Economics of Cloud Computing and Open Protocol on the Manufacturing Long Tail

Manufacturers are in relentless pursuit of continuous improvement in decreasing lead times, reducing costs and exploring new opportunities. Offering services along with products for additional revenue streams is becoming a commonplace. Additionally, long supply chains and fluctuating demands create a need to be agile and responsive to meet customer requirements. Effectively managing complex manufacturing operations requires accurate, granular, and real time data to make fact-based decisions. The manufacturing industry is unfortunately marred with closed architecture, highly customized and proprietary systems making it difficult to access data for analytics, business intelligence, and data mining. Even though large manufacturers might have resources for such technology, small and medium manufacturers (SMM), which account for 40% of US production output and 60% of employment, often don’t have the access and cannot justify the business case to implement manufacturing intelligence systems. Software application providers have traditionally concentrated on the larger firms which offer greater opportunity and scope. Ironically, SMMs have a great need for such manufacturing intelligence as they focus on higher-end, higher-margin products where cutting-edge technologies, responsive service, and lead times are very important. The recent advent of open source communication protocols like MTConnect and cloud-based applications has changed the business models for offering manufacturing intelligence technology solutions to SMMs. There is huge economic opportunity to serve this “long” manufacturing tail which comprise of more than 296K+ firms, employing more than 8M+ skilled labor and representing 99% of nations manufacturers. 

MTConnect is an open, royalty-free standard intended to foster greater interoperability between controls, devices and software applications by publishing data over networks using the Internet Protocol. Benefits include real time production dashboard, alerts, equipment availability and usage, overall equipment effectiveness, production reporting/tracking, visualization of maintenance tracking, problem resolution and planning, energy conservation, quality, statistical process control, data mining, genealogy and security. Additional benefits can be achieved by integrating functions such as purchase order management, master scheduling, material requirement planning and shop floor control with other business functions such as accounting, sales, maintenance and shipping. 

The cloud computing pay-per-use model is cost effective, secure, and efficient. The end-user does not have to purchase all of the required hardware, software, manage networks, software licenses, and maintain IT support staff which is very advantageous for SMMs as they often have limited human and financial resources. Additionally, while SMMs can use this data for better operations management, they can also predict and adjust to changes in the economy, technology, customer behavior, and the global marketplace. 

This paper will discuss the impact of open protocols and cloud computing for providing manufacturing intelligence applications for SMMs. A case study describing the economics of using MTConnect compliant cloud based ShopViz application at a gear manufacturing factory will be described along with benefits, limitations, return-on-investment, and future work. 

Reference: Economics of Cloud Computing and Open Protocol on the Manufacturing Long Tail; Amit Deshpande, 2014 Conference of the Society for Machinery Failure Prevention Technology (MFPT); May 20-22, 2014; Virginia Beach, VA [ SUBMITTED].