Smart Factories for

Small to Medium
Manufacturers:
How to get from
Here to There

This white paper is sponsored by Siemens.

SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

SMART FACTORIES FOR SMALL TO

MEDIUM MANUFACTURERS: HOW
TO GET FROM HERE TO THERE

In the swarm of buzzwords surrounding today’s manufacturing sector, the

“Smart Factory” or “Factory of the Future” buzz is especially prominent. In
this white paper featuring experts from Siemens Digital Industries Software,
we’ll unpack the meaning of the term, examine key considerations in
understanding its value and explore a few important takeaways for how
to take advantage of these technologies, including for small and medium
businesses (SMBs).

In a sense, good factories have always been smart. Before sensors monitored
equipment, skilled operators relied on their years of experience with specific
pieces of equipment to monitor processes and equipment maintenance
needs by feel, sound or touch. That legacy knowledge still exists—especially
among North America’s numerous manufacturing SMBs—and new
operators are still capable of learning those skills. But in an increasingly
complex manufacturing landscape with increasing workforce and training
challenges, it’s harder to develop and rely on.

Today, unprecedented computational capability and ubiquity is giving

smaller manufacturing firms access to data which has previously been
reserved for major players. If analyzed correctly, smaller firms can use this
data to improve efficiency, sustainability, quality and time-to-market. The
smart factory will be the only factory in the future, so getting from here to
there is of paramount importance.

SIEMENS DIGITAL INDUSTRIES SOFTWARE EXPERTS

IN THIS WHITE PAPER

Mike Denley, senior director of Strategic Programs and Initiatives at Siemens

Digital Industries Software, currently leads the Siemens Cloud Application
Solutions Program and Initiatives team. His academic and industry
experience includes graduate and postgraduate work in Total Quality
Management, software design and development, organizational change,
Lean Six Sigma and business analytics with a focus in sustainability.

Rahul Garg is vice president of Industrial Machinery and Small to Medium

Business Programs at Siemens Digital Industries Software. His multiple roles
deliver solutions to help manufacturers develop competitive products and
fill portfolio gaps using tools such as software-as-a-service to create effective
go-to-market strategies, as well as business practices that support small and
medium-sized manufacturing customers in achieving high performance.
Rahul holds graduate and undergraduate degrees in computer science and
computer engineering.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

WHAT IS A SMART FACTORY?

A smart factory is a manufacturing facility that uses advanced technologies

such as artificial intelligence and digital twins along with the Internet
of Things (IoT), to improve efficiency and productivity. In a smart factory,
machines and other equipment are connected to each other and to a
central network, allowing them to communicate and share data in real-
time. This enables the factory to respond quickly to changing conditions
and customer demands. Smart factories also incorporate automation and
robotics to perform tasks more accurately, consistently and efficiently than
humans could.

SMART FACTORY TECHNOLOGIES

Cloud Computing | Smart factories rely on cloud-hosted computing

resources to manage the high demands of the digital technologies in use.
Today’s cloud-hosted data storage and processing solutions are more secure,
reliable, scalable and cost-efficient than all but the best on-premise solutions,
making the cloud a perfect solution for smaller companies with limited IT
data center space and budgets.

The Internet of Things | With computing devices embedded in

equipment, sensors and even safety equipment, every part of the factory
can be connected to the central software platform, making up the digital
infrastructure of the factory. For any SMB that needs to pivot quickly between
production runs, this connectivity is critical.

Sensors | Sensors collect equipment and process data for maintenance,

quality and safety purposes in the smart factory. Today’s sensors, when
combined with edge devices, are capable of storing data, processing them or
transmitting them to the cloud.

Reporting and Analytics Software | Software platforms such as ERP, PLM

and business intelligence tools are critical, along with IoT analytics, for turning
data into actionable insights. For example, a log of 100,000 temperature
readings is useless without a graph indicating that temperature goes out
of range toward the end of every month, for example. With that insight,
maintenance changes can be planned.

Machine Learning and AI | This technology is becoming increasingly critical

to Smart Factory strategies. As systems and data become more and more
complex and multifaceted, machine learning algorithms can intake mass
volumes of data and learn to find patterns where human data scientists can’t.
Smaller firms can use this to reduce setup times, design-to-production cycles
and down time.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

Digital Twin | Using advanced simulation software, factory designers can

build a complete simulated twin of a piece of equipment, a line or even an
entire factory, using this twin to plan, design, optimize and predict outcomes.
More importantly, Closed-Loop Digital Twin provides continual feedback
against models to help manage and predict operations including anomalies,
defects and maintenance. This can be a game-changing edge for any small
manufacturer in a highly competitive marketplace.

“THE COST OF BREAKING A TOOL DIGITALLY IS ZERO.

THE COST OF BREAKING THAT TOOL ON THE MACHINE
IS PRETTY HUGE.”
Rahul Garg

WHY DO YOU NEED A SMART FACTORY?

MANUFACTURING IS BECOMING MORE COMPLEX

Complexity in manufacturing is like entropy: it’s always increasing. Moore’s

law in the semiconductor industry is a perfect example. In other industries,
even if the product isn’t becoming more technologically advanced, process
technology is advancing to draw even more cost out of the process while
maintaining quality.

One example of increasing complexity is the growing phenomenon of mass

customization, by which manufacturers allow each customer to configure
the product to match their specific needs and tastes, while producing these
customized items at a mass production scale. Smart factory technology
makes this possible. For example, an automotive manufacturer can offer
a customized bezel on the instrument cluster and allow the customer to
design the color and texture of the part online. With G-code—the software
language the tells a machine how to move—controlling the machine that
prints or machines the part, each part costs the same as a mass-produced
part. Without the need for dies or molds, economy of scale is less of an issue
for manufacturing cost. However, manufacturers still need to define the
right level of customization and set parameters that maximize value for the
customer while maintaining an efficient process.

Another way manufacturing is becoming more complex is by the growing

role of environmental concerns in production. For example, the full lifecycle
of the product is now under scrutiny in a circular economy model. How can
the product be recycled, reused or repaired? This is no longer a concern
saved for only the largest of companies, as sustainability mandates are
forcing suppliers further down the value chain to participate in meeting their
customers’ sustainability goals.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

WHAT IS MASS CUSTOMIZATION?

Mass customization is a manufacturing strategy that involves producing

goods or services as a part of continuous manufacturing operations, while
still allowing customers to customize their products to their individual
preferences. This is achieved by using advanced technologies such as
computer-aided design and manufacturing, as well as flexible manufacturing
systems that can quickly and easily adapt to changing customer
requirements. Mass customization allows manufacturers to produce a wide
range of products with minimal setup and changeover time, while still
offering customers the ability to personalize their purchases. This can help
manufacturers reduce costs and increase efficiency, while still meeting the
unique needs of each customer.

REPEATABILITY AND PROCESS STANDARDIZATION

Collecting and analyzing data on every motion and operation of the

equipment in the factory helps standardize and document processes,
making them more repeatable and predictable. This is especially important
for industries such as aerospace, where quality and regulatory compliance
requires documentation and traceability, and in automotive, where OEMs rely
on suppliers to produce quality parts according to specifications.

As equipment becomes more complex, this documenting and validation of

process data becomes more complex. For example, compare a stamping
press to a 3D printer. A stamping press applies a force to a billet of material
and produces a part. The 3D printer may deposit thousands of layers of
precisely melted polymer filament with each layer adhering at specific
temperatures and cooling at a specific rate to minimize warping. The 3D
printer requires much more complex monitoring to ensure it is performing
correctly. Sensors, IoT and analytics – at the edge – are the enablers.

MITIGATING RISK USING SIMULATION

WHAT IS A DIGITAL TWIN?

A digital twin is a virtual representation of a physical object or system. It is

created by using data from sensors, computer-aided design (CAD) models
and other sources to create a detailed, real-time simulation of the object or
system. In manufacturing, a digital twin can help optimize processes and
identify potential problems before they occur.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

For example, as Garg mentioned, a digital twin of a factory floor could

be used to simulate and test different production scenarios, allowing
manufacturers to identify bottlenecks and inefficiencies before they occur
in the real world. Digital twins can also be used to monitor and control the
performance of a physical object or system.

Simulation software has been used for many years in manufacturing for
applications such as robot programming, product design and CNC toolpath
programming. But advances in computing power and data access have
vastly improved the value and quality of simulations to the point where,
according to Garg, even the commissioning process of a machine on the
shopfloor can be simulated. Every step of a process can be simulated,
avoiding costs such as line stoppages and mistakes.

“One of the interesting parts is that once we simulate it and we have the
behavior models, that becomes a state of a version of configuration for that
plant. And we can use that to program the CNC machines or program the
robots,” said Denley.

According to Rahul Garg, capabilities around simulation have improved

so dramatically, to where we can get down to inside a factory, down to the
smallest motor and evaluate the energy loss on that motor. Or we can go up
to a machine, to validate the machine and optimize how that machine itself
will be working; up to a production line, getting the kinematic validation,
getting the geometry validation; and then all the way up to a factory, getting
the complete throughput validation, getting the time validation, getting the
logistics validation in a factory. The whole process of simulation has improved
to where it has become an important step to undertake before you start
production. The cost of this technology and the level of expertise required to
conduct these simulations have both been significantly reduced in recent
years, empowering smaller manufacturers to leverage these techniques in
ways that have previously been beyond their means.

SENSOR MONITORING AND

ACTIONABLE DATA

One of the challenges that manufacturers face as they begin to collect

equipment monitoring data is what exactly to do with it. High-frequency
data such as vibration or temperature readings can quickly stack up to
massive quantities of digital data. Without the tools and strategies in place to
parse it, it’s useless and may even become a hindrance.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

The smart factory brings intelligence to that data collection. A sensor can tell
you that a vibration of a motor housing is increasing, but smart analytics can
tell you which bearing needs to be replaced. That’s the gap between data
collection and actionable data.

PREDICTIVE ANALYTICS

Actionable data also includes predictive analytics. With remote monitoring of

equipment, trends and patterns in equipment sensor data can spot trends as
they begin, giving maintenance personnel more time to plan maintenance,
becoming predictive, rather than reactive (which leads to unplanned
downtime) or preventive (which causes planned downtime, and may waste
some value by replacing parts or equipment before their time). For any
SMB that’s struggling to hire skilled workers or fill a knowledge gap left by
experienced workers who have moved on, predictive analytics can be a force
multiplier.

SUSTAINABILITY

Sustainability is undoubtedly an important consideration for manufacturing

today, whether it’s one of the core values of your organization or your
customers, or if compliance to sustainability standards is regulated in your
area. Smart factory technology can better enable sustainable practices and
compliance.

Simulation and digital manufacturing technologies can help shift product

design to the concept of the circular economy, in which resources are kept
in use for as long as possible and when they are no longer needed, they are
recovered and regenerated into new products or materials. This approach
is in contrast to the traditional linear economy, in which resources are
extracted, used and then discarded.

“Just recently I was at a machine tool event where one of the vendors
was demonstrating a new 5-axis milling machine. But what was more
interesting in that whole concept was the lubricant and the cooling agent
that was being used in the milling process. They had built-in processes
where they could actually be recycling the coolant for the next three years.
That’s something you cannot just do in the end. That’s something you have
to think through your entire design process right up front when you are
designing that machine. And a lot of that is driven by this whole nature of
sustainability and circular economy requirements,” said Garg.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

REGULATORY COMPLIANCE FOR SUSTAINABILITY

Another smart factory technology that can help measure sustainability

compliance is equipment monitoring and analytics. “Being able to go
down to even the small motor and understand the energy footprint, the
consumption pattern—that’s a big deal today about your carbon footprint
and how that product is going to be built, manufactured as well as operated
in the field,” said Denley. This analysis can also be done in simulation, before
that motor is even installed. “I think that’s a really interesting item as we
start now thinking about more of the social goals around CO2 reduction, a
lowered carbon footprint and alternate energy sources.”

The automation of Industry 4.0 is the collection of data. It’s used for many
factors; one is to improve, the other is the audit trail. Can I prove what I’ve
done? Equipment data can help corporations meet internal sustainability
goals, such as their carbon footprint, but also meet regulatory requirements
set by the government. And for any SMB serving larger B2B customers,
this ability may be the difference between winning a lucrative contract and
being the runner-up.

EVERYTHING-AS-A-SERVICE

One interesting facet of the conversation of the smart factory is digital

technologies make production so much more flexible and reconfigurable
that it enables new ways of doing business. One new model popping up is
the “as-a-service model”, which comes from the software world.

For example, rather than buying a piece of equipment such as a motor, a

machine tool or even a jet engine, vendors will lease that equipment and
provide it as a service to the factory. In this model, the mindset for factory
managers is that it isn’t the equipment that’s needed, it’s the equipment
output. Using IoT-connected monitoring technology, vendors remotely
monitor the leased equipment, providing reliable maintenance. This shift
reduces a company’s capital expenditures, instead turning the machine (or
more accurately, its output) into an operational expenditure. A manufacturer
won’t be tied to a particular piece of equipment for years to amortize the
cost and achieve positive return on investment (ROI). With KPIs built into the
service level agreement from the vendor, ROI can be more accurately priced
into every contract.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

Many SMBs are already leveraging this new model with the use of
collaborative robotics (cobots) for production and material handling
processes. This model allows a smaller manufacturer to put a super functional
robotic arm on the shop floor in a matter of days instead of spending weeks
commissioning and proving out a larger, more robust traditional robot. The
model usually includes programming and troubleshooting help from the
service provider, meaning they can efficiently deploy the cobot without
having to spend time searching for highly skilled operators with experience in
that particular brand of robot, all for one monthly fee.

Another application of this new as-a-service model is production as a service.

For example, service bureaus such as Protolabs take advantage of automation
and digitalization to the point where machine operators at Protolabs mainly
load material into machines and unload finished parts. The custom parts are
programmed into the machines remotely, and parts are traced and delivered
to the customer using smart logistics.

NEXT STEPS

Small and medium-sized business owners may be thinking, “Of course I’ve
been to the Siemens booth at a trade show and seen demonstrations of
the ‘factory of the future’ or ‘smart factory,’ but it’s unrealistic to imagine the
capital expenditure and time that it would cost to rip and replace an entire
factory, while also investing in new technology and network infrastructure,
not to mention the personnel training required.” These concerns are valid,
especially with the pressure on today’s workforce and economy.

One answer to this concern is software-as-a service. In the past, a network-

connected factory with computer analytics would require network cabling
throughout the factory, with a server room and up-to-date data storage,
processing power and cybersecurity investments. Today, it requires a monthly
subscription to a service like Microsoft Azure or AWS. These cloud service
vendors provide secure and scalable data storage and processing capabilities.

“So, bearing that cloud capability in mind, look at two things. One is, how do
you start doing more virtual development of your manufacturing process?
How do you start bringing in more of your digital twin and making small
steps in that?” said Garg. “By evaluating your current production virtually, you
can optimize and improve production, rather than rip-and-replace.

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SMART FACTORIES FOR SMALL TO MEDIUM MANUFACTURERS: HOW TO GET FROM HERE TO THERE

“The second is, how do you bring intelligence into your production process?
Intelligence comes in through the IoT systems, through the manufacturing
execution systems. So, keep those two vectors and start taking smaller steps
so you become more and more virtual, and you become more and more
intelligent,” said Garg. These are systems that can be added to your current
production system and equipment.

So, is it possible for a factory to get smart one step at a time? According
to Denley, the answer is yes, through a process of iterative education and
improvement. However, it may not be up to your organization leaders to
choose whether to “get smart.” The value and improvement driven by
smart factory technology is leading your competitors to improve, and this
movement will force you to make changes.

“How do you solve a multi-variable problem?” said Denley. “One variable

at a time. And so, I think you start with one step. You start looking at a way
to understand one of your steps of your processes and start perfecting
that more. Now it’s not that we haven’t done that before, but now we can
do it much faster and cheaper. You talked about, ‘Can I get a new piece of
equipment, a new drilling press to come in as an OpEx rather than a CapEx?’
Why not? The risk is nominal and if they don’t like it, you still have your
original CapEx investment.”

In today’s manufacturing landscape, manufacturers have a “prove it to me”

attitude towards smart factory vendors and engineers at organizations who
are pushing for these investments. So, vendors and internal champions must
start small, step by step, and building on past successes.

For more information on smart factory technology,

visit Siemens.

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