Key Trends Helping Industry Overcome Digital Transformation Challenges48 min video / 42 minute read
ARC Advisory Group
Digital Transformation is essential for industrial companies to meet the challenges of thriving in an environment where the only certainty is uncertainty. This is driving demand for deploying key technologies to better monitor and control operations, protect against downtime, ensure product fulfillment and high productivity, protect and upskill personnel, enable remote workforces, manage supply chains, and do this while leveraging enhanced cybersecurity architectures. To help industrial companies meet these challenges, this presentation will discuss what are the key technologies and trends that can help these companies accelerate Digital Transformation that enables improved productivity, profitability, agility, reliability, sustainability, resilience and efficiency.
Don Pearson: My name is Don Pearson, Chief Strategy Officer with Inductive Automation, and welcome you to the session. I'll serve as the moderator here. The topic of today's session is “Key Trends Helping Industry Overcome Digital Transformation Challenges.” A brief introduction to Craig. I've had the pleasure of working with Craig for eight years, nine years, something like that since we started going to ARC, so quite a while. Craig is the primary Analyst for many of ARC's automation and financial services clients, focusing on Digital Transformation, automation platforms, edge, OT/IT convergence, production, management, and HMI/SCADA software solutions. Craig holds a BS in Electrical Engineering and an MBA from Northwestern University, and he has a full deck of knowledge and expertise, so please welcome Craig.
Craig Resnick: Thanks. And a full deck on the PowerPoint, so if there's such a thing as death by PowerPoint, you will have that today, but we'll go fast, and certainly if you want a copy of the presentation after the fact, we can certainly make that happen as well if I go a little bit too fast. I think there's no question about a lot of the trends that we've been seeing, and we're gonna certainly spend a lot of these slides are gonna get into deeper dive into some of these trends. But some of the ones that certainly stand out are the whole area of sustainability, ESG, and companies thinking to trying to move in that direction, the whole issue of the shrinking and aging workforce, a lot of the things were also, of course, some of these trends were accelerated by the pandemic, especially remote work, and some of those things that were instigated by the pandemic really haven't come back just yet, either because companies like to work this way or workers like to work this way.
Craig Resnick: So we're certainly seeing that some of these pandemic-started trends that started two and a half years ago certainly begin to remaining with us. But the thing we find is you look at any of your customers' websites or your own websites, and usually it starts off with what are we doing as far as sustainability or ESG, and what kind of metrics do we actually have to be able to show that we're making progress? Are we participating in the circular economy, are we capturing carbon, but what are we doing to kinda help deal with this climate change crisis and become a good corporate citizen?
Craig Resnick: So one of the things that really gets involved with all these trends is what is its impact on sustainability and ESG? So you're gonna certainly see a lot of that as we go forward. There's no question that we're not having, our processes are not getting any less complex and adding a lot of the newest technologies that we have access to, add to that level of complexity, issues with manufacturing, consistency, and what we have especially because of the supply-chain issues, which we'll also talk about, obviously inflation is something that is on everybody's mind, whether it be the consumer's mind, but also certainly in the ability to get raw materials. So if you've been able to procure it on the supply chain, now you have to be able to figure out how you're gonna be able to pay for it and still make that product profitably. Issues with regulations, how agile are you going to be able to be, how responsive you're able to be to market changes and market shifts.
Craig Resnick: So it's really a matter of do you have the right technology and the right solutions to make the process and production improvements that you really need to do?
Craig Resnick: We look around globally, we do have a world where there is a more affluent population, growing middle class. I think what that does is that really needs the fact that we have that combination increases demand for consumer products in economies around the world, and what does that take? It takes certainly a stronger global supply chain, and obviously how do we make sure that supply chain is reliable, how do we make sure that it's traceable so we can actually predict it and plan our manufacturing around it?
Craig Resnick: And what it really means is that for you to be able to execute that, you really need to have smart manufacturing solutions, and a lot of this certainly pertains to some of the solutions that you can get through the whole Ignition portfolio, which is certainly the ability to do real-time visibility or performance, do a lot of predictive and prescriptive analytics to be able to predict what's gonna happen in the future, make sure you have your sustainability and operational resilience initiatives to make sure that you can withstand a loss from the supply chain, or if there's ever any issues regarding weather or climate that might affect and also cause a shutdown, and continuing with the high cost of energy and some of the unpredictability of the supply, are you actually getting down to some of your net zero goals?
Craig Resnick: So, the first step in this Digital Transformation journey is to really begin to think in terms of what are some of those best practices that you have in your facilities, what kinda best practices and technologies are you able to do working with your systems integrators, and as systems integrators, are you able to be able to bring a lot of those solutions to bear for your customers to really begin to help them and accelerate that Digital Transformation journey? And the one thing we'll talk a little bit about later is that it's not only an issue of technical challenges, but it's also cultural challenges, because even if the plant has signed off on procuring the technology, do you have, from a culture perspective, are the employees willing to embrace it to make it effective?
Craig Resnick: But the bottom line is that you really have to have smart manufacturing technologies if you really wanna help accelerate your Digital Transformation to maintain your competitiveness. Now the one thing, of course, that this does for you is it helps you having some of these latest technologies, such as which we'll talk a little bit about later, like augmented reality and virtual reality, is actually attractive to bring a new workforce in because it actually shows them that they can use some of the tools in manufacturing that they might be more familiar with using with gaming, for example, especially with a Gen Z and a millennial workforce.
Craig Resnick: With the pandemic began to push people to remote work environments, having people spread out throughout the world and knowledge centers or centers of excellence. Do you have the right collaboration tools that it takes to be more efficient and be able to take those remote experts from any part of the planet to be able to execute and help people at facilities around the world? And what do you do to reduce complexity? We'll talk a lot about IT/OT convergence. But that adds that expertise but also adds another level of complexity. So what are you able to do with sometimes a reduced workforce or a new workforce to do a lot of knowledge capture so you can provide that information to the new employees to help them do their job? And we'll talk a lot about that also in a little while. I think the idea though is do you have the real-time visibility tools? Do you have the information and monitoring tools?
Craig Resnick: But the thing we find with the new workforce is, sometimes the workers come in and because of that lack of experience, they don't really, you can certainly, whether you try to train them or show them YouTube videos, but the idea is they really need that tools to go through their job, step by step, things that help them manage their workflow and give them the step-by-step instructions that they need. And the idea is that, so now you can take somebody who doesn't have that level of experience and make them productive as soon as possible. But the one thing that we find is that having these workforce tools is essential. And many times, we'll also talk about this a little bit later, is that using things like augmented reality really help with this workforce guide as we go along.
Craig Resnick: The other issue is the whole issue of the supply chain. Because now you're in a situation where if you don't have the material, no matter what the... Most companies that we deal with don't have a demand problem. They have a supply problem. They can't make as much material as their company is able to sell. So the idea is what can we do to have real-time supply-chain solutions? And it's funny, in the past you never associated the word “real-time” with supply chain, but right now we're finding is we're looking for these kind of tools that really help be able to predict what's gonna come in the door, schedule manufacturing as a result of what's coming in. And we're a little later when we talk about digital thread, sometimes even be able to make changes in the design of the product, from the CAD and the PLM operations to be able to adjust the product to be able to utilize these new materials that have been procured based on having the difficulty of procuring the supply chain.
Craig Resnick: And how we do that, is what we call as the digital thread, where actually you're connecting things from design and build operation, maintain and be able to put all this software together so you're now able to make the best decisions possible based on what material you're able to procure and be able to change the design of the product if needed, change the 61131 code and the PLC if needed based on the new material. But the idea is that if you don't have this level of connection, you can't not only take advantage of this real-time supply-chain tools. So having this connection in this digital thread is really, really essential as part of any sort of Digital Transformation process.
Craig Resnick: So what does that do for you? You know, it certainly helps you also to, from reducing energy and sustainability and moving onto net zero. It allows you to tie together the augmented reality and virtual reality and be able to save more information into that's already been analyzed into historians. So you can leverage it for artificial intelligence and machine learning later. Simplify complex processes, leveraging things like simulation technology to, in digital twins to be able to predict what's gonna happen before you actually deploy it and implement it.
Craig Resnick: So that something that's tying all this together is really essential to be able to making sure that you're able to leverage all these technologies, because if they're all islands, it's really not gonna do you very, very much good as far as your productivity and profitability.
Craig Resnick: So, to really have this modern digital infrastructure, we always tell people we're working with our clients is, “You have to be more proactive. You're gonna have to be able to…” One of the things that we get things and catch problems before they occur. You still wanna leverage certainly all your HMI and SCADA products. Certainly like MES products like you have certainly with Ignition, but you really have to take more of a proactive approach rather than a reactive approach. You always wanna move to that single pane of glass. So as you're getting to IT/OT convergence, which as I said we'll talk a little bit about, in more detail later, but that idea is you wanna make sure you have that one visualization platform so you can look at what's going on on the floor as well as what's going on in the production management space and making sure you're doing this on systems that are redundant.
Craig Resnick: And as you're moving down the road, if people do wanna move to SaaS and subscription type of models that you're able to get them there, but with IT/OT convergence, you're really able to be in this position where you can now take the best of all worlds. And we'll get into a little bit more detail about that later. But the idea is that take the advantages of what IT brings with their expertise, take advantage of what OT knows regarding the factory floor and put it all together. And obviously Ignition is a really great product and a great solution to be able to help with IT/OT convergence.
Craig Resnick: So one of the things that we try to do if we're trying to, with the whole issue of the questions you want to ask as far as data is concerned, we wanna make sure, is your data secure? Can you make sure the data can... Is that you have the right protection to make sure to the best of your ability that it's not tampered with. Certainly thinking in terms of cybersecurity, you want to be able to, again, is that data helping you do predictive or prescriptive type of analytics to make sure you can capture problems beforehand, before the problem occurs?
Craig Resnick: Is it something that's scalable? You don't want to create... You make that investment and then as your application grows, can you easily scale it without having to do full rip and replace? And then thinking in terms of backups and redundancy, because obviously the greatest sin in manufacturing is unscheduled downtime. How do you make sure you have the hardware and the software systems that are available to make sure that does not happen? Now I'm gonna get into some of the trends that we certainly spend a lot of time trying to forecast. And, I think it's one of those things where, again, we shifted in terms from, trying to make companies purely more productive to hopefully do a good job meeting customer demand, to being more of, being able to have the fact that with demand so exceeds supply, especially in certain industries where, that, whether it be because they've had supply-chain problems with semiconductors in the automotive industry.
Craig Resnick: So you're gonna be in a position that a lot of these trends are really designed to kind of figure out how do we live in this world where supply chain is often our biggest barrier to success? And, so one of the things that we're doing is, we're kind of driving all this all... Leveraging all this technology and trying to increase productivity and upskill personnel. But at the same time, we still can't forget if I wanna say I've read some stuff from our own research that about 50% of all companies have had a major hack. And so what are we able to do to kind of thinking in terms of trying to always stay one step ahead from a cybersecurity perspective to kind of keep all this stuff tied together?
Craig Resnick: So how do you do that at the same time, trying to advance with your Digital Transformation? How do you do that by being able to establish that digital thread that's required so all this software can talk together? So you really have to have this whole new method of implementing these projects. And certainly as systems integrators, we're certainly living that everyday. Some of the things that we've been seeing, most of coming maybe going into this year was the whole area of where everybody's kind of moving on their IT/OT convergence journey. Some people have a long ways to go and other people have done a pretty good job. And we go to some companies, the IT and OT departments where they've done a good job with IT/OT convergence, it almost looks like it's fused together.
Craig Resnick: We see that's something that's really gonna be taking hold. At one time, operational resilience was never really like a key corporate objective, but now it's like how, again, how do we avoid to make sure we’re resilient against supply-chain issues, geopolitical issues, climate change issues, what can we do to make sure our plants aren't gonna get shut down? When the pandemic came and we moved to remote operations, we saw cases of companies that never will always would tell us, “Our operations will never be remote.” Then the pandemic came, they moved the remote and interestingly enough, they're not going back. And I don't know if you certainly as you see that either in your own facilities or as systems integrators, you see that in a lot of your projects. And one of the other things we're starting to see is, more and more adoption of autonomous operations.
Craig Resnick: Now, this isn't really the idea to have lights out plants. The idea is to have certain applications that either due to their physical location or the hazards of the job or the sometimes of the job that can be just very repetitive and very error prone for humans, leveraging and trying to move some of those and to become autonomous. And then the idea is looking at one time we would think of edge. Edge was something we would think at the IT level, but now we're looking at it at the OT level. And what we're seeing is that is really, we call that like the real, the local version of a real-time cloud. And we, that's where we see a lot of applications that are gonna be, the analytics running at the edge.
Craig Resnick: And this is something that we really see going forward is, and companies having this full edge-to-cloud hybrid strategy. This is something that, we're certainly seeing, as we look a little bit forward what we're trying to see is almost the metaization of the HMI world, really the integration of things like augmented reality and virtual reality tied together with some of the traditional HMI solutions. Mainly what we find is for maintenance people, and I'll go into some detail on some of these trends in a little while, again, the adding that real-time element to supply chain as we've talked about, we've also started to see a little bit of a convergence with artificial intelligence and IoT and kind of bring, we'll also dive into that a little bit later, with the smart safety solutions, just seeing the fact that, we're beginning to see a lot of the things, the intelligence embedded, these aren't just, the safety solutions aren't just redundant protection backup, it's really putting intelligence into things.
Craig Resnick: So there's, so we've gone well beyond the E-stop, shall we say, and actually the integration of things like virtual commissioning technology along with digital twins. So, just to get into a little bit more detail, we really see this as being important with this metavisualization is we got people doing a lot of they maybe have dual roles. They're going from the control room to the factory floor. And some of those people don't have necessarily that experience, especially for maintenance. So by actually, doing inlaid templates of augmented reality and letting them use that on their tablet. As they're walking through the factory floor, that really helps them do a quicker job with diagnostics and maintenance. And certainly, being able to click on the QR code and get your draw the drawings loaded down and be able to kind of make the necessary changes and make these employees that don't necessarily have the experience, but actually make them, you know, make them far more efficient. We're certainly seeing that even in areas like with PLM and putting together some of the production management and MES and field service management. This is something I think looking forward, you're gonna start to see more metaization of HMI.
Craig Resnick: We're seeing is this whole real-time supply-chain solutions. The idea here is, again, it can't be accomplished without that digital thread, is how do you now be able to say, whether it be because of a geopolitical issue, we've now lost access to a certain raw material in a certain country. Now how do I procure it? Now that I've been able to procure it, I now have to put that into my production forecast. And now that I do that, what type of changes do I need to make again, in the design of the product, the operations, the manufacturer of the product based on this new raw material?
Craig Resnick: So this is something that is really gonna become much, much more pervasive as we go forward. And what we mean by artificial intelligence and IoT, it's really being able to take that, leverage all that data that we are getting from all these new and additional sensing technology that we now have in these assets. And let's say for example, we take a gearbox where we've had a lot of issues with failure because of shock or vibration or what have you. How do I now take that data and by applying artificial intelligence to it, be able to predict when is that next downtime gonna be? And now when do I need to maybe do a schedule downtime or schedule parts or repair to be able to come in and make those changes? This is what you're really gonna see more and more with IIoT.
Craig Resnick: And then we get into what I call again, with the smart safety is, it's no longer just good enough to have the E-stops and safety mats and light curtains. How do we now apply intelligence to that just as we do in the traditional automation systems, so they can be more effective, so they can do a better job as far as, so not only cause... Obviously helping catch any sort of a safety issue, but being able to even become more predictive and prescriptive regarding that as well. So, do expect to see that a lot of... Especially with is... A lot of these devices now have IP addresses and certainly some of them use leveraging some of the microprocessor technology to be able to have analytics and things loaded into them.
Craig Resnick: This is a case that you're gonna start to see more again with smart safety. And then we've... With all virtual commissioning and a lot of this really came to light during the pandemic when people couldn't go on site and do their factory acceptance testing. So, what they would do is they would try to do the virtual commissioning online and leveraging, they said, "Well, what type of technology can we leverage to try to simulate the production?" And in many cases, they would rather bring in some digital twin technology along with it. So, we're really counting to see kind of the merger or the convergence of virtual commissioning and digital twin.
Craig Resnick: Down the road you're gonna see a lot more of even, of virtual factory acceptance testing and really to the point where almost nothing will be deployed on the factory floor until really it's kind of gone through... It's with its digital twin has been simulated. You're now able to make what sort of adjustments that you need to make before it's deployed. And then you actually go ahead and roll it out. And then we certainly also see some areas with some smart great increasing technology with smart vision systems and video analytics and becoming more... We're starting to see 5G go from just a... From something that we'll use down the road to something that we're finally seeing deployed. Certainly the whole issue with 3D printing, which was strongest, let's say in aerospace and automotive manufacturing becoming more pervasive in some other industries and certainly more of a containerization of apps and just actually more and more lifecycle management of anything to do with all connected assets.
Craig Resnick: So, this is just some of the things that we are seeing. I'm sure some of these you've seen at different levels based on your customers or certainly based on the projects that you're implementing. And again, the reason we're just kind of rehashing the IT/OT convergence is that from our perspective, this is something that we think that Ignition does really really well. And it's something about, we go to these plants and in many cases we find that certainly the IT brings that great level of expertise in things, let's say such as cybersecurity. OT of course it's all about real time, but what we sometimes find there's a... It's difficulties, does IT really truly understand real time in the fashion that OT understands real time?
Craig Resnick: And also the generational gap between the age level of the equipment, between an IT where you're using pretty... Certainly relatively modern equipment in OT where you're certainly gonna be ranging from modern equipment to equipment that's sometimes 25, 30, 35 years old, and how to really help each other and how do I take some of this modern technology because I'm not gonna do a full rip and replace on all my IoT equipment on the factory floor because of... It just realistically in most cases, it is just not gonna happen. The idea is, what we're trying to do, is be able to kind of find ways of having how do we... Systems can coexist, how can I take a modern system and still leverage maybe a DCS or a PLC that may be 25, 30 years old? And even though I can't leverage it as well as I could if it was new or state of the art, but what can I, in many cases, certainly when OPC came out in about 1996, how do I leverage some of those drivers that even are older and maybe can I upgrade drivers?
Craig Resnick: Can I maybe go into MQTT for example, if this is say, a lower bandwidth application for communications to leverage some of those older assets? Can I put in some IIoT sensors to be able to gather more information from some of those older assets? It's something that this is where IT/OT convergence can really help.
Craig Resnick: And again, in some cases we would find a lot of customers would keep kind of what we call, like kicking the can down the road for a lot of these projects. And they would say, “Yeah, we'll do it later. We'll do it later, we'll do it later.” And then once the pandemic came from came, it really, I would say, move some of these projects from kicking the can down the road to something that we wanna actually do right away. And, I'd say the first, probably the most popular thing, certainly with the remote workforce was how do I provide remote access to a lot of those applications? So that really was certainly, came to fruition. And then of course, you never really... The supply-chain issue really kind of came front and center, and this is where IT/OT convergence really helped, to kind of move some of those things along and really accelerated a lot of those projects.
Craig Resnick: So again, it's what do we do to kind of take the best of IT from cybersecurity experts and data scientists to the people on the factory floor that understand the process, understand what's being made, understand, again, what real time truly means and how do we put it all together? And what we really think this is gonna be extremely helpful is because of our strong belief in the edge is that this is where I think this is all gonna really help, because we think the edge controllers are gonna be scattered. I wouldn't say they're gonna be certainly the controllers of the future, but they're certainly gonna be working hand in hand with a lot of the PLCs and PACs and DCS systems as that local, analytics platform to do a certain amount of storage, share that data to the cloud, but then not have to worry about that latency issue to kind of, that would make something non-real time.
Craig Resnick: So but what we see is we see how all these, a lot of the concerns of both IT and OT, they do have sometimes more in common, than are different, sometimes when we have these workshops between IT personnel and OT personnel to kind of help them kind of educate each other, and we find that a lot of them have, again, more in common than they sometimes realize. So what we see in the future is really with a lot of the plants that have really advanced with their convergence, we really see this fusion effect. And I think one thing you bring to the table is you're implementing, Ignition is you have a product, you have a solution that really can help establish IT/OT fusion. And I think that that certainly puts, certainly Inductive Automation in a leading-edge position to be able to do that.
Craig Resnick: And I think that's one of the ways you probably wanna position Ignition as something that helps with this IT/OT fusion. So again, what are the results? Obviously you're gonna have fewer process upsets, you're gonna have less issues with scrap and having to do less rerun, more efficiency, less waste, greater, having a far more reliable supply chain, or at least the fact that when you get it, you'll actually know when to schedule it, how to manufacture the product. So you'll be able to certainly do a better job meeting your production forecast. And now when we look at things like what applications are, I'm gonna shift over a little bit to the cloud. We've certainly seen a migration going in that direction and just for some surveys that we've done, we've kind of seen, which applications certainly like analytics and advanced analytics, mobile enablement.
Craig Resnick: Certainly with the gateways. We've certainly seen greater adoption of using the cloud. But I would say that, it's down to the point where very few of people that certainly took this survey said that there is no cloud in their future. It's down to about 10% and this data is probably a year old. So I would say at this point that that number's only gonna continue to go down where we certainly see, there's certainly certain more resistance in some of the highly regulated industries as far as maybe we're with cloud adoption maybe than some others. But, again, we do see those barriers coming down. I think there's still, at this point, whether you're gonna do DCS in the cloud, PLCs, PACs in the cloud, we're probably not quite there yet, but I think that's really where the edge devices are gonna come into play.
Craig Resnick: And then using the cloud mainly just for the fact, storage and obviously the historian would be in that platform. But, as far as where they seem to be getting benefit from it today, certainly in production operations and actually doing things to make sure we minimize any unscheduled downtime and maximize your performance and all their production KPIs. Leveraging a lot of the engineering and design, because some of that's certainly gonna involve some of the CAD and the PLM, which are all part of the digital thread. And of course, any of the applications that help with the supply chain and logistics are certainly things that we expect to continue to migrate to the cloud. And where we are seeing from our odd data that it seems to be, getting a lot of better acceptance.
Craig Resnick: So the idea is, is that, we're thinking in terms of... So we begin to sort of sum things up. We're looking at applications that, what are the common denominators? It's what do we do for better visualization from all levels of the plant, from the factory floor to the remote worker? How are we leveraging the technologies from augmented reality for, as I said, for maintenance and virtual reality is really becoming kind of the primary training tool. I mean, no longer is it just good enough to tell an employee to go watch some YouTube videos. The idea is how do we simulate an explosion in the plant, or how do we simulate some sort of a disaster and using virtual reality to kind of help with that type of preparation type of training? How are we leveraging things like digital twin, creating digital scans of plants and modeling all that and leveraging all the engineering tools to make sure we simulate before we deploy, are our supply chains completely integrated, with all our software processes, is there true cloud and edge hybrid applications where we're leveraging real time on the factory floor, but certainly taking advantage of all the great storage capabilities that the cloud brings? How do we bring all that industry, the IoT and Industry 4.0 technology? Are we answering the fact that do we have the answers for sustainability, operational resilience, and net zero?
Craig Resnick: Are we, so... Do we have KPIs that we can now actually measure our progress on that front? And this is some of the things that again, by leveraging these tools and following these trends that we're getting certainly a better handle on, and what the world wants really is, they're looking for solutions that are somewhat outta the box. I mean, they're not looking... We certainly know in spite of IT/OT convergence or IT/OT fusion, we don't wanna have to leave everything to the systems integrators, you can do it, but in the plant, you have maybe a minimal number of data scientists or people that are Python or R or C++ programmers that can make these things happen with themselves internally. And making sure that the software and the tools have the features that actually empower employees. The idea is we're not trying to replace employees, we're just trying to empower them and give them all the tools that they need to do a better job. Are we able to again, have the... Is the visualization better? But not just the visualization from HMI perspective, but the visualization that enables them to do augmented reality, virtual reality, do the modeling and simulation technologies, and creating those digital twin models.
Craig Resnick: And do we have analytics that really will truly do a good job and not only be able to predict potential downtime but also again, be able to load that historian up so we can do a better job with artificial intelligence and machine learning to kinda predict, although any potential scenario that could occur? So, and again, are we having these things that must still provide a return on investment? I mean, no one is really gonna be making any investments that they can't see the return. So are you able to show them and model for them and be able to prove the return on investment amongst those that might still be skeptical? So and again, leveraging a lot of the other new complementary technology, we certainly see also a big market increasing with cobots, to actually become more of assistance to people on the factory floor rather than necessarily replacing people on the factory floor. So, to sum it up, one of the things is, so here it is. We go through all this technology, but in reality, and I know we said this earlier in the presentation, culture beats technology in many of these companies, and I think the thing you wanna show as you, whether you're as systems integrators in deploying the solutions, or as users trying to make these solutions work within your plant, is showing... Is actually empowering teams.
Craig Resnick: So it's not a case of you going into the plant and saying, “This is what you're gonna use.” It's really getting input from the people who are doing the jobs and say, “How we... What can we do to make your quality of life better? What can we do to make you more productive? What can we do to raise the output of the plant and maybe give you some opportunities to hit some of your KPI goals and make some bonuses?” But if we find that, if the culture embraces it, that makes all the difference in the world of whether it's gonna be successful or not, and really try to articulate why sustainability and operational resilience is essential long-term for the company. Because sometimes we go into plants and people will say, “Yeah, it's okay. I understand it, but how is that gonna be beneficial to our plant as far as, again, productivity and profitability?” And there's enough goal. I mean, the bottom line is if you're not operationally resilient, and that means you are vulnerable more to supply-chain problems, you're vulnerable more to climate-change issues, you're vulnerable to any sort of geopolitical issues that could, again cause any sort of interruptions.
Craig Resnick: So in reality, if you're not operationally resilient, that could be your biggest impediment to being able to be in business or not in business actually, and making sure that... Sometimes what people need is low-hanging fruit, measurable wins. So focus in on those areas where there are the biggest problems. Maybe it's with unscheduled downtime, solve that, show the ROI, prove it, and then move on to the next to build a sense of confidence within the plant. And the other thing, of course, is to prove to some of these people, and part of this is on the culture, that digital solutions are not job eliminators. They are actually... They actually save jobs because they make the plant viable in a global economy. So the idea is what are you doing to show how this technology makes you and your job more valuable? It's not an excuse to automate something and, again, push additional people out the door because that's always something that we hear about when we go in and we talk about automating these solutions. And they'll say, “Yeah, I don't wanna do that because I don't wanna lose my job.”
Craig Resnick: And we are saying, if you don't do that, then you have a far greater chance of having the plant not be viable anymore, and then you're all gonna lose your jobs. So again, really try to demonstrate that. And to be honest with you, the difference between success and failure we find in these projects is, it's the effectiveness of the systems integrators and partners. And the good news is, is that certainly with how effective, certainly the Inductive Automation has been, how effective the systems integrator group through that has certainly worked with Inductive Automation. I think the success that you've had is really because you've been able to establish that relationship and have that level of success with the customers. So I think you guys are, you're certainly on the leading edge of this and certainly following a lot of the advice that we certainly provide our customers. So, again, be that trailblazer that is gonna make the company very viable and make those jobs. Not only save those jobs, but make those jobs more interesting and viable for the employees and more attractive to bring and recruit people into manufacturing that wouldn't otherwise and hopefully do a better job of with climate change. So with that, I could ready to take some questions Don?
Don Pearson: Yep. If I didn't mention it, I should have. Could you come down to the microphone so we can get this? 'Cause this is gonna replay in the virtual conference and that means we need to know what the question is. So first brave soul to walk down to the mic. Any questions for Craig on any of the topics he covered?
Audience Member 1: Hi, I'm Mike Benz with Feyen Zylstra. I'll fall on the sword first, I guess.
Craig Resnick: No problem.
Audience Member 1: We look at all these solutions and they look wonderful. But cybersecurity doesn't happen by accident. So as we look going forward to implementing and intertwining different databases, especially on the supply-chain side, how do we do that still in a cybersafe model? Is S95 still viable? Is NIST still viable? What does that future look like?
Craig Resnick: Well, it's interesting because one of the things that we've found is... Yes, ISA S95, ISA 95 is certainly kind of... Is still viable. We've certainly seen some people begin to kind of migrate away from it and kind of flatten things out. But what we find is that what makes it more viable is the fact that by bringing in a combination of the IT cybersecurity expertise, they tend to bring along with them some of their vendors that rarely have that level of expertise more so than, say some of the traditional automation suppliers. If I look at... Most of them, let's say we will... For their cybersecurity solutions might partner with a company like Clarity...
Audience Member 1: Okay.
Craig Resnick: For example. But we find is, is that IT/OT convergence kind of understands this need. And what we find is, is that getting them involved and their partners involved certainly do a great... Certainly brings a lot of that... I don't wanna say nothing's certainly gonna be absolute and 100%, but it certainly helps. And certainly bring... Also involve some of the hyperscalers and certainly the... Whether it be AWS or Azure that, again, you're bringing that level of cybersecurity expertise. Again, it's not a perfect solution and there's certainly points of vulnerability, but at least the fact that when you're implementing these projects, those people are now involved that would not have been involved in kind of a non-IT/OT converged world in the past, that would've relied on solely the automation vendors and today some of the partnerships that they bring involved. So it's not a perfect solution, but I think we are going in that direction, but it's always that magic trying to stay a half a step ahead.
Audience Member 1: Yeah. It is a very interesting topic.
Craig Resnick: Right.
Audience Member 1: Now between IoT and MES and then between NIST and how do we move the data to the cloud and back and still honor and keep things safe? I appreciate your answer.
Craig Resnick: Thanks.
Audience Member 1: Thank you.
Don Pearson:: Cool. You were gonna ask me a question.
Craig Resnick: Well, if there's no other questions, I would say is putting... Thinking in terms of these trends, how do you feel that Inductive Automation matches some of these trends as far as...
Don Pearson: Yeah, I was listening to that and thinking back to some of the things that both more Colby than Carl this morning said in the keynote about looking at some of what's happening on the world scene. And it actually brought me to a question related to one of your trends on supply chain. It seems... Maybe there was a little bit of optimism, or at least mentioning straightening out the supply chain and getting it right, but getting it right isn't as easy today as it was maybe a little while ago. So how do you see supply-chain challenges evolving and over what short or long period of time do you see that, Craig?
Craig Resnick: Well, obviously it's evolution not revolution. It's beginning to progress, but what I'm finding is by having the discussions with your suppliers as far as... First of all, making sure that your supplier that all your connectivity to the supplier is digital. It's not a matter of making the phone calls or just sending in your purchase orders, that it's... It's a real-time digital connection we find that makes a difference. Secondly, it's having that moment when you're just talking to the supply chain saying, we're looking at it. I know you've been our supplier for 10 years, 15 years, 20 years, but we are gonna have to have viable backups based on different geographies, especially if you're in a geography that's potentially vulnerable. I mean and we go through this all the time, even with some of the... Our auto clients. They're buying semiconductors, which they can barely get from Taiwan, and they're saying what would happen if at some point, God forbid China decides to go into Taiwan and does that... What does that do to supply chain? So certainly what they've been going through in Europe, with Ukraine and having energy cutoff, is the gas flowing through Ukraine?
Craig Resnick: What are we doing? Are we looking for the US to help us maybe with LNG as a potential replacement? It's... The idea is having honest discussions with your supply chain requiring that level of digital connection and requiring that they use some of these automated tools. As you’re putting on your request for quotation, this is now... It's raising the bar among your supply-chain suppliers to make sure that they're going through the Digital Transformation.
Don Pearson: Sure. Do we have another question here? Sir, go ahead. Take the mic.
Audience Member 2: Do I sing or just ask the question? So I'm glad you mentioned a lot of different industries and topics. I didn't hear anything about the integration that happens within the supply chains. Sometimes we do projects as integrators for OEMs and manufacturers and warehouses. With the mobilization of IoT, meaning like the use of mobile devices, tablets, phones’ geolocation properties and features incorporated into projects. Do you... What are your thoughts and your comments about how... The evolution of that from 10 years ago, from five years ago to now, and where do you see it in the future where we're leveraging these things, like for example, there's some companies that track vehicles, their speeds, their locations, their efficiencies? I know Inductive Automation made, did a project for a customer that they would literally rate the drivers that would go and spray airplanes with a anti-freezing liquid, and basically it was like a PLC in wheels. They would tell, "Hey, enter the next model of airplane. You're gonna go wash, so you don't have enough liquid, go and refuel." So adding some intelligence doesn't necessarily need to be like high-level artificial intelligence, but just some calculations and predictions, utilizing geofencing and geolocation features.
Craig Resnick: I mean, certainly GPS in that case certainly is a critical technology. But the idea, what we always tell them is, let's just take advantage of what we have... If you can take advantage of what we have today...
Audience Member 2: And build on it.
Craig Resnick: Like for example, are you connected? Sometimes is just a matter of they're not connected, and we'll talk about how do they even connect into that digital thread, even if it's some sort of a connection, whether that it leverages, say, an OPC for example. But just the ability to communicate is step one, and obviously in your particular application, certainly where GPS is gonna be critical.
Craig Resnick: But again, we’re not asking them to say, okay, you're gonna have to... You're gonna need to move, to have artificial intelligence and machine learning off the cuff, three to five years from now, that's gonna be critical, but just today, just communicate with what's there and being able to see what's going on on the factory floor, what's the status of the materials based on the production schedule, what do we think we're gonna have enough material left or based on what we think is gonna run out? And then now how do I procure it? And if I can't procure it, what are my alternatives? How fast can I get them? And based on that material, do I now need to do... Make any product design changes? We would have cases like working with GM where they were... Here they're shipping $70/80,000 Escalades and Suburbans, and they didn't have the chips for the heated seats. So here it is, you're spending a... You're able to get your vehicle that you've waited six to 12 months for, and in the winter time you can't turn the seats on. And they're gonna handle that in a recall.
Audience Member 2: Yeah.
Craig Resnick: But still the idea is it's because they weren't able to find another chip that they could now run that circuit, that intelligence through that chip. So the idea is leverage the tech... All the technologies you have today, but it's all about the connectivity and even be able to share data. If you can't do that it's useless.
Audience Member 2: And leveraging things like QR codes.
Craig Resnick: Yes.
Audience Member 2: And RFID not just for pallets or product tracking, but also tracking vehicles and raw material. And even personnel.
Craig Resnick: Absolutely.
Audience Member 2: Logging in and stuff like that, using their...
Craig Resnick: Yeah. You gotta connect it, otherwise you're an island and if you're an island, you're gonna fail.
Audience Member 2: Alright, Craig. Thanks. Appreciate it.
Don Pearson: Craig thank you very much. Let's give an acknowledgement to Craig Resnick.
Craig Resnick: Thank you. Now off to the panel.
Don Pearson: Yeah. Thanks. We’re adjourned.
Announcer: We’re adjourned. Thank you.
Don Pearson: Thanks.