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manufacturing (6)

The Dynamics of ODMs and OEMs

I've seen a lot of different thoughts about "original equipment manufacturers" and "original design manufacturers" recently, so I figured I'd offer my observations from my time working in Shenzhen for my IoT company.

Backstory: we’re partnered with Qualcomm to cloud enable bluetooth mesh technology across myriad US, Asian, and European based companies, primarily for lighting and smart home products in consumer/commercial markets. I spent about 6 months in Shenzhen and Hong Kong during 2017 putting together the supply chain partnerships.

From what I’ve experienced, “brand,” i.e. the companies we’re familiar with as consumers, and Original Equipment Manufacturer “OEM” are used interchangeably, while Original Design Manufacturer “ODM” refers to the “factory.”

In most of my interactions, there is a tight albeit painful relationship between the OEM and ODM in consumer electronics because cooperation between multiple vendors is often required to get a product to market, especially in IoT. Typically, the most differentiated intellectual property (IP) is in the hands of the OEM (brand)— industrial design, software, firmware, and it’s in their best interests to obfuscate as much as possible throughout the supply chain to make it harder to replicate the technology, which everyone assumes will happen. And it does. This is especially true during the rise of the IoT, where connectivity challenges plague both sides of the pond, and clever solutions are the 11th hour superpower everyone is fighting to find first to use as leverage in the supply chain. 

There is another class of manufacturers— not sure the technical name, but we call them “module makers” — companies that specialize in the design and production of drop-in PCB modules for various connectivity chipsets to make them easier to productize. An example would be ITON, who provides chips for several of GE’s products to the prime ODM (such as Leedarson or Eastfield) who is responsible for final assembly (note: many ODMs are also module makers— they keep chips in house to maximize control and profits).

Both ODMs and module makers participate in a process of product innovation that presupposes the market. Chipmakers (and other tech vendors) like Qualcomm send their reps out to the factories to demo new silicon technology in the form of a “reference design” in a bid to get the ODM to create a module or product based on that chipset that answers to a trend they’ve noticed from their OEM/brand customers. In this way, the ODM bears the R&D cost as a bet for business, but doing so gives them a chance to retain the right to get a royalty on every module sold. Ask an ODM to hand over any firmware they've made and they’ll tell you with their sweet puppy dog eyes “eat my shorts” because it’s how they keep you from just taking everything to another vendor.

For brands like Home Depot (or more generally companies less interested in designing hardware) these ODMs are essential because they are flexible enough to develop a catalog of partially developed products on speculation— whatever successfully sells up the food chain at Home Depot, they make real (note: the “make real” part is where a lot hits the fan because this stuff is hard to scale).

The OEM-ODM-module maker ecosystem creates a sort of “it takes a village to make a product” atmosphere, but with grumpy uncles, annoying neighbors, and meddling kids abounding. There's a constant sense of quiet espionage on both sides, although that tends to get better if you develop a direct relationship with your mfg partners. Western business has evolved to sustain trust with purely transactional relationships-- this is way less true in places like China. Go to lunch with them and take them to dinner a few times, invite them to Macau, get them drunk and having fun with you. These relationships are insurance policies on getting screwed. Further, having boots on the ground near your manufacturing is practically a requirement nowadays if you want to have any hope of your supply chain operating smoothly. 

In the case of a brand like Apple, who meticulously defines and controls every little detail of their product and supply chain works with an Electronic Manufacturing Services company “EMS” like Foxconn who primarily invest only in building other designs precisely to specification.

So OEM v. EMS: OEM: “build this for me, exactly like this, and don’t ask too many questions, or I’ll eat your children.” 

EMS: ;)

The ODM/OEM relationship is a bit shakier: 

OEM: “build this for me, and pretty please do your best not to use lead paint or explode my users.” 

ODM: ¯\_(ツ)_/¯

All that said, many companies I’ve encountered are chimeric— companies that usually do business as an EMS could also be caught as an ODM if the opportunity is right. I’ve wracked my brain over how to approach meetings with ODMs that also have an OEM/brand side to the company. The ODM side is a potential partner while the OEM side is a potential customer— in the already confusing world of IoT this can be quite the rollercoaster.

I could be off, but the cash value of the above has navigated me through hella lots of conversations from ivory tower to where the dog food gets made. It is a truly global and complex web of associations, across cultural, language, political, and social boundaries. Read “Poorly Made in China” and “Barbarians at the Gate” to see the differences in East vs. West strategies for business success, which I see as orthogonal values of Replication and Dominance.

If you’re interested, here’s a great article by a Shenzhen based supply chain expert: https://www.linkedin.com/pulse/3-types-partners-product-managers-can-use-development-changtsong-lin/

 

Thanks for reading! Our company is expert at IoT integrations, and we thrive on building ecosystems of partners with positive feedback loops on new services and revenue streams. Kindred spririts, please reach out to me at [email protected] 

 

Best, 

 Preston

COO @ Droplit

https://droplit.io

[email protected]

 

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The predicted growth of the IoT market in manufacturing is unprecedented. At the moment, Markets and Markets researchers predict it to reach $13.49 billion by 2020. Just to give you some perspective, in 2015 the value of this market was estimated at $4.11 billion. The main IoT technology applications in manufacturing revolve around enhancing connectivity and automation. The main goal of this tech is to maximize the efficiency of the manufacturing process while minimizing its costs. The benefits of utilizing digital solutions in this industry are a great motivation for the developers as seeing what has already been achieved prompts them to see how far they can push these solutions.

The most important benefits, no doubt responsible for such a tremendous growth of the IoT manufacturing industry, include:

Boost in Work Efficiency

 

Constant improvement of the manufacturing operation is one of the main goals for any industrial business owner. Implementing IoT technology on any level of the manufacturing allows to:

  • Automate the production process, or some of its steps
  • Pre-test new ideas and designs (using a combination of advanced modeling and testing solutions)
  • Analyze the production process and identify its strengths and weaknesses
  • Save time and money for the business by increasing the efficiency of both the production line and employees
  • Monitor the manufacturing business performance at all times, analyze the data, and use this information for accurate predictions

Steady Improvements in Performance

 

The most important benefit of the contemporary IoT solutions is their ability to improve constantly by simply ‘doing their job’. The AI that governs them is usually programmed to process data collected during the manufacturing process and optimizing that process based on it.

As the system is regulated by the AI developed specifically for it, the efficiency and accuracy of these changes and advancements are greater than any settings set by man. However, making manual adjustments is possible and this will add another layer to the machine’s betterment. The intuitive operation systems of today will memorize the most effective patterns in the production process and find a multitude of ways to achieve or even improve those results. They will do this with utmost accuracy and speed. Utilizing these particular solutions can make even a small manufacturing business into a big player on its market.

Creating the Perfect Environment for Innovation

 

Manufacturing facilities reigned by IoT technology are extremely flexible. This means that the business owner is able to integrate new solutions quickly and boost the production process’ efficiency right away.

Most importantly, implementing this technology allows to step away from the traditional linear production process. This, in turn, leads to the creation of more efficient singular production cycles organized into a cohesive system that can adjust to the change in manufacturing demand immediately. Such a scheme allows for the most efficient use of resources.

This kind of ‘cluster’ manufacturing also enables the owner to monitor the entire system more easily. One can determine where an issue occurs and have other sectors pick up the slack if possible. In any case, this scheme allows making quick and more accurate fixes for any problems.

Allowing for Predictive Maintenance

 

Predictive maintenance is a very efficient method of cutting the manufacturing costs. It is exactly what the name states, a maintenance based on predictions. It’s a step up from preventative maintenance as it’s more effectively targeted.

Predictive analytics drive this solution and allow you to maximize the equipment output while minimizing the costs for its maintenance. Note that using such technology also helps you save money you would have lost due to the manufacturing process stopping.

The IoT for the manufacturing industry develops extremely fast with dozens of solutions released for any kind of business. Embracing this technology now can not only give one an edge over the competition. With the high popularity rate of this tech, not using any of these solutions is sure to marginalize the business.

Adam Flamberg is a consultant at DO Supply.

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The manufacturing industry is undergoing many changes. Those specializing in traditional manufacturing are finding it difficult to keep up with the changes. Perhaps the biggest change has been how traditional manufacturing has come under pressure to manage vast amounts of data captured from different sources. Here are some of the reasons the Internet of Things (IoT) can help.

1. KEEPING AN EYE ON SUPPLIERS

Quality control has become easier because IoT helps keep an eye on suppliers. This makes for easier manufacturing processes. Keeping an eye on suppliers is all about looking at all the constituents that the supplier offers. Capturing data about these constituents through IoT helps make for faster data processing and better quality control.

2. MORE PRODUCTIVITY

Thanks to IoT, many manufacturers are now building self-correcting systems. Missing parts are replaced and parts are replenished, giving rise to greater productivity. Since manufacturing industries are looking in particular for ways to boost productivity, there is no way for them to overlook what IoT can do for them. In addition to greater productivity, there is also more convenience since the need for human labor reduces.

3. MAINTAINING SUPPLY LINES

The Internet of Things is expected to help manufacturers stick to lean manufacturing while at the same time helping maintain supply lines. Since lean manufacturing often requires smart management of the supply lines – to ensure that components are never in short supply but there is no overstock – IoT is expected to help resolve many problems. It will help ensure that suppliers located in different regions can be kept in the loop and supply lines can be managed smoothly so that there is no shortage. It will also help reduce waste and optimize the use of resources.

4. UNINTERRUPTED MANUFACTURING PROCESS

Usually, manufacturing is divided into many processes, from sourcing of raw materials to production, transportation and reaching the customer. However, with the Internet of Things, experts envision something extra. The entire process will be smooth and effective. The raw materials will be already marked for production, intended to reach a particular buyer. This is how experts see things play out as IoT advances to new levels.

5. REDUCED COST

As IoT gains more efficiency, manufacturers can expect to see lowered costs. This is one of the primary reasons manufacturing experts are enthusiastic about the role of IoT. It will become easier to track information about products and processes and more automation would help bring about greater efficiency, thus eventually reducing costs. Lowered costs are expected to boost profit margins. If your manufacturing plant has not invested in IoT yet, this might be the right time to start.

6. LAUNCH NEW PRODUCTS

With IoT, studying needs and launching new products becomes easier. There is less jostle and inefficiency than traditional systems. Manufacturing is thus one of the key areas where you can expect a lot of improvement, thanks to the Internet of Things.

7. INTEGRATING OFFLINE AND ONLINE PROCESSES

Traditionally data and manufacturing have been treated as separate entities. However, in manufacturing industries where IoT advances, this is expected to change. As products begin to carry information about them, it becomes easier to assign a processing and logistics path to them. This is why it becomes critical to involve IoT in your manufacturing plant.

8. CONNECTED TO THE CONSUMER

Products are, in the end, manufactured to suit the consumer. Thanks to IoT, it becomes easier to stay connected to the consumer and create products that match their requirements. This offers two-way benefits, as the consumer gets the best products and the manufacturing plant is able to manufacture products per exact specification. There are a lot of benefits that manufacturers can expect in the long term, thanks to the Internet of Things.As manufacturing processes undergo change, it becomes imperative for manufacturers to make the most of the coming revolution. Supply chains and logistics will become smoother thanks to the industrial Internet of Things. According to many experts, we are at the cusp of another major revolution that will change not only how things are manufactured but also the market economy. It is a good idea to be prepared for these changes by investing in the right IoT system.

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10 Articles on Manufacturing and IoT

This resource is part of a series of specific topics related to the Internet of Things. To keep receiving these articles, sign up on IoT Central

 

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Guest blog by Kai Goerlich. This post originally appeared here

While discrete manufacturing is used in a diverse range of industries, including automotive, aerospace, defense, construction, industrial machinery, and high tech, all of them face common and tough challenges such as higher resource volatility, more competition, increasing customer expectations, and shorter innovation cycles.

According to a study by a Roland Berger (see chart), product complexity has increased dramatically in the past 15 years. Manufacturers have to cope with two overlapping trends: the variety of products is constantly increasing and has more than doubled in the past 15 years, and, in parallel, product lifecycles have gotten about 25% shorter. These factors are putting an increasing pressure on margins, on supply and procurement systems, and on overall business models. According to Roland Berger, managing this complexity could reduce costs by roughly 3% – and certainly digitization can help improve this margin.

The threats and potentials of digitization

Adapting to the age of hyperconnectivity is a matter of life and death for the majority of companies, according to a study by the Economist Intelligence Unit. More than half of enterprises feel very strong competitive pressure from digital offerings by their traditional competition, established companies using digital to enter their market, and digital startups. Certainly, the competition is not waiting, and neither will today’s well-informed digital customers, who want more choice, better customization, and more information around the buying process. While digitization might add another disruptive dimension to an already rising complexity, discrete manufacturers are seeking the benefits of digitization. They are already proactively exploring the use of the IoT to better connect their supply chains, assets, and products, according to an IDC white paper, The Internet of Things and Digital Transformation: A Tale of Four Industries, sponsored by SAP.

Most manufacturers start with less complex projects, such as enhanced visibility or tracking, and progress to more sophisticated processes that require automated or predictive workflows, according to IDC. The findings of the study suggest that companies should start their IoT projects with the overarching goal of a live business operation already in mind. By combining three IoT use cases for manufacturing, i.e. connecting products, creating a connected shop floor with customization, and extending digital business models (see chart), companies will create a competitive business operation that fully exploits the digital opportunities.

Connecting products to improve innovation

Using IoT for innovation is a highly underestimated potential of digitization. A significant percentage of new products fail, and the associated R&D and marketing costs are lost. Customers already expect their products to come with a certain degree of interactivity and this demand will certainly grow in the future. According some estimates on the adoption of connected technology by consumers, the ratio of connected and interactive products will rise to approximately 20% on average by 2020, according to Forbes. This is a conservative estimate, and in some segments the ratio might increase much faster.

By digitizing current products and launching fully digitized ones, manufacturers can significantly reduce the risk of new product failures, as IoT-based products will enable them to monitor the actual use and performance of their products, get live feedback from their customers, and adopt future product innovation. IDC expects that by 2017, 60% of global manufacturers will use IoT to sense data from connected products and analyze that data to optimize the product portfolios, performance, and manufacturing processes. Similarly, the integration of IT assets and information with operational technology in the plant and the supply chain is also on the roadmap, if not already started.

Connecting the shop floor

Digitization offers the possibility to oversee every step in the manufacturing process, from customer demand, through production, and across the complete supply chain. The IDC study identified two IoT use cases – strategic asset management and customer experience – that seem to be very attractive for discrete manufacturing.

1. Strategic asset management

Manufacturers should start to digitize all of their assets in the production process and use IoT-based preventive and predictive maintenance scenarios in the plant and supply chain to reduce downtime and improve utilization. Using the information generated from digitization and IoT, businesses can evaluate use patterns and maintenance routines of their inventory and assets and optimize operations. Fixed assets can account for as much as one-third of all operating costs, so under today’s cost pressures a digital asset management surely matters. To fully use the potential of IoT and the real-time information gathered from assets, devices, and machines, companies need to ramp up their analytical and decision-making capabilities. Anecdotally, companies report that IoT use cases (such as remote maintenance) changed the way they thought about data and got them thinking significantly differently about information and insights.

2. Customization for customer experience

Demand for more choice, flexibility, and customized products is growing fast and estimated to be 15% of all products by 2020, according to MIT Smart Customization Group. Depending on size, material, and complexity, that percentage might be significantly higher. However complex the challenge for manufacturers might be, connected production in real-time is the basis, and it needs the right data from production capabilities, supply, equipment, and workforce, combined with all customer preferences. Getting the customer into the customization and production process is increasingly important for an improved customer experience, so IoT should be used to connect the products and, with it, the customer. This will not only give companies valuable data about user preferences and ideas for product innovation and improvements, but it will allow them to plan the customization of products much more efficiently.

Digitally enhanced business models

Digitization is by now a synonym for disruption. According to a study by the Economist Intelligence Unit, 60% of companies think that digitization is the biggest risk they face. More than half of companies feel competitive pressure from digital offerings by their traditional competition and digital startups. As IDC found, discrete manufacturers are already actively exploring the IoT opportunities, so the change is already underway.

As we pointed out previously, the customer experience of choosing and buying a product is increasingly important, but it does not stop there. IoT-connected products will get the customer into an ongoing interaction with the product vendor and/or retailer, enhancing the buying and use experience. Moreover, companies can use this connection to expand their business models. In its study, IDC mentions a wider range of ideas that manufacturers already explore, such as remote maintenance, refill and replenishment, contracting, product performance, training, and location-based services. While they may not be applicable for all companies, they show the wide range of possibilities and opportunities. Digitization may be a threat for some traditional business models and companies, but it offers huge potentials for those who focus on the customer experience.

Creating a live business operation

The huge potential that IoT offers is less the physical connection of things, machines, and devices, and more the opportunity to create a live business operation based on an advanced data strategy and analytics. While all aspects of IoT have large innovation opportunities on their own, the combination of connected products, customization, and digitally expanded business models promises the biggest benefits for discrete manufacturers. Thus any IoT strategy – wherever it starts – should be created with a larger digitization goal in mind.

Conclusion

  • Connecting products and strategic asset management has big potentials for discrete industries.
  • The combination of connected products, customization, and digitally expanded business models promises the biggest benefits.
  • Companies should create a live business operation with advanced data and analytical skills to use the full potential of IoT.

For more details and information, please read IDC’s IoT whitepaper IoT and Digital Transformation: A Tale of Four Industries and look for future IoT papers that delve deeper into the IDC study’s findings.

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New IOT Trends in Manufacturing

Trends That Will Shape the Internet of Things in 2016

In a relatively short time, The Internet of Things (IoT) has grown from a niche technology in the global market, into a widely embraced phenomenon. Rapid advancements in IP technologies, as well as the IoT devices and industries that they’re used in, mean that devices are now able to be integrated in more ways than ever before. One particular sector that has strongly embraced IoT adoption, is the manufacturing industry.

Offering a range of benefits, IoT will be a major force in shaping manufacturing throughout 2016 and beyond.

Manufacturers Will Become Increasingly Software Centric

Manufacturing hardware, processes, and even operational processes, will become more reliant on software. Whether referring to the embedded apps and software within devices, or the server-side software that controls machines and automations, manufacturers that adopt IoT as part of their strategy will need to focus investment and knowledge building around software. Not only will this affect the depth and complexity of their IoT integration, but it will also mean that these manufacturers will need to procure new talent or upskill existing staff with specific IoT skillsets in IT.

Costs will Decrease, Increasing Adoption

Cost has been a significant factor for manufacturers who have been hesitant to adopt widespread IoT systems in manufacturing. As IoT technologies continue to mature, implementation costs will decrease. Because IoT provides significant benefits in operational efficiency, price shrinkages will influence manufacturers who were previously undecided on the financial benefits of IoT.

RFID Will Be a Major Technology in Manufacturing

Research firm Markets and Markets, has projected that RFID will be widely adopted in the manufacturing sector. There are a number of factors contributing to this, including the ability to use passive RFID chips in manufacturing, with little additional cost. NFC is expected to experience the highest level of growth. Manufacturers will be able to benefit from RFID tracking on the production floor, but also in packaging and distribution.

In case studies, such as the use of RFID to track luggage at Hong Kong International Airport, RFID tags have been shown to provide read rates of up to 97%, compared to 80% for optically read barcode tags.

North America will Lead IoT use in Manufacturing

Although China and the United States have often swapped positions at the top spot of total manufacturing output, it is the U.S. that will lead IoT implementation in manufacturing for 2016. This is mostly due to high automation, frequent technological advancements, and a history of early-adoption of new technologies. This contrasts greatly with China, where output is high, but production methods differ, favoring low-cost labor in place of high levels of automation.

This increased trend in IoT adoption is expected to benefit other areas of North American industry, such as the R&D and software sectors. Cisco Systems, Microsoft, Intel, IBM, and General Electric are all U.S. based multinationals that lead in IoT sensor and software development. German companies SAP SE, Siemens, and Bosch, are also IoT leaders that will benefit from increased demand for IoT solutions in manufacturing.

 

 

Bottom Line – IoT Shows no Signs of Slowing Down

Regardless of initial reluctance to adopt, and increasing security concerns surrounding IoT devices, the industry as a whole is showing no signs of slowing down. Firms like Gartner research have predicted that there will be almost 7 billion sensors in use by the end of 2016, and that enterprise level software spend will total over $860bn, globally.

Manufacturers will realize more efficient operations which stretch from administration, to production floors, and even distribution. The internet of things doesn’t represent a flawless group of technologies, but it is set to be a significant aspect of the future of high tech manufacturing, no matter which way you look at it.

For more information on IOT Recruiting please check out our new websitewww.internetofthingsrecruiting.com  

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