In a recent interview, executives from Robert Bosch GmbH and McKinsey discussed the Internet of Everything (IoE) and its impact on manufacturing. They described significant changes to the production process and to the management of supply chains from this “fourth industrial revolution.” The IoE allows for the interconnection of factories within and across regions and the exposure or “display” of the status of each component of each product for each customer via each distribution method. Sensors in machines and in components will be able to keep universally in synch about what has to be done, what has been done and how well it was done.
A global decentralization of production control is now possible. Creating this reality will require new forms of intercompany and interdisciplinary collaboration. The buyer, seller and distributor will all be involved in product design, engineering, and logistics.
Today, physical flows and financial flows and information flows are different for manufacturing. The IoE vision has them increasingly fusing together. This transformation to what GE calls the Industrial Internet begs a set of questions: In this future how will orders be placed and with whom? Who or what verifies the accuracy of an order or a deliverable across a network of suppliers, manufacturers and distributors that is formed, of an instant, down to the level of at an order at a time?
In this coming future state information, via the cloud, will be real-time available to all concerned parties. The decisions to be made based on this information will be subtle, situation-sensitive, and so voluminous and time dependent that people won’t be making them. Algorithms running in machine-machine (M2M) systems will. On first consideration this all seems overwhelmingly complicated. We’ll need a model, an example to build from, on how to make the transition. It turns out we have one.
Changing the trading cycles for Wall Street are recent, real examples that provide a roadmap for the manufacturing transition. In that world the number of days allowed to settle a trade, the “settlement cycle,” has undergone major transitions. The most notable was from 5 days to 3 days, so-called T+5 to T+3, occurred in 1995. That change required almost every firm in the US to make some changes to their processing flows and systems. Since the move to T+3 various exchanges have made further improvements towards T+1. The table below shows some of the major changes, the before and after, that were accomplished:
T+1, even if never mandated, can be viewed as an example of industry opportunity through dislocation. At some level, IoE capabilities can enable dramatic cycle time gains by unlinking end-to-end dependencies (e.g. I no longer need to “affirm” trades based upon evaluating “confirm trade” messages). Some entities/roles will become more independent, some more dependent. Some may disappear if they no longer add value.
The parallels for manufacturing in an Internet of Everything world are clear (though some elements used in trading may not be used here or at the same level of emphasis). Cross-industry governance will be needed on the format and import of transactions, acceptable technical modes of sending and receiving the messages, management of the quality and timing of the messages both in content and technically, and how to handle disputes.
July 16, 2015