According to a study by Bitkom Research, 96% of German industrial companies now believe that Industry 4.0 is a decisive factor for international competitiveness. An important component of this is the Internet of Things (IoT): it makes the networking of machines possible in the first place.
However, the Internet of Things alone does not add value to your business processes. Only the interlinking of IoT and ERP leads to a profitable evaluation of machine data. This in turn creates various opportunities for your company. But be careful: if you want to take advantage of these opportunities, you should also be aware of the other side of the coin. Linking the Internet of Things with an ERP system is also associated with challenges.
What is the difference between IoT and IIoT
Internet of Things (IoT)
The Internet of Things describes the networking of devices that actually work autonomously. The term is also frequently used in an industrial environment. But strictly speaking, it primarily refers to the private sphere, e.g. the networking and smartphone-controlled operation of everyday devices such as lamps or security cameras.
Industrial Internet of Things (IIoT)
The Industrial Internet of Things, on the other hand, is a special form of IoT and relates specifically to commercial use. The focus of IIoT is on linking machines, production systems and sensors in order to monitor and automatically control digital industrial processes. The requirements for security and reliability are significantly higher than for private use.
In IIoT environments, for example, production lines can communicate with other machines and exchange data independently via sensors. This enables them to optimize processes autonomously and therefore produce particularly efficiently. Appropriately, this type of production system is also known as a smart factory.
Differences between IoT and IIoT – short and sweet
| IoT (Internet of Things) | IIoT (Industrial Internet of Things) | |
| Field of application | Everyday life, household, consumer goods | Industry, production, manufacturing |
| Goal | Convenience and user-friendliness | Efficiency and process optimization |
| Examples | Smart home systems, wearables | Machines, sensors, systems |
| Requirements | Lower safety requirements | High security and reliability |
Streng genommen haben die Wörter IoT und IIoT also unterschiedliche Bedeutungen. Dennoch hat sich der Begriff IoT in der Praxis auch im Businessumfeld etabliert und findet daher ebenso im industriellen Umfeld Verwendung.
IoT and ERP: an interplay with many opportunities
It is not only IoT platforms that are important in Industry 4.0. The ERP system also plays a central role. As a data hub for company processes, it collects and processes IoT information almost in real time, enabling end-to-end planning and control of the entire value chain. By acting as the brain and real-time distributor of data, the interaction between ERP and IoT results in valuable synergy effects for your company.
Data-based process optimization
The volume of data is constantly growing with the implementation of IoT projects. However, the information only gains value through the use of a modern ERP solution that offers integration with the IoT network. The ERP software is designed to perform in-depth analyses and thus provide useful insights for process optimization. Artificial intelligence is playing an increasingly central role in this: among other things, it takes over the pre-selection and interpretation of data.
An example from production:
- Machines report when certain components are ready and can be used for further processing.
- The ERP system then measures the time interval and uses AI to recognize certain correlations and patterns in the process data.
- As a result, the ERP solution uncovers potential for improvement so that further processing can be carried out much faster in future.
Another example from project management:
- The ERP system links the working times of the skilled workers from time recording with planned project tasks and machine running times.
- Machine and movement data show when and where resources are actually needed or remain unused.
- These correlations enable the system to recognize bottlenecks and idle time. This in turn enables the optimization of project processes and personnel deployment.
Better planning capability
In Industry 4.0, machine sensors continuously supply information about the condition of the systems to the ERP system. Using this database, the software predicts when breakdowns are imminent and suggests an optimal time for proactive maintenance.
Predictive maintenance can therefore significantly reduce faults and ensure availability. At the same time, maintenance costs are reduced as unnecessary interventions are eliminated.
Increasing the ability to innovate
Intelligently analyzed data always leads to new insights and thus automatically promotes the development of new products and services. The interlinking of Industry 4.0 and ERP gives companies a precise picture of the status of devices, maintenance cycles and existing problems.
This knowledge can also be easily used for innovative, data-based business models. In the manufacturing sector in particular, companies generally experience an increase in their ability to innovate.
Precise prediction of customer behavior
Customer behavior also follows certain patterns, which the ERP software can analyze. Whether returns, complaints or requests: the growing data sets provide information about the needs of buyers. This in turn allows you to predict the future behavior of your customers much better.
For example:
Numerous interactions with a product or a long time spent on a particular product page indicate loyalty. If these characteristics are recorded, the sales department can make appropriate cross-selling and upselling offers .
Asset tracking through the ERP system
Asset tracking describes a system that enables the electronic real-time tracking of goods or other objects via the Internet of Things. This is how it works:
- The so-called “tracked devices” can be equipped with eSIMs, for example, and automatically dial into the available networks.
- The tracker software, which works as a Real Time Location System (RTLS) and transmits the location of the devices in real time, then comes into play.
- Once the data has been transferred to the cloud, the ERP system can process the IoT information.
In this way, customers receive information about when their goods will arrive, for example. If the goods are lost, the data helps with the recovery or at least with finding the cause. The advantages are obvious:
- Fewer losses and thefts
- Fewer human errors
- Higher customer satisfaction
- Cost savings
Spatial flexibility through real-time data
Large production and office facilities were often necessary in the past because physical proximity shortened the flow of information. Now that the Internet of Things provides the IoT data for the ERP system, this constraint no longer applies – after all, information is available in real time and regardless of location.
Company structures can be set up flexibly and yet productively, as distances for data flows become less important. This also allows distributed teams or other locations to be seamlessly integrated into processes. This is particularly advantageous for small and medium-sized companies.
Stefan Kiesel, Asseco Solutions
The Internet of Things alone does not add value to your business processes. Only the interlinking of IoT and ERP leads to a profitable evaluation of machine data.
IoT and ERP: risks that are easily avoidable
Rising costs
Anyone connecting IoT systems with an ERP solution often fears rising costs:
- If the software for controlling processes is made available via cloud computing, ongoing hosting costs are to be expected.
- Further resources must be planned for the IoT applications and the IoT devices that employees use.
- In addition, there may be costs for the acquisition of applications that allow the evaluation of large amounts of data.
The positive:
In most cases, these investments end up paying off twice or three times over for a company. This is because the optimization of processes, predictive maintenance and innovative products result in potential savings and additional profits. Provided you take advantage of the opportunities offered by ERP and IoT.
Big data complexity
In Industry 4.0, networked machines deliver huge amounts of data every day. This data is “raw” – i.e. neither hierarchized nor semantized. Such a big data environment is a problem for many ERP solutions, as they cannot process raw data. Instead, they need information that is weighted according to its ranking and provides an understandable context.
For example:
If an invoice is received, the software can ideally post it itself. In any case, however, it forwards the document to the accounting department. The meta information is responsible for this: “Invoice” indicates as a data module that the “Pay” action is to be carried out. The action is then linked to the fixed command “Post and transfer”.
The positive:
Even if the majority of IoT data does not arrive at the ERP system with such meta-information, there is a solution to the complexity of big data: an integrated ERP module first ensures that the data is structured accordingly so that it can be analyzed in the next step.
Security against external attacks decreases
Networking devices via the Internet is of course always associated with a certain security risk. After all, this provides points of attack for external attacks. Successful cyberattacks are particularly fatal if the ERP is linked to the Internet of Things: as the business software is the control unit of your business processes, third parties have access to sensitive data in an emergency.
The positive:
If you are well prepared, you can avoid worse scenarios in terms of ERP and IoT security, for example by using the following security mechanisms:
- Gateway solution
Here, all sensor data must pass through a “gate” before it is allowed through to the ERP. The gateway carries out a check and blocks external attacks. - End-to-end encryption
The data is encrypted in such a way that it can only be read by the sender and the intended recipient. - Zero-Trust
With this security concept, every access must be checked and authorized.
| Opportunities of IoT and ERP | Risks of IoT and ERP |
| Optimization of processes | Additional costs |
| Better planning capability | Big data complexity |
| Spatial flexibility | Reduced security due to possible external attacks |
| Increasing the ability to innovate | |
| Precise forecasts of customer behavior | |
| Asset tracking through the ERP system |
ERP and IoT: success factors for a smooth project
1. pursue a clear data strategy
Determine at an early stage which IoT data you actually need and how it should be structured, stored and used. A clear strategy prevents an excessive flood of data without any real benefit.
2. choose an ERP system with IoT capabilities
The ERP system should have standardized IoT interfaces and support the processing of real-time data. This is the only way to seamlessly integrate sensor data.
3. establish a well thought-out security concept
A good security concept protects your systems from unauthorized access and reduces consequential damage that could threaten your existence.
4. rely on gradual scaling
Small pilot projects help you to identify and minimize technical and organizational risks at an early stage. Successful approaches can then be extended to other processes in a controlled manner.
5. train your employees
Your employees need to understand how ERP and IoT interact and how they can make the best use of IoT data. Training increases acceptance, competence and the long-term added value of the solution.
IoT and ERP: practical application examples
Robert Plersch Edelstahl GmbH:
Reduction in order throughput time by 80%
Plersch uses the APplus ERP system as a central data hub for Industry 4.0 processes: The machines in the company are directly connected to the business software, enabling smart production. This has reduced the order throughput time by 80%.
After processing, the machines continue to interact with the system, e.g. through automatic quantity and time feedback. This enables end-to-end transparency and control of production.
Relevant ERP functions:
– Machine connection and feedback
– Order status in real time via dashboard
– Paperless production processing
Benefits for IoT scenarios:
– Transparency along the production line
– Automatic status and order updates
– Integration of IoT data into planning and control processes
Demonstration Factory Aachen (DFA):
Integration of various technologies in research & production environments
DFA works with APplus as an ERP platform for industrial research and IoT projects. Among other things, 5G, augmented reality, automated transport systems (AGVs) and machine connections are used. The ERP system can be flexibly integrated with third-party systems and serves as the backbone for smart production processes.
DFA uses APplus to support its research and scenarios for the factory of the future. The solution offers native functionalities for the smart factory – such as options for connecting machines or implementing predictive maintenance scenarios.
Relevant IoT approaches:
– Smart Factory concepts
• Predictive Maintenance
– Integration of AR/5G/AGVs
– Flexible system landscapes with real-time data
Fazit: ERP und IoT bilden eine starke Einheit
There are simply no IT projects without risks. And so the integration of IoT and ERP is also associated with certain challenges. However, this is by no means a reason to throw in the towel. For one thing, the risks can be reduced to a minimum with the right preparation. And secondly, the opportunities far outweigh the risks.
Through the interaction of IoT and ERP, you benefit from valuable synergy effects that help your company move forward in a wide variety of areas. As a result, they ensure optimized processes, enable the development of innovative business models and increase customer satisfaction. This makes it easy for you to withstand growing competitive pressure.
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