Smart Factory

A Smart Factory is a highly-integrated digital ecosystem that operates using smart manufacturing tools in the IIoT like data analysis and connected technologies. It is emblematic of Industry 4.0 and the future of lean manufacturing.

Key Takeaways

  • Flexible, highly automated, fully integrated digital factory

  • Connected tech with Industry 4.0 and IIoT

  • Continuous improvement (kaizen) through data collection

  • Optimized, lean, and often agile

Difference Between Smart Factory and Smart Manufacturing

Smart manufacturing is the technology and best practices used by a Smart Factory. The Smart Factory is a facility that takes smart manufacturing techniques to the next level through a cohesive and integrated production process.

They are both similar terms, especially within the context of modern industry. To remember the difference, think of smart manufacturing as the practice, and the Smart Factory as the place where practicing occurs.

For example, utilizing sensors for assessing product specifications is a smart manufacturing technique, and a production site that integrates sensors in its IIoT architecture would be a Smart Factory.

Disadvantages of Smart Factories

Smart Factories are the future of manufacturing, but there are some difficulties in implementing smart manufacturing that could turn into potential problems if you are not careful.

  • Require higher cybersecurity standards
  • Require full collaboration between IT and OT
  • Potentially costly depending on machinery and tech stack
  • Possibility of collecting data with no clear plan for analysis
  • Increasing reliance on digital skills requires incremental upskilling of workforce

These points reveal that developing a Smart Factory without a clear plan and framework could sabotage the digital transformation. These disadvantages are therefore hypothetical and not inevitable, especially if you are careful about implementing smart manufacturing practices.

Advantages of Smart Factories

The benefits of Smart Factories are numerous and even more are being discovered today as IoT devices and other technologies are further developed.

  • Optimized efficiency and productivity
  • Reduced waste (downtimes, materials excess, inventory)
  • Better quality control and proactive quality planning throughout production
  • Predictive capabilities for maintenance and demand forecasting
  • Increased workflow visibility for troubleshooting
  • Safer and less repetitive work for floor employees
  • Increased energy efficiency for net zero emissions goals

The best thing is that the more integrated your Smart Factory becomes, the more you’ll reap the benefits of a flexible digital ecosystem. There’s no limit to what you can improve in your production processes with targeted data acquisition and actionable insights.

worker oversees data collection of machinery within Smart Factory

How to Become a Smart Factory

There is no one right or wrong path to becoming a Smart Factory. However, there are key elements of Smart Factories that are crucial to its success and are found across the board. Here are components of the archetypical Smart Factory:

The Where: Robust Information Architecture

No Smart Factory would be complete without a robust information architecture to provide the foundation for connected manufacturing technology. Whether using cloud computing or on premises capabilities, Smart Factories are successful when in full operative control of their IT decisions. Most Smart Factories use a combination of the two in order to provide opportunities for scalability in their production lines as well as to lessen financial costs.

This foundation sets the stage for tuning into the Industrial Internet of Things (IIoT). The IIoT is a network of IoT devices like sensors and automated equipment that collect data for further analysis. Without a good understanding and structuring of your information technologies, you will not be able to benefit from the IIoT’s near-infinite capabilities.

The Why: Smart Manufacturing Methodologies

The concept of lean manufacturing is fairly universally practiced among Smart Factories in the modern age of manufacturing. The basics of lean are minimizing unnecessary production wastes and optimizing workflows.

Going further into the why, or purpose behind Smart manufacturing, Smart Factories often follow additional methodologies like Flexible Manufacturing Systems (FMS) or Total Quality Management (TQM). They may employ a combination of batch processing and continuous workflows, depending on the overall philosophy of the company and the means by which leadership guides operations and overall workflow.

Smart Factories are led by manufacturers who understand and draw from various elements of these guiding principles for long-term production strategies.

The What: Connected Factory Technology

Connected technologies are what Smart Factories have physically (hardware) or virtually (software) contributing to production by collecting data or organizing workflow. This includes things like Smart Forms, Business Intelligence software, and cyber-physical systems themselves.

Some Smart Factories find immeasurable benefits from using automated IoT sensors; others may prefer wearables to ensure connected workers, or a network of deployed programmable logic controllers.

The most important thing about what tech Smart Factories depend on is that there is never just “one” thing. True Smart Factories rely upon networks of these devices and softwares interacting with each other to paint a cohesive picture of operations. What’s critical is that Smart Factories integrate these capabilities using analytics.

The When: Integrated Analytics

The final critical component of Smart Factories is big data analytics, or the when – the application and implementation of insights revealed from data you’ve collected using connected technologies at work on the shop floor.

Examples of data analytics are statistical process control (SPC), overall equipment effectiveness (OEE) measurements, or Pareto charts and analyses. It’s not enough to collect data, it must be sorted, analyzed, and used.

This is why data-driven insight is the when – it identifies areas within the production process that can be improved and at what time. For example, predictive models can scrape data from connected Smart Factory machinery and indicate optimized scheduling for push-pull manufacturing updates.

Examples of Smart Factories

You can find Smart Factories in almost every industry of manufacturing, and you may not recognize them right away because a lot of the data capturing and digitization processes are “underneath the hood” of the system.

Smart Factories often share similar features but they can present in distinct ways. Nonetheless, here are some tangible examples of modern Smart Factories for easy reference:

worker uses digital work instructions to assess problem

1. Mitsubishi Electric

Mitsubishi Electric’s Smart Factory transformation began with tossing paper work instructions and replacing them with interactive and integrated visual work instructions.

Smart Forms increase traceability in the production life cycle. This incorporation of quality check forms with standardized digital work instructions goes farther than the factory floor to ensure satisfactory production: in the rare case where a client receives a damaged product, Mitsubishi Electric can refer back to prior quality check forms that include pictures and measurements of the product before it leaves the warehouse. Mitsubishi continues to seek innovative ways to pursue continuous improvement. The next step in their path to Smart Factory integration is to implement VKS’ ToolConnect feature. This function ensures proper assembly by communicating with intelligent torque tools using open protocol. For example, for every screw or bolt applied in the assembly process, ToolConnect measures the performed action and verifies that the proper torque, angle, and thread count are achieved. After the platform verifies that the correct figures have been met, the work instruction automatically moves to the next step of the process, keeping the operator in sync with the work instructions in real time.

Read more about how Mitsubishi Electric became more environmentally sustainable in its Smart Factory pursuit.

2. Valve Research

Valve Research reinvented its production processes by digitizing its assembly instructions along with capturing data on parts.

One of the processes that is key to future workflow planning is analyzing the data that VKS sends automatically to supervisors. Ingleton explains, ‘It tells me what happened in detail for specific jobs. We also have a lot of forms that automatically send me information daily about the processes at work, like electrical functioning, for example. Most of the data we collect is related to process improvement.’ This aggregated data allows Ingleton to test changes in the assembly process with greater precision in timing and measurements.

Read more about how Valve standardized assembly procedures using VKS software.


KONE Coal Valley is fueling its ERP system towards Smart Factory standards by integrating interactive work instructions with improved workflows.

Guidebooks outline best practices, safety protocols, and the required steps for every action. The only things that are different are material lengths and some specifications. In light of this, KONE Coal Valley links drawings, engineering plans, and supplemental materials within the work instructions. This allows operators to see the proper steps and quickly review specifications within one purpose-built system. KONE updates their processes and documents with one click. Now, their paperless format is easy to track, update, and improve. This comes in handy for a high-mix low-volume (HMLV) manufacturer.

Read more about how KONE cut its production time by 75% by pursuing Smart Factory tools.

4. Schneider Electric

Using APIs and real-time data collection, Schneider Electric has captured critical tribal knowledge and standardized it for the shop floor.

Since incorporating VKS into their operation, Schneider Electric Dinel in Gournay has benefited from increased standardization, improved sustainable practices, and a more independent and resilient workforce. As a leading manufacturer of sensors and incredible solutions that facilitate data centers, smart homes, and sustainable buildings, Schneider Electric is committed to empowering people to make the most of their energy and resources around the world.

Read more about how Schneider Electric has increased productivity by utilizing video demonstrations.

The Future of Smart Factories

The current age of manufacturing is Industry 4.0. Some industry experts suspect we are well on our way to Industry 5.0 with the contributions of artificial intelligence and robotics. Industry 5.0 focuses on the continued integration between humans and computers within manufacturing.

This human-machine interaction is only developing further with the pursuit of digital skills sharing and upskilling being incentivized by companies.

As automation and AI capabilities get better and better, big data will end up playing a bigger role within the Smart Factory to the benefit of manufacturers. That’s why it’s never too late to begin your digital transformation.

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