How industrial IoT disrupts the metal fabrication business model

Industrial internet of things (IIoT) could spur new business models that will change who owns what in the metal fabrication supply chain. Getty Images

Let’s be honest. “Disruptive technology” is a vague, muddy term. What’s disrupting what, and how? This morning, John R. Brandt made it a lot less muddy. The CEO of The MPI Group Inc. spoke at the Fabricators & Manufacturers Association Annual Meeting in San Antonio, Texas. He tallied off the usual buzzwords: artificial intelligence, machine learning, industrial internet of things. But then he made an intriguing insight: “When you meet to strategize about disruptive technologies, invite your accountant.”

What, what?

Brandt continued. “IIoT will change the relationship you have with your suppliers.”

Brandt describe a prime example of this in a surprising fact: many airlines don’t “own” the jet engines that power their planes. They don’t pay for the engines themselves, only their use and maintenance. Embedded sensors detect when the engines are in use, how they’re used, and help predict when those engines need maintenance. Perhaps most significant, this turns that engine into a cost reported on the income statement; it’s no longer a capital expense.

He went on to describe a similar arrangement that a packaging machine maker has with its customers: that is, customers pay for the time the machine produces, but customers actually don’t “own” the machine itself. Riffing off software as a service (SaaS), you could call it “manufacturing machinery as a service.”

Perhaps the idea isn’t that far-fetched, especially as machines become more reliable and productive. Made evident by the afternoon presentations here at the conference, technology—especially in cutting and bending—have made fabrication more predictable than ever. The laser beam focus can adapt to changing surface conditions and material thicknesses. Press brakes can adapt to variations in material grain. Nesting engines and part-sorting automation can take all these variables into account and more. Sensors communicate machine data directly to machine vendors.

Fabricators and the Industrial IoT

Fabricators would never agree to pay a machine vendor for cutting or bending time if the machine produced bad parts. But what if the process were highly monitored and controlled, even adaptable to material variation? What if the service included on-site service techs from the machine vendor to ensure the equipment is in topnotch working condition? Would the business model work?

Paying for machine time would incentivize fabricators to make best use of available capacity and eliminate the need to even think about machine utilization to recoup a machine investment. Instead, a fabricator would need to pay the machine vendor to use equipment on the floor. Those fabricators who run their equipment less and yet sell more (think strategic nesting, setup reduction, sophisticated scheduling, strategic cross training) would edge out competitors.

I admit it’s far-fetched. Still, the business model is intriguing, because it would point everyone in the supply chain—the machine vendor, the fabricator, and the end customer—toward a common goal: to deliver the right parts at the right time at the right price.

Industrial IoT Variables in Fabrication

The devil is in the details, of course. How would the concept work if a customer mix changes and a fabricator no longer needs a machine? Perhaps payments could vary depending on how long a machine is in production. But then what about third-party tooling, assist gas delivery, nitrogen generation? The variables go on.

In fact, the business model might be utterly impractical. But with all the disruptive technologies out there, people are at least starting to ask questions—not just about how to cut, bend, or weld a part faster or better, but about entire supply chains and the business models within them.