Digital investment is key to long-term growth for industrial manufacturers
21 November 2019
Global trade disputes and political instability, particularly around Brexit, are making businesses cautious when it comes to investment decisions. The depth of these challenges has not been lost on the industrial manufacturing (IM) sector’s leaders, with our 22nd Annual Global CEO Survey showing that government policy worries are top of mind (40%), while trade conflicts come a close second (39%).
The CEO survey also emphasises the fact that streamlined, digitised processes and operations can help IM businesses respond quickly to these global economic challenges. This is reiterated in our eight ‘no regret’ decisions that will help organisations as they prepare for Brexit – number one on the list is ‘plan to be agile’. As such, this should actually be a time for the IM sector to invest in digitisation programmes that underpin long-term strategic goals and protect jobs.
PwC's Industry 4.0 research found that only 1% of UK manufacturing companies are considered to be 'digital champions' compared to 10% globally. The implication is that few UK firms have implemented digital tools that would give them a low-cost and lean operating environment flexible enough to respond quickly to geopolitical and global economic challenges.
Digitise wherever possible
Until now, many of the programmes aimed at digitising operations in the IM sector have been piecemeal, with companies running pilots that solve local issues rather than common problems. In some cases, the same pilot is executed by different teams at different locations trying to solve an identical problem. There are several reasons for this, including a cautiousness about making extensive financial investments, perhaps underpinned by a traditional risk-averse engineering mindset but also an inability to govern a process that allows innovation at the edge while standards are set from headquarters.
Some of this resistance is understandable. Technology in many IM organisations is fragmented, so companies prefer to avoid the complexity of connecting machines, platforms and software from different vendors, which has likely been deployed by different integrators.
But while no real leader in digital transformation has emerged, some businesses have been making moves in the right direction. UK manufacturers could look at Bosch, the German industrial products manufacturer for the automotive industry, which has implemented automation tools that help workers from procurement through to shipment logistics. The company has set a goal of attaining €1bn in cost savings from this effort by 2020.
Similarly, aerospace supplier Safran has streamlined its production line with collaborative robots, or 'cobots', which combine people-specific skills such as analysis and decision-making with the brute strength and precision of a machine.
Smaller-scale digitisation programmes can also yield significant savings if targeted in the right areas and implemented thoughtfully. For example, digital tools can provide more transparency in the manufacturing process with realtime waste and OEE (overall equipment effectiveness), while automation can create efficiencies and new insights in certain administrative roles such as HR, accounting and compliance.
To get the full benefits of investments in digital technology and processes, businesses must also invest in upskilling their workforce so they’re able to successfully manage the adoption of new technologies. This is true both of IM senior leaders, who need awareness and knowledge of relevant technologies, and the broader workforce that will need to operate new systems.
However, PwC's Upskilling Hopes and Fears research found that while almost four out of five (79%) manufacturing workers would welcome the chance to better understand new technology, only 23% said their employer was currently giving them relevant training. Closing this knowledge gap will be critical to driving successful technology adoption, and in turn critical to the future competitiveness of the UK IM sector.
That said, new technology is also widely perceived as a threat rather than an asset. The same research found that more than a quarter of employees in the sector (29%) think that their job will be significantly changed or made obsolete by automation in the next 10 years.
Ultimately, businesses need to be flexible and streamlined if they're going to withstand the ongoing economic uncertainty. Our research shows that IM leaders are already looking inward to protect revenue, with 81% of the industry’s CEOs saying they plan to rely on operational efficiencies to improve their competitiveness. These investments will be critical to ensuring that the industrial manufacturing sector is setup to achieve long-term growth.