The traditional manufacturing business model – making products and selling them for a profit -- is increasingly on its way out, given rapid advances in smart technology and changing consumer demands.

Instead of just accepting what’s mass produced out of the factory – as we have done for the last century – with converged technologies in place, we (as consumers) will ultimately be able to tell the factory what to produce based on individual needs and wants. This shift will see manufacturers adopting a point-of-sale approach to business -- building to order versus building to stock.

As recent numbers from ARC Advisory Group revealed, the current state of manufacturing in the United States is, well, less than prepared for this revolution.

• Unscheduled downtime costs industry $20 billion
• Nearly 75 percent of U.S. plants are more than 20 years old
• The value of global legacy automation systems reaching end of life is equivalent to $65 billion
• Less than 14 percent of U.S. manufacturers have completely integrated their machines to the enterprise network

This means many manufacturing plants are using legacy equipment that is 20 years old or older, and nearing end of life stage. (See our infographic on the state of obsolescence, which showcases equipment that is approaching end of life or has become obsolete.)

“One of the biggest challenges facing our industrial manufacturing facilities today is the ability to properly identify and quantify the benefits of modernization. For most facilities that will require a significant investment to upgrade equipment at a time when budgets are tight,” said Keith Beheler, regional sales manager at Williams Supply.

What is modernization?

The thought process of many plant managers is to maximize the use of existing equipment before beginning to invest in new technologies. The problem, although they may still be working, is that these conventional machines or control systems often don’t meet new technology standards.  Spare parts may be obsolete, original equipment manufacturers (OEMs) may have gone out of business, and operating systems may be dated. Any one or all of these may be the case.

The answer to this problem is modernization.

“The modernization of a machine means an introduction of changes into the design of machines which improve their performance and capacity and prolong their service life. It permits conversion of obsolete machines into semiautomatic and completely automatic machines with low expenditure in terms of labor, time and money

Once a control system loses its operational efficiency, it’s time to either replace it or retrofit it. To replace a large piece of equipment could involve a substantial amount of capital. This is why a retrofit situation may be preferred, if possible. This will still allow for better functioning of the system and its parts without having to replace the entire system.

Benefits of modernization

Adopting a modernization strategy, even just small, progressive upgrades applied according to plant needs, is crucial in an effort to evolve with the future of manufacturing. There are certain benefits to modernization, not least of all:

• Increased productivity
• Better machine performance
• Guaranteed availability of spare parts
• Better automation equals improved plant performance … less downtime

One of the biggest advantages of modernizing your equipment is more advanced data collection. More access to intelligent data means more real-time insight into the factory floor. The real gem isn’t the data itself but the use of data to improve business decisions as they come up.

Barriers to modernization

In order to compete in a changing world, it’s imperative that industrial plants adopt new technologies that will provide data in a very different way. But it isn’t a simple process and there are definite barriers at play.

No formal plan

Industrial plants aren’t the most nimble when it comes to upgrading technologies on a regular basis. In fact, in conducting our research, we found that many don’t have a formal modernization plan in place. The mentality seems to be that if it’s not broken, don’t fix it. If a plant is operational and until existing investments are realized, it is tough to justify upgrades, however efficient and necessary.

The first step toward plant modernization is the need for a plant-wide flow assessment. In order to upgrade systems, it is vital to get the big picture of your plant’s assets. Critical information can be obtained from this report, such as:

• Obsolescence dates and mitigation risks supporting your legacy equipment
• A complete BOM for parts on critical assets plant-wide
• Ways to reduce costs by finding and reducing excess inventory

Building the business case

One of the biggest hurdles when it comes to modernization efforts is obtaining funding. Manufacturers can take small steps today toward modernization.

The evolution to integrated architecture is a progression, not a leap. If implemented properly, modernization efforts will increase efficiency thereby increasing ROI and reducing operating and production costs. This will ultimately help to offset initial investment dollars.

In most cases, the upgrade process takes time and can’t be undertaken immediately. Careful planning has to take place. A third party integrator may be required. Some manufacturers make the case for modernization well in advance – six months to a year – in order to secure the capital necessary for these upgrade projects to occur; sometimes not even until the following year.

A plan for modernization is extremely important during this time when U.S. manufacturing equipment is faced with increasing obsolescence.