Why CPG Manufacturers Are Embracing the Technology Service Model

March 30, 2021
For both software and equipment, consumer packaged goods manufacturers are increasingly adopting the “as-a-service” model for its scalability and continuous improvement capabilities.

As part of a recent survey on projected 2021 spending plans conducted by Automation World with automation technology suppliers, an interesting side note emerged. Amid the effort to determine where spending by manufacturers will be most focused among 20 technology categories, an increasing interest among consumer packaged goods manufacturers for the software-as-a-service model emerged.

If you’re not familiar with the “as-a-service” business model, it essentially means that, rather than purchase a particular product outright and maintain and upgrade it yourself, you pay a monthly or annual fee for access to the technology. The provider handles all the maintenance and upgrades to ensure you are running the most up-to-date version. 

“Software as a Service (SaaS) makes justifying investing in transformational software more clear-cut for batch manufacturers as they often had difficulty justifying spend on software applications and Industrial Internet of Things (IIoT) technologies based on the return on investment (ROI) and perceived complexity of deploying software on premises,” said Keith Chambers, vice president, operations management software at Aveva. “SaaS offerings promise a lower total cost of ownership, faster time to value, and flexible consumption based on a company’s needs. For example, cloud-based SaaS applications provide new opportunities in small and medium plants through IIoT-enabled functional sub-applications, such as performance management and data-driven continuous improvement tools, delivering manufacturers the power to scale software functionality up or down, with the right applications, according to their functional and business needs.”Rockwell Automation also sees increased interest in SaaS, not just from the batch manufacturing industries, but across the board. “Software-as-a-service models can remove the upfront capital expenditure of investing in a full automation service, allowing manufacturers to try new things with lower risk,” said Bruce Kane, global life sciences technical industry consultant at Rockwell Automation. “The flexibility and scalability of the SaaS model also enables companies to purchase new technologies based on the needs of individual plants.” 

Mark Ruberg, packaging industry manager at Beckhoff Automation, noted that, in reaction to manufacturers’ growing interest SaaS, software suppliers across industries are embracing SaaS as a general model. “Cloud-based MES (manufacturing execution systems), ERP (enterprise resources planning) and even mass market software packages like Microsoft Office are migrating to this model,” he said. “Overall, SaaS reduces in-house hardware infrastructure and internal IT support efforts to maintain the system. It also increases system availability.”

Engineering software was once a large expense for manufacturers, but Ruberg notes even this type of targeted and complex software is moving toward the SaaS model with free development environments and automatic code generation. “Beckhoff has always provided a free engineering environment for our TwinCAT automation software, and now we are providing a new SaaS solution in TwinCAT Cloud Engineering,” he added. “This allows engineers to program at no cost anywhere that they have access to a web browser and simply purchase a license at runtime.”

Read about how PTC adapted its PLM and CAD portfolio for SaaS.

The service model beyond SaaS

In addition to SaaS, the machine-as-a-service model is gaining ground, especially in batch manufacturing, according to Ruberg. “This disruptive trend incentivizes the OEM to guarantee high performance and throughput by loading up innovative features, including integrated safety, vision, mechatronics, and many of the technologies that really drive digital transformation.”

Ruberg contends that this trend applies to remote access and monitoring technologies as well. “Previously, OEMs might have scaled back capabilities to keep machine prices competitive,” he explained. “Now, a monthly contract and/or piecemeal payment makes this less of an issue. If the machine stops, so does the OEM’s revenue stream. Since this model aligns the machine builder’s goals with the CPG manufacturer’s, we expect it to become more common. Some of our customers in this space are already seeing great success from pilot projects, achieving greater uptime and throughput.”

Aveva’s Chambers said he expects to see a transition in the consumer goods industries towards adoption of hybrid cloud/edge MES (manufacturing execution system) applications. These cloud/edge computing mix implementations will “enable smart plant environments while centrally managing master data and production history in the cloud,” he said. “Smart plant environments facilitate mission critical, real-time capabilities, such as managing short-term production execution plans and high-resolution data collection integrated with the automated process as an edge application. These will leverage the full benefit of IIoT to connect the enterprise functions and remote workers with the smart plant environments to take advantage of big data analysis capabilities in the cloud and to reduce the total cost of software application ownership across the business.”