Cloud manufacturing: A game changer for business or an illusion?

Some of the first research on cloud manufacturing (CM) began as early as 2010, and since then this has only increased substantially. However, although CM promises to improve manufacturers’ efficiency, it has not yet been widely embraced by global manufacturing companies.

Positioned as a key instrument to foster interconnectivity between manufacturing companies, CM has the potential to become an integral part of Industry 4.0. It is defined as an integrated and interconnected virtualized network of manufacturing companies, including its manufacturing capacities and capabilities.

Cloud manufacturing has the potential to become an integral part of Industry 4.0.

Companies can access manufacturing services on demand based on a pay-per-use model. CM is based on technologies such as cloud, social media, IoT and a service-oriented architecture, leveraging the idea that companies of any size can procure high quality services through this platform.

Creating asset-light organizations with CM

According to a recent study by Roland Berger Strategy Consultants (Next Generation Manufacturing, March 2022), 51% of the executives surveyed said that they would like to stop in-house production and concentrate on product development, branding and marketing — thereby allowing them to become asset-light institutions. This opinion is particularly popular among health and consumer companies. Following the example of companies like Apple, organizations are convinced about outsourcing production through CM, especially with their eyes set on the following benefits:

  1. Reduced investment, operational and maintenance costs, because cloud manufacturing services are priced on a pay-per-use basis
  2. Easy access to a variety of manufacturing services that are otherwise not feasible, especially for small and medium-sized companies
  3. Flexibility to meet changing demand and volume by procuring manufacturing services on demand
  4. Scalability, since manufacturing capacities can be expanded without time and capital-intensive investments
  5. Improved focus on product innovation, as manufacturing activities are partly procured through the CM platform

Furthermore, the concept can be expanded to the entire product lifecycle — conceptualization, design, prototyping, engineering and production, providing an opportunity to create a complete ecosystem.

Overcoming obstacles

Although the advantages of CM are striking, its adaptation to the real manufacturing world is still limited to pilot projects. Let’s take a look at the challenges and barriers preventing CM from widespread adoption, and what can be done to counter them.

  1. Predictable and reliable processes: Since CM uses AI and analytics to pick the right services for the manufacturer, the tender process can be abandoned. CM needs to ensure the procured services are delivered on time, in the right quality and to the manufacturers’ specifications.
  2. Security: The interconnectivity of different participants on the CM platform requires sophisticated security concepts and solutions to avoid intrusions by third parties that may endanger the manufacturer’s intellectual property.
  3. Resistance to change: Manufacturing organizations are conservative. Managers want to control manufacturing processes end-to-end to be able to react to incidents in the production process. To realize the advantages of CM, these managers must learn to trust the cloud-based processes as well as the vendors that supply them.
  4. Upskilling and reskilling: Most manufacturing companies still lack the skills to understand and integrate cloud-based tools for the purpose of CM. Existing personnel need to upskill, while the organization needs to focus on recruiting key talent to manage the change successfully.
  5. Time to value: A CM implementation will require multiple pilot projects before a working solution can be implemented. During this time, organizations should focus on quick wins to bridge the time needed to achieve the full ROI of CM.
  6. Lack of partners: Manufacturers must establish a network of qualified partners that are willing to provide the required manufacturing services. This will be time-consuming and will need a driver to bring partners together in a single network. One way to achieve this may be the integration of existing OEM supplier networks, as well as searching for other OEMs with complementary products that are motivating their suppliers and partners to join the network.

Charging ahead

The above-mentioned challenges may take some time to overcome but, in the interim, your organization needs to change its business model and focus on services and products instead of manufacturing activities. This will help free up capacities for product innovation — the major differentiating factor that will drive competitive advantage in the future.

As we can see, although cloud manufacturing has not fully materialized, it is far from being an illusion. In fact, we believe that laying the foundation for CM is a necessity that will help manufacturers perform successfully in their markets, both now and over the long term.

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About Stefan Zimmermann
Global Head of Incubator Portfolio Industry Manufacturing
Stefan Zimmermann is responsible for the innovation and portfolio development in Industry 4.0 at Global Atos B&PS. He aims at helping industrial companies to identify business opportunities enabled by Industry 4.0 during their digital transformation process, embracing the Industry 4.0 framework. He’s got a very strong industrial background, having worked for companies like Siemens (>10 years) and Rheinmetall Group and also comprehensive consulting skills gained when working for Roland Berger & Partner.

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