a system that:

  1. Automatically calculates when each machine will need service.

  2. Determines the service that needs to be performed.

  3. Figures out how long the service will take.

  4. Decides the best time to perform the service, such as when the plant shuts down at night.

Further, the system could also choose the right staff to perform the maintenance based on skill level. At the same time, it could avoid assigning over-qualified individuals to fix the machines who may be paid a higher hourly rate.

In this way, the smart manufacturing system helps eliminate downtime while simultaneously saving money.

2. Innovation makes your business a stronger competitor

By innovating, small and midsize manufacturers can keep up with and even surpass competitors. For many SMBs, smart manufacturing is one of the easiest and least expensive ways to innovate at a pace quick enough to stay ahead of the curve.

This is because the foundation of smart manufacturing isn’t expensive new machinery — it’s data. If you shift to a data-powered innovation strategy, you can innovate on a budget.

Let's say you have several competitors in your manufacturing sector, and you’re all targeting the same core group of customers. Your clients frequently compare prices and fulfillment times between you and your competition. Instead of working your existing staff harder or spending more on production, you can use smart manufacturing principles to innovate your way to a competitive advantage.

For example, using enterprise resource planning (ERP) software, you can collect and track data such as:

  • How much each component costs from different suppliers.

  • How long it takes to get components to your facility using different providers.

  • The costs associated with each shipment method.

  • The amount of each component you need to maintain in your inventory to manufacture your goods on a consistent basis.

  • The likelihood of a product being returned when parts from one supplier are used versus parts from another.

You can then use this data to make strategic decisions, including:

  • Which supplier to use to reduce overall cost of goods sold (COGS), even if that means increasing the time it takes to produce your goods.

  • How to speed up production, even if that means spending a little more on shipping methods.

  • The best way to match production rate with the frequency with which your customers want to reorder your products while balancing out the costs to do so.

These insights merely scratch the surface of what is possible when innovating using manufacturing data. You could take your innovation to the next level, directly targeting customer satisfaction by automating an email system that tells customers the manufacturing process phase their products are in, how much longer they have to wait, and the time they have left to request order changes.

By embracing smart manufacturing, you facilitate an innovation-focused company culture that, in turn, makes your business a stronger competitor.

Wondering about manufacturing software costs? We explain pricing models here.

3. Improves flexibility and mitigates risk

In a 2020 Gartner survey of businesses in the manufacturing industry, 44% cited improving flexibility as a primary concern when building a business case to invest in smart manufacturing*

Whether it’s changing economic conditions, staffing issues, or supply chain crises, the manufacturing world is constantly inundated with reasons to boost flexibility. Mitigating risk goes hand in hand with flexibility, because an agile manufacturer has less exposure to risk events that could slow down or pause operations altogether.

Smart manufacturing arms a company with the data it needs to adjust to changing circumstances while reducing the money they have to spend to do so.

As a recent example, the Great Resignation left many manufacturers without the staff they needed to pump out products at an acceptable rate. Many had to reevaluate their staffing decisions, investing heavily in staff that could handle jobs left unfilled by departing workers.

With smart manufacturing, an organization can reduce the number of tough decisions they must make around staffing—and the money they invest—using production data. With an ERP, for example, you can map out the skills of each employee and connect them to each facet of the production process. Then, you can decide which employees to train, giving them specific skills to create intentional skillset redundancies. 

So, instead of having only two people who know how to operate a machine, you can train four individuals. That way, if one or two resign or go on vacation, someone else can slip into their role, bringing the effects of that staffing anomaly closer to zero.

What types of businesses should consider smart manufacturing?

Any business that wants to boost agility and operational efficiency should consider smart manufacturing. But the journey may be easier for those with equipment that produces data.

However, a lack of data-producing machinery doesn’t have to prevent you from undertaking a smart manufacturing journey. Your most important “machines,” your people, also produce valuable data. 

Whether it’s production rates, average number of sick days, or pay rates, each person in your organization has a different impact on what you manufacture and the overhead it takes to do so. 

Both human-powered and machine-powered manufacturing operations can adopt and benefit from smart manufacturing.

3 steps to prepare your business for smart manufacturing 

  1. Prepare your budget. You can use budgeting and forecasting software, as well as investment management software, to make sure you have the funds available to purchase software, machinery, or sensors for your smart manufacturing endeavor.

  2. Introduce the idea to all stakeholders. Once you have buy-in from leadership, formally announce your initiative to the rest of the company. While doing so, emphasize how it will make their jobs easier and benefit the entire organization.

  3. Brainstorm and identify which processes can benefit from smart manufacturing. The earlier you take this step, the easier it may be to get key decision-makers on board as you can present both the idea and tangible use cases at once.

Survey methodology

* 2020 Gartner Smart Manufacturing Strategy and Implementation Trends Survey 

This survey was conducted online from October 23 through December 3, 2020 to help develop and ratify roadmaps, assess organizations’ strategies against a collective market perspective, and ensure their strategies for recovery and renewal are as future-proof as possible.

In total, 439 respondents were interviewed in their native language across North America (36%, n = 160; the U.S. and Canada), Western Europe (42%, n = 184; the U.K., France, Germany and Sweden) and Asia/Pacific (22%, n = 95; Australia and New Zealand).

Qualifying organizations operated in the manufacturing industries and reported enterprise-wide annual revenue for fiscal 2019 of at least $500 million (at least $1 billion in the U.S.) or equivalent. Companies must have had a smart manufacturing strategy or plans to deploy. Qualified participants have had a role tied to a supply chain function and were in director or above roles. All respondents were involved in their company’s decisions regarding manufacturing operations and/or overall manufacturing strategy.

Disclaimer: Results of this survey do not represent global findings or the market as a whole, but reflect the sentiments of the respondents and companies surveyed.