It also promotes continuous improvement and cost control by leveraging hidden capabilities and optimizing processes.
While it can bring significant benefits, the adoption of Industry 4.0 presents major challenges, and one of the most complex is demonstrating that the project will deliver the required return on investment (ROI). Companies typically calculate the ROI of new production machinery, such as a new press that can produce more products in less time or a more efficient motor that will reduce energy costs, but with Industry 4.0, ROI is more intangible since improvements are based on better use of data rather than physical counts and measurements.
Ultimately, Industry 4.0 relies on smart technology to capture data that can be transformed into actionable insights: if data isn't measured accurately, the process can't be improved. Without improvements, the technology doesn't deliver a return on investment.
Red Lion, a manufacturer represented by Farnell, specializes in solutions that enable companies to visualize their process data to ensure improvements are implemented. Barry Turner, Red Lion Technical Business Development Manager, states: “If we don’t have a clear understanding of where we’re going and why we’re going there, it’s very difficult to determine if we’ve actually arrived. At the beginning of a project, we need to decide on the business outcome we want to achieve, for example, by connecting process control data to our IT data system. What are we trying to do, and how are we going to measure it afterward to determine if we’ve achieved the objective?”
Three key areas to improve ROI
To achieve the appropriate ROI for a project and demonstrate that it has been achieved, you need to focus on some key areas.
• Evaluation of key performance indicators
Industry 4.0 can help improve product quality, efficiency, production availability, and energy consumption. Companies should identify relevant key performance indicators (KPIs) in these areas and monitor them before, during, and after project implementation. This way, manufacturers can be confident they have verified the return on investment (ROI). There may also be qualitative advantages that, while not impacting profits, can increase operational efficiency, for example, by making data available more promptly. This could allow for earlier intervention in a process to adjust it to specifications, thereby preventing losses and maintaining high product quality.
• Identification of critical points
The best overall strategy for implementing Industry 4.0 is to focus on the areas with the greatest potential for improvement that can increase profit margins. By focusing on the most critical points, it's possible to use data to inform actions that improve performance. The best way to achieve a reasonable ROI is through small projects that can demonstrate measurable improvement within 90 to 120 days.
Kevin Goohs, Director of IoT Implementation Strategy at Omega Engineering, a manufacturer represented by Farnell and a specialist in process monitoring and detection solutions, states: "To achieve the necessary ROI, once the data is integrated, start with a pilot project. This will allow you to begin identifying patterns in your equipment that you hadn't seen before. At that scale, it doesn't take long to see how product and process quality could be improved with data that was never available before."
• Greater utilization of employees
Given the labor challenges and shortages of skilled workers that are impacting business operations, it is crucial to make better use of what can be a costly resource. Industry 4.0 techniques allow for more efficient and effective use of labor by eliminating the need for physical readings of data from measuring devices and the need to record results on paper. Faster and more accurate readings ensure better quality and fewer complaints, boosting quality and efficiency throughout the plant and contributing to a high overall ROI.
Quick access to good data
Achieving a measurable ROI often depends on quick access to data that can reveal where improvements can be made within a reasonable timeframe. This data should be aggregated through a dashboard to display the essential information that managers need.
New smart technologies facilitate rapid data collection and comparison, which in turn simplifies ROI management, monitoring, and justification. Advantech, a manufacturer represented by Farnell, offers a range of data collection solutions, from smart sensors to smart modules with built-in intelligence. It also provides backend solutions that allow users to drag and drop various types of ROI calculations, such as overall equipment effectiveness and energy usage.
Matt Dentino, Industrial Internet of Things Channel Manager at Advantech in North America, explains: “Our modules provide the backend intelligence to easily and quickly convert data into information that is immediately available to management. Typically, vibration analysis and oil sample data are not required. What is needed, however, is to understand how these factors affect the production line. How does it affect the number of products manufactured? How does it impact the bottom line? What is the residual cost?”
"All of that can now be integrated into easily created control panel displays that provide ROI. You no longer need someone to take physical readings to determine your energy consumption. Now those figures are compiled in minutes, if not seconds.".
The cost of inactivity
Production disruptions due to equipment failures can cost many hundreds of thousands of euros in a short time.
For example, an analysis by ABB Motors has indicated the potential costs arising from a motor failure. [1]
The analysis examined a 315 kW motor with an efficiency of 95.5% used in a continuous process. Assuming an energy cost of €0.11/kWh and the motor operating for 8,400 hours per year, the operating cost over 20 years would be approximately €7 million. This figure is extremely high when compared to an approximate purchase price of €18,000.
However, the cost of not using the engine is equally significant. The analysis cited the example of an engine used in the oil and gas industry, where such a failure could result in losses of €220,000 per hour. That means a single ten-hour shutdown over the engine's 20-year lifespan would cause losses of around €2.2 million.
Investments in Industry 4.0 technologies can be justified by pointing to these kinds of potential losses, which are often due to a lack of experience with predictive maintenance. Predictive maintenance uses data and analysis to determine which machines are at risk of failure long before it actually happens.
Alexandra Rangel, National PowerXpert Application Engineer for Eaton's power components division, a Farnell partner, highlights the importance of data-driven predictive maintenance to achieve the required ROI: "The staff who maintain the facilities, who keep them running, are starting to retire, and their knowledge isn't being passed on. Many factories, plants, and even regular facilities are starting to consider predictive maintenance instead of preventive maintenance."
“It’s essential to have the ability to gather data on different system status parameters or receive alarms from each component and compare them in a central location,” says Rangel. “This allows us to predict priorities in the next round of maintenance because the data shows that something isn’t right, or to intervene proactively before something happens. Scheduled ‘preventive’ maintenance is performed, as the term suggests, regularly, but that sometimes means it takes place when it’s not necessary. Furthermore, it can miss indicators that something is going to go wrong because nobody looks for a problem in something they just checked last month.”
"The most important thing to consider is: how much will it cost if that tool breaks down? What if it shuts down the entire manufacturing plant? And if the process is interrupted for eight hours, how much are you losing by not being able to process the products? So, the ability to collect the data and make smart decisions about it will work in favor of the overall ROI.".
Conclusion
Using IoT technology and Industry 4.0 techniques in a manufacturing environment offers significant benefits but also presents major challenges. One of these challenges is justifying the cost of the proposed solutions by demonstrating that they can produce a reasonable return on investment.
Leading Industry 4.0 solution providers, such as Red Lion, Advantech, and Eaton, whose products are available through Farnell, can help manufacturers overcome these challenges and make Industry 4.0 work for them.
Kevin Goohs of Omega concludes: "I believe that over time the ROI will become evident. Either the technologies are adopted, or the problem of managing facilities effectively will gradually be addressed. The ROI will serve to improve the ability to compete in the market and enhance product quality.".
References
[1] https://drivesncontrols.com/news/fullstory.php/aid/5847/What_is_the_real_cost_of_owning_a_motor_.html
