Manufacturer Weighs Converting to Internet of Things

You are a member of the plant information systems group for a small manufacturer of all-natural ingredient cosmetics. Your firm promotes itself as adhering to the highest standards of compliance and quality. Manufacturing is rigorously monitored via sensors and computer controls throughout the entire process, and automated temperature controls ensure complete stability in the manufacturing environment. Sensor tracking is performed from the moment that raw materials enter your facility, throughout the manufacturing process, packaging, and on to distribution. The sensors and computer controls were installed when the plant was built in the 1990s and use proprietary communications protocols and are not Internet enabled. Data from these sensors is monitored by a group of three technicians in the computer control room. Twelve workers are required to staff the control room 24/7, including weekends and most holidays. Your company has just purchased a plant previously owned by one of your competitors in a nearby state. Your group has been asked to look at the feasibility of upgrading the sensors used in both plants to Internet-enabled sensors connected to the Internet of Things. This would make it possible for technicians in one control room to monitor the operation of both plants. Plant staffing could be reduced by 12 workers saving $1.2 million in labor expenses per year. It is estimated that the cost of replacing the existing sensors and converting to the Internet of Things is in the vicinity of $1.5 million.

Review Questions

1. Why is it necessary to replace the existing sensors to implement an IoT network?

2. What additional benefits may arise from converting the plants to the Internet of Things?

Critical Thinking Questions

1. What new risks are raised by placing the new system of sensors on the Internet of Things?

2. What actions could be taken to reduce these risks?

Blue computers, a major pc manufacturer in the united states, currently has plants in kentucky and pennsylvania. the kentucky plant has a capacity of 1 million units a year and the pennsylvania plant has a capacity of 1.5 million units a year. the firm divides the united states into five markets: northeast, southeast, midwest, south, and west. each pc sells for $1,000. the firm anticipates a 50 perc~nt growth in demand (in each region) this year (after which demand will stabilize) and wants to build a plant with a capacity of 1.5 million units per year to accommodate the growth. potential sites being considered are in north carolina and california. currently the firm pays federal, state, and local taxes on the income from each plant. federal taxes are 20 percent of income, and all state and local taxes are 7 percent of income in each state. north carolina has offered to reduce taxes for the next 10 years from 7 percent to 2 percent. blue computers would like to take the tax break into consideration when planning its network. consider income over the next 10 years in your analysis. assume that all costs remain unchanged over the 10 years. use a discount factor of 0.1 for your analysis. annual fixed costs, production and shipping costs per unit, and current regional demand (before the 50 percent growth) are shown in table 5-13. (a) if blue computers sets an objective of minimizing total fixed and variable costs, where should they build the new plant? how should the network be structured? (b) if blue computers sets an objective of maximizing after-tax profits, where should they build the new plant? how should the network be structured? variable production and shipping cost ($/unit) annual fixed cost northeast southeast midwest south west (million$) kentucky 185 180 175 175 200 150 pennsylvania 170 190 180 200 220 200 n. carolina 180 180 185 185 215 150 california 220 220 195 195 175 150 demand ('000 units/month) 700 400 400 300 600