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Smart Factory Insights: Differentiation, Community, and Composability

Are progress and evolution in the industry driven by collective hive minds, business opportunity, and thought leadership, or is it just through random events? I believe it’s all the above. The real question about progress is better related to the strategy of how we balance differentiation with our contribution to common industry goals that bring about business opportunity, and then how we apply that same strategy to the tools and services that we use. Let’s look both internally and externally into how we control and actively reduce risks and threats to our business.

Differentiation
The potential of a manufacturing operation is the sum of its assets and capabilities, including skills, location, size, expertise, and focus, as well as both the positive and negative effects of cumulative experience. Every operation is therefore unique and uses that to differentiate itself as it competes on conditions of quality, price, delivery, reliability, and trustworthiness.

As a business seeks to differentiate, external factors can influence and restrict the business. Success, therefore, rests on the ability to influence these external conditions, which are usually common across peers in the industry. Simply reacting to trends and changes is too passive for companies seeking to succeed and expand, though most of these external issues cannot be directly influenced by a single, average company.

Let’s look at the material supply network. A manufacturer in the U.S. or Europe—encouraged by government support for onshore manufacturing—is inspired by new automation technologies. For them, this is a sustainable business growth opportunity. But reality hits: The needed materials cannot be locally sourced. To access them, the materials must travel halfway around the world and likely from relatively unmanageable partners. Such risk often kills the best of local manufacturing business plans. Giving up is not an option, so how can the manufacturing supply network be motivated to locate onshore?

Historically, to reduce logistics costs and by utilizing “just in time” (JIT), the supply network will follow the customer. Their investment will only be viable once a critical mass of material consumption business is available that spreads their risk to an acceptable level. Local manufacturing, however, must bear the additional costs and risk of remote material sourcing, so it’s challenging for this to happen organically. To expedite this process, trade associations that represent both manufacturing and supply networks must work together. They should encourage local manufacturers to share their broad business plans and intents. Such representation works best with aggregation to the regional and national levels, as trade associations can combine information in a way that protects the privacy and IP of individual companies; potential competitors will effectively be working together.

Community
This need not negatively impact the EMS business model, which competes based on business owners’ material buying power. Localized manufacturing communities collectively drive the volume that reduces supply network relocation risk, whilst still allowing larger companies to negotiate individual, volume-driven pricing. The key point is that these two elements are not mutually exclusive.

Balancing differentiation vs. common goals is relevant to more than the upstream supply network and other external conditions; a similar strategy should be followed internally and downstream. Let’s take an example of a machine vendor looking at their potential customer base. To be successful, the vendor must create machines that meet common requirements, while also supporting any significant residual needs required for different groups of customers, rather than customizing case by case. This allows the development and provision of technologies that support the evolution of the industry.

This is, by far, the most efficient and preferred method of the automation market, other than where specialized, bespoke functional test or mechanical assembly stations are required. It is important that such flexibility is easy for the customer to select, implement, and support, such as the case of an SMT placement machine, where the selection of different conveyor widths, number of stages and lanes, types of heads, feeders, cameras, nozzles etc., are available. The hardware automation market has evolved—and has proved itself in this respect—over hundreds of years. Though differentiated, most manufacturing operational needs, especially in electronics, have a very high degree of commonality, and are satisfied by common automation products.

The same principle should be true for software automation solutions (such as MES), but compared to hardware, the software industry is relatively new and still evolving. We see the same patterns emerging from many software automation providers—including those newly emerging in the industry. They follow immature product architectures that behave like those early, primitive, hardware solutions, and are based on continuously customized and bespoke development.

It is disappointing to see software automation solutions today where the customer is expected to develop bespoke code—including database queries that drive dashboards and reports—as well as some common functionality. It is worse still to see the perceived need in many manufacturers that drive them to develop solutions themselves.

Even the latest, simplistic “app-based platforms” perpetuate this at the low end of the market, which may represent a low initial investment and code development overhead, only to reveal the need for extensive coding, customization, and DIY data modelling after installation. This reveals the lack of value creation built into the solution’s data-model and architecture. Successful manufacturing cannot afford perpetual bespoke customizations from neither hardware nor software vendors, nor by having to do it themselves.

Composability
From a mature software automation solution perspective, differentiation is satisfied through composability—the easy way to tailor operational visibility, control, and data exchange—by simply selecting appropriate options and configuring built-in templates within the solution that meet the required needs. It is crucial that these can be altered at any time to suit multiple, simultaneously changing conditions and use-cases. Composability represents the lowest cost of flexibility, such that businesses can adapt and thrive, and differentiate themselves with the greatest of agility—without the cost and risks associated with customization. The fact that many companies use the same automated machine or software solution does not diminish their differentiation.

We must become smarter about how we approach change in the industry; we must be willing and able to influence conditions around us, as well as differentiate our business. Significant challenges continue to emerge due to evolving world conditions. We cannot afford to waste resources on planet-wide logistics and risk being locked into restrictive practices associated with product volumes expectations, nor to be endlessly customizing our solutions every time some change takes place.

As we look ahead, we see that in some areas we differentiate, while in others we benefit from a collective evolution. In the supply network, we enjoy volume-driven, pricing-based competitive differentiation, while working together to attract local low-risk suppliers. For hardware and software automation solutions, we use off-the-shelf industry hardware with supported options, and composable software automation solutions, eliminating the need for customization and self-coding. It is the best of both worlds.

Let’s all make a change to compete based on differentiation whilst also being respectful and responsible members of our manufacturing industry infrastructure. This will bring confidence to those who would invest in manufacturing reshoring initiatives.

This column originally appeared in the March 2023 issue of SMT007 Magazine.