For decades American Manufacturing was defined by the automotive industry. GM, Ford, and Chrysler were the Big Three, producing cars in Detroit factories full of the best hardware in the world.
In the 1950s, the country was producing three-quarters of all cars manufactured in the world. Sturdy engineering and solid car parts were at the core of Motor City’s business model.
But jump into any recent vehicle produced by these companies and you’ll notice a remarkable difference. Instead of relying solely on your maneuvering and eyesight, the car’s sensors tell you if you’re about to hit something. Hybrid vehicles tell you when your batteries are running low and display how fuel efficient you’re being as you drive. These cars aren’t just built with hardware; they simply wouldn’t function without Software built into its core.
The importance of software is evident in the way these companies are spending their money. GM spent $1 billion to acquire Cruise, a fully autonomous car expected to be on the road by the end of the year. Ford is building its first self-driving fleet at a new production center in Michigan. Fiat Chrysler Automobiles (FCA) is investing $30 million in a research facility in Michigan to study autonomous-driving technology.
In fact, today’s high-end cars have more lines of code than a Boeing 787. This is only going to increase, as the cars of the future will be connected, communicating with other cars, data centers, and infrastructure, and even monitoring its own systems. Most cars today already have wireless systems that transmit data from the vehicle to the manufacturer, or to a mechanic to look at diagnostics. McKinsey estimates this data could be worth $750 billion by 2030, making it a point of contention for data privacy advocates.
If the automotive industry is leaning more and more towards software, what does that mean for the manufacturing industry as a whole? What role does software play today in an industry traditionally dominated by hardware? If companies like GM are producing products that are hardware on the outside but drive value from its internal software, it’s just as important to make the same investment in your manufacturing operations.
The rise of digital factories
According to research from PwC, 91% of industrial companies are investing in digital factories, which means they use software to operate their manufacturing processes. A nearly identical percentage of industry leaders state that efficiency is the main reason for their investment in digital solutions. Yet the same study also found that only 6% of companies believe they are fully digitized.
This dichotomy may be due to the fact that while most manufacturing businesses are willing to invest in software that can help them improve their processes, automate as much as possible, and give them insights into their businesses, it’s not an easy transition.
Some of the most powerful manufacturing software can be cost-prohibitive. There may be other non-software investments that take priority. At other times, it’s simply not clear which software would give you the best return on investment.
You might invest in enterprise resource planning (ERP) to run operations, but it turns out not to be the panacea you thought it would be. The thought of migrating to another system is terrifying because you know the costs and challenges involved in implementing new software. So you stick with your sunk cost, hoping to make the best of it.
Operating with outdated systems has become a dangerous proposition given the speed of software innovation today. The global consulting firm Capgemini predicts that smart manufacturing will drive up productivity by 27% by 2022, adding $500 billion to the global economy. To remain competitive, manufacturing businesses must incorporate software into their models.
Software is increasingly being used for automation, analytics, and process streamlining. All of these functions work with hardware to make manufacturing operations more efficient.
Back to our car analogy, your Prius might be equipped with sensors and a smart dashboard to give the driver more information, but it still needs quality hardware to serve its primary function, which is to get drivers safely from point A to B. Similarly, a digital manufacturing operation still needs hardware to process materials and build physical products, which is the main function of a factory. But the software is what allows you to execute the process, gather data, and monitor operations.
Without the software, a manufacturer loses its competitive advantage because it won’t be able to generate valuable data to optimize its operations and improve its products.
Smart manufacturing: fusing hardware with software
If hardware and software previously worked like separate parts within the same system, the future heralds a much more symbiotic relationship where software merges with hardware for smart manufacturing.
Companies that want to optimize their manufacturing processes will need to invest in software to help them achieve their goals. Advanced robotics and connected devices on the factory floor are all examples of software-based investments. Installing sensors on hardware is becoming standard because they help reduce downtime, diagnose errors in production, and increase productivity. Advanced robotics are hardware products that run on software to give them autonomy and require minimal monitoring from humans.
Stephen Phipson, CEO of Make UK, a manufacturing trade organization, recently said, “Digitisation is not just the domain of major players… Investment of £1,000 in smart sensors on a CNC machine could harvest data and double SME [small and medium-sized enterprise] productivity within a month.”
Similarly, while hardware can’t be maintained or upgraded regularly the same way software can, its upkeep can be managed with the help of software. An outdated piece of equipment or malfunctioning parts will eventually need to be replaced. But software can predict how long the hardware will last, how many parts will need to be ordered or manufactured, and do a cost analysis on those parts.
If you had $100,000 to invest your manufacturing business, how would you spend it?
Maybe you have your eye on a new machine that you know would vastly increase productivity or you’re leaning towards software that would give you the analytics you need to run things more efficiently.
The bottom line is investing in hardware is not always a clear choice anymore. When evaluating potential investments, consider the benefits software can provide in the long run for your overall manufacturing process.
Weigh the improvements you can gain from equipping your hardware with software to make what you already have even more powerful. In today’s manufacturing landscape, a balanced investment in both software and hardware is essential for both short-term and long-term solutions for your manufacturing business.
The post Why the balancing act between hardware and software investment will determine manufacturing success appeared first on QuickBooks.