UK manufacturing may have had a rough few years, but despite the uncertainties caused by Brexit and other external forces, a new white paper from Sage suggests the sector is in much better shape than statistics suggest.
Writing in the white paper, Professor Frank Piller of RWTH Aachen University and co-founder of MIT’s (Massachusetts Institute of Technology) Smart Customization Group, said the global survey of leaders in the discrete manufacturing sector demonstrated the following:
Sharing – Businesses need to embrace more openness in their innovation systems. They should think about getting value from sharing their data both internally and externally. The adoption of cloud-based systems is a big driver for this type of transformation.
Vision – Manufacturers must develop a vision that can enable a different type of business model, or a different value proposition in terms of the circular economy. They should not just look for operational efficiencies, but also the strategic value and cultural change that they can enable.
Agile thinking – Companies could give their manufacturing people a whole new set of tools and train people on the shop floor in design thinking. It’s more about process development and innovation, and how processes are managed, and much less about product development.
Optimisation – As everything becomes more interconnected, there will be a much larger chain from which to glean competitive and relevant data on which successful leaders will make smarter decisions, by connecting what they do in manufacturing with what happens in the broader supply chain, and how users consume their products.
This article first appeared in the March/April issue of The Manufacturer magazine. Click here to subscribe
That’s where emerging technologies like AI, automation, IIoT and analytics will really come into their own. I spoke to Rob Sinfield, Vice President Product Sage Business Cloud X3 at Sage, about the report.
Rob Sinfield: What we’re trying to say with this white paper is that UK manufacturing is in a much better state than people think. Looking at the report, it’s clear to see that the UK is ahead of our brothers and sisters in places like the US, Australia and Europe in terms of adoption of the circular economy and servitization.
No, it doesn’t. I think it’s quite clear to see, just looking again at some of the outputs of the report, that lowering carbon footprint will ultimately lower costs for these manufacturers. And manufacturers are doing this to gain favour with and goodwill from consumers. People are starting to look at companies who are actively promoting that they’re carbon neutral or pursuing a green agenda going forward.
Servitization is changing traditional business models. Do you believe this is a way for manufacturers to compete with overseas companies that can offer lower prices but not necessarily a better service?
Definitely. A company that manufactures a product, can install and provision it, and then ultimately service and look after it, extending its economic life has a massive advantage. UK manufacturers that can offer an operating expenditure model, or a subscription-based licensing or usage model, will be far more attractive than those selling something that may have a very large initial capital outlay that will, over time, not necessarily give you the same benefits.
The research showed that companies are pursuing the strategy because they get a higher level of market share. It also creates a recurring revenue model for that manufacturer. And, of course, we know from the software industry, for example, that if you look at companies which have a much higher recurring revenue versus a once-off revenue model, then they tend to have a much higher market valuation and that means they can get access to funding more easily. Servitization is a way of getting more wallet share from their customers and creating a more sticky customer relationship.
Your research says that significant numbers of UK manufacturing businesses are finding it challenging or extremely challenging to introduce cloud computing infrastructure. Why do you think companies like Sage can make their life easier?
One of the reasons why companies are struggling to adopt cloud infrastructure is that there are underlying infrastructural problems in the UK in terms of high speed fibre and broadband. If you’re in a high-velocity manufacturing environment and you’re connected to a manufacturing execution system that’s in the cloud, any form of latency (delay) could register as a dip in operational equipment efficiency. But the report also says the vast majority of manufacturers are consuming at least one or more cloud services at this stage: their CRM solutions, or perhaps HR and payroll solutions.
Sage is really starting to invest in both cloud native solutions, but also hybrid deployment, where some solutions are available on premises because of proximity and the types of capabilities required. This means delivering a large variety of choice, so a manufacturer could have their financials in the cloud, their HR in the cloud, but potentially manufacturing solutions and operations capabilities on premises or deployed in a hosted environment, managed by the customer or by a partner.
And you can listen to Rob Sinfield being interviewed as part of the new The Manufacturer Podcast