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How Manufacturers Use IoT to improve Operational Efficiency

One of the key factors separating the leaders from the laggards in manufacturing is improving production efficiency and implementing cost-effective measures. To keep up, most manufacturers today are leveraging the Internet of Things (IoT), particularly the Industrial Internet of Things (IIoT). According to a recent study, manufacturers implementing Industrial IoT have gained an 82% increase in efficiency and 49% fewer defects!

A good example is General Electric, a company that is projected to generate about $19 trillion in profits and cost savings within the next five years as a result of implementing IoT.

In manufacturing, IoT is an ecosystem of connected production equipment, supply chain, inventory, quality assurance, maintenance, and business operations. Connected, these systems can send, receive and collate data over a wireless network without human intervention. In today’s world, IoT has endless potential as the world edges towards digitization. But, how exactly do manufacturers use IoT with respect to operational efficiency

Let's find out!

Production Quality

IIoT implementation can significantly help optimize production quality. Several costs can be reduced by integrating IoT devices into production machinery. These include sensors and other instrumentation.

Incorporating IoT into all parts of the production cycle provides real-time data that can be leveraged to help the company maximize its potential. The availability of data and interconnected devices allows the company to monitor and improve the plant’s operation. With such connectivity, companies can enjoy lower production expenses which translate into increased profits.

Reduce Machine Downtime

Besides improving production quality, IoT increases operational efficiency by reducing machinery breakdown. It facilitates quick detection, helping manufacturers to stay ahead of possible system and equipment failure. 

Without IoT in everyday production processes, factory supervisors are forced to do regular equipment checks. This is not only time-consuming but financially taxing as well. Routine maintenance and fixes are one of the major culprits slowing down production. According to a recent ITIC survey 98% of companies report losing roughly around $100,000 per hour from machine downtime. 33% of these businesses reported as much as $1million to $5million lost per hour from downtime. 

As a rule of thumb, these organizations will not shoulder these costs but rather transfer it to the sale price. And this comes with additional complications:

  • It puts enterprises in a tight corner when setting the product's price, as they must also consider what the market expectation is before coming up with an exact figure.
  • It could also influence sales. Despite brand loyalty, brands still have to be price competitive. 

From the above examples, we can see how the effects of machine downtime are echoed throughout business operations. For this reason, let’s look at how IIoT can help reduce machine downtime:

  • Tracking to stave off operational performance degradation: 

IoT enables manufacturers or factory supervisors to track products during manufacturing. As a result, defects or irregularities can easily be spotted and thus avoided. 

Imagine a scenario where production machinery is not connected to device sensors, leading to the sale of defective products. In such a case, the company has to recall that line immediately after spotting the defect - or worse - being informed by your customers. Also, you can imagine a situation where a product contains impurities. The manufacturing company will be forced to do away with the entire batch. That's a waste of time, money, and resources.

  • Maintenance of equipment

Thanks to IIoT, organizations can be assured of increased operational efficiencies within plants. Tracking helps evaluate the performance of machinery, considering that the operational condition of the equipment is crucial in determining the quality of the product. Ignoring the condition of machinery can also be detrimental to the overall production process, create bottle-necks and pose a challenge to the delivery of high-quality products. 

Maximum Transparency

IIoT ensures maximum transparency and accountability in manufacturing. As such, employees can easily access data and monitor processes at each production stage. That way, with a swipe of a finger or a few clicks, production supervisors can also quickly check the quality of the products without the need to look at individual batches.

Apart from assessing the product quality, IIoT allows transparency in logistics. Some clients demand transparency during the production, disbursement, and transportation stages. By using trackers in the transportation of products, for example, the client and manufacturer know the exact location of the cargo, giving them peace of mind.

Supply Chain Management

Supply chain management is one of the beneficiaries of IoT. The Internet of Things helps firms to streamline operational efficiency across multiple sectors. 

How you may wonder? 

IIoT allows companies to not only track but also authenticate goods using technology. 

  • How many trucks have been loaded? 

  • How many goods in terms of price and quantity have been loaded? 

  • To whom the goods were sent?

  • What is the predicted time of arrival to the destination? 

  • What remains in the inventory? 

  • What is the condition of the remaining goods? 

Thanks to IoT, entrepreneurs can answer all the above questions.

IIoT can single-handedly transform a company's supply chain management when utilized appropriately! Here’s how:

Identify delivery issues or complications: Incorporating IoT into the supply chain helps identify delivery issues earlier on, allowing the manufacturer to come up with appropriate solutions before the situation gets out of hand. 

For example, installing tracking devices on delivery trucks allows the sending of real-time data to its parent's company's location. That way, a supply chain manager can detect issues like robberies or accidents that could delay the delivery and distribution of products.

Once detected, the company can take immediate action. In case of a robbery, they can call law enforcement in the area. If the truck has broken down, they can send out another truck immediately to ensure the goods still reach the client on time. 

Optimal storage and quality management: IIoT also ensures optimal storage in the warehouse, as supervisors can ascertain the current condition of the inventory. Considering that certain products such as chemicals or food need special environments, thanks to IoT, employees can assess the storage conditions of these raw materials to help maintain quality. These devices monitor humidity levels, and other atmospheric factors,  and can even sound alarms in the case of irregularities.

Offer reassurances: Real-time data offers reassurance to stakeholders. A wholesaler complaining of late delivery? All that needs to be done is to check the individual tracking details of a shipment. 

An excellent example of this is delivery companies providing a shipment tracking ID to customers, assuring them that their package is being transported. The company doesn't have to spend hours convincing the customer of this. The individual can do it all by themselves by logging into the personalized dashboard provided, improving efficiency.

But with every advantage comes a disadvantage. Yes, IIoT makes the future of business efficiency brighter. As a result, organizations leverage these operational efficiencies to reduce costs

However, there are problems most companies are likely to face from adopting IoT during manufacturing. Let's take a look at some of them.

Problems of Adoption of IoT in Manufacturing

Expensive Sensors: We have been looking at how IoT inherently reduces cost, but there is a twist. Sensors that enable IoT are ridiculously expensive, given their functionality. As much as they ensure efficiency, small business owners operating on a shoestring budget might not be able to afford them.

Hardware/Software Compatibility: 

Each company has its unique way of handling business processes. To ensure efficiency, they will adopt hardware and software best suited for their business model. In some cases, when businesses are looking to incorporate IoT into their operations, they might face compatibility challenges. 

Considering that some companies still use ‘old-school’ systems, installing IoT devices may be a problem because the hardware might not be able to support these gadgets. As such, entrepreneurs need to determine how the desired technology fits into their existing system. They must also consider its future needs and growth goals, to ensure they invest in devices with the right scalability.

Data Leaks:  This is the hallmark of IoT. IIoT is susceptible to leaks. Not only with respect to the manufacturing process but also consumer data which has been incorporated into the production process. A simple ransomware demand can decapitate the production process for days! 

Additionally, a data breach could lead to the loss of trade secrets. Once competitors gain such data, they can use them to produce better products and do better business dealing, gaining a competitive advantage. 

To ensure the safety of such sensitive information, a company needs to pay for premium security services. As such, the incorporation of IoT demands extra costs like the installation of firewalls. 

A small circle of IoT specialists: Besides all the costs of incorporating IIoT into the manufacturing process, there is the problem of incompetency. Unfortunately, not everyone is technologically savvy. For these reasons, there may be limited expertise to help companies monitor and maintain IoT devices to ensure optimal functionality.

Bottom Line

IIoT cuts costs and enhances production efficiency. However, installation and maintenance costs might be high. Business organizations must consider all the above factors before forging ahead to enjoy the many benefits of the Industrial Internet of Things. Analyze potential costs over their potential returns. If the result is positive, then why not get on board with IoT?



Companies use IoT devices to connect machinery and systems. These gadgets come in handy in monitoring inventory, storage of raw production materials and in the logistics department.

  • Smart packaging
  • Quality control
  • Inventory management
  • Safety in manufacturing operations
  • Smart metering, among others.

IoT applications must have open-source coding, connectivity, and scalability. Besides these particular features, IoT components include devices/sensors, data processing, connectivity, and a user interface.

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