Why U.S. Manufacturers Need to Increase Their Use of Internet of Things

Boston Consulting Group surveyed over 300 German and U.S. manufacturing executives about their plans for applied digital solutions. Combined, only 17% of German and U.S. manufacturers were, so far, using such technology, including Internet of Things, in their factories. However, while 40% of German companies plan to invest in digital solutions in the future, only a quarter of American executives said they plan to do so. Also, 14% of German manufactures said they were using autonomous robots and assistance systems compared to just 8% of U.S. companies.

The report said that Germany’s enthusiasm for IoT is largely being driven by their need to overcome challenges of high labor costs. “These factor costs encourage companies to strive for greater productivity and, thus, promote faster adoption of new technologies,” the report said.

It’s not surprising that German manufacturers are leading the charge in IoT. An article in InTech Magazine points to Germany’s founding of Industry 4.0 as a holistic automation, business information, and manufacturing execution architecture. German strategies emphasize cooperation between industry and science to promote a closer link between knowledge and skills. The implementation of Industry 4.0 is largely being driven by IoT, including open software platforms, open communications and powerful processors. “Cyber-physical systems” (CPS) help drive interaction between physical architecture and computing, which includes embedded intelligence at all levels.

Thomas Pilz, managing director of automation safety firm Pilz, told IndustryWeek that the “stakes are high” for Western companies to invest in Industry 4.0 technology. Yet Pilz’ U.S. manager Mike Beerman said that many American customers were taking a “wait and see” attitude toward new technologies.

“They want to make sure that this actually makes good business sense,” says Beerman. “Over the course of time, they will be convinced, just as they were with safety. It will take a little more time in the United States… Europe got a little bit of a head start on us.”

The report noted that as firms are starting to relocated factories from Asia to their biggest sales market, manufacturers are increasingly finding cost savings by using things like industrial robots. They also are increasingly turning to wirelessly connected machines to automate processes and improve output. Boston Consulting Group anticipates that global IoT spending will surge from $29 billion in 2015 to $70 billion in 2020.