ECONOMIC IMPLICATIONS OF IOT-ENABLED SMART MANUFACTURING FOR SMALL AND MEDIUM ENTERPRISES

Abstract

Manufacturing is on the verge of revolution with the Internet of Things (IoT), which enables linking of various different machines, sensors, production equipment, humans and information systems—gaining access to a wealth of operational information constantly. The economic impact of this change is particularly concerned with the small and medium enterprises (SMEs) in the company as they may have very small technical teams, minimal capital, and they may be extremely vulnerable to downtime, quality problems, inventory costs and demand fluctuations. The purpose for this mini project is to design a framework for exploring the role of IoT technology to increase the productivity of SMEs, improve their work downtime, monitor quality, provide visibility of stock, manage energy, plan the maintenance and make better decisions. The study takes up the systematic process of the given reference project (problem definition, variables and parameters, mathematical formulation, qualitative analysis, numerical simulation, interpretation, validation and limitations) into a manufacturing-economics context. The 'representative numbers' are not from a real firm or person but are given as an example. In this analysis the effects of different utilizations, defect rates, maintenance costs, inventory and implementation costs on the operating cost, output and payback are shown. Technology benefits and technology costs – all sensors, connectivity, software and integration, cyber security, training and data governance – are highlighted. The project shows how investments in IoT implementation in SMEs, when correlated to real operational challenges, can be an important competitive advantage for the SMEs, if implemented step-by-step, and assessed both from a financial and an operational point of view.