Stuart Hall, sales director for Epicor Software, UK and Ireland explores the issues…
Whilst manufacturing earnings and exports continue to stimulate economic prosperity, the nations that are at the top of the global manufacturing landscape are changing. To stave off the competition, those countries – such as Germany, the UK and the US – with a historical manufacturing legacy, are needing to invest in high-tech infrastructure and education to keep ahead of the pack; something that is triggering a technological renaissance, according to PWC. As the digital and physical worlds of manufacturing converge, advanced technologies have become even more essential for manufacturers and their wider competitiveness.
A recent Deloitte Global Manufacturing Competitiveness Index showed that the traditional manufacturing hubs are continuing to dominate the manufacturing landscape. Whilst these countries, on the whole, are expected to hold their own in the top ten over the next five years, it expects Asia Pacific nations such as India, Vietnam, Malaysia and Indonesia to all make great strides by 2020. Deloitte puts this increased market competitiveness down to their low labour costs, agile manufacturing methods, demographic trends and market growth.
Deloitte highlights that “Smart Factories” in the US, Japan and Europe, as well as Industry 4.0 initiatives, will need to play a decisive role to ensure they keep ahead of the emerging global competition from the East in the future.
The need for a digital transformation
According to another report from PwC, Industry 4.0 initiatives – undergoing a digital transformation to remain competitive – will add, on average, 2.9 per cent to revenues and contribute a 3.6 per cent cost reduction per annum over the next five years. First movers who combine high investment levels with advanced digitisation are set to achieve even more dramatic gains. To succeed, manufacturers – especially older manufacturing businesses – will need robust data analytics capabilities and need to focus on developing the internal culture to drive the transformation.
It is interesting to compare the industry attitudes of business leaders throughout the globe in regard to the risks and opportunities of business growth. A recent Epicor study found whilst 56 per cent of executives in China cite technology as an important factor in helping business growth in the past twelve months; whilst 29 per cent in the UK and only 12 per cent in Sweden thought the same. When asked what factors promote the growth of medium-sized companies in particular, technology leadership was higher, with 68 per cent among respondents from China, 38 per cent in the UK and 25 per cent in Sweden agreeing.
A potential skills gap
In tandem with technology, a skilled workforce is, according to the same Deloitte study as above, the most significant factor in aiding competitiveness in the manufacturing industry. In fact, the recruitment, development and retention of staff is just as important as adopting new collaboration models across an organisation.
There was more agreement from respondents to the Epicor survey when it came to the importance of a skilled workforce to drive business growth. 52 per cent of decision-makers from Germany, 52 per cent in India and 48 in Australia all agreed in its importance. The UK was the only real anomaly, with only a third of respondents (32 per cent) citing a skilled workforce as being imperative, perhaps due to the UK having such a shortage of skills engineers.
However, 63 per cent of respondents from the UK conceded that technology was the best way to compensate for the shortage. Compared to 51 per cent of respondents from Germany, and only 22 per cent of respondents from Sweden.
When it comes to using technology in order to free employees from mundane tasks, there was agreement, with 76 per cent of China, 78 per cent of India and two thirds (66 per cent) of UK business leaders agreeing it was important.
Keeping ahead of the pack
There is no doubt that continuing to embrace technology will play a significant role in the manufacturing sector. Digitally transforming the production processes can lower costs, accelerate enablement and ensure that a manufacturer is able to fend off the competition. Global competitors, especially new market entrants, are gaining ground due to their own investment of technology; and by their very nature they are often more agile and able to respond to changing market demands quickly.
Yet, it is important that manufacturers not only focus on the digital transformation of the production process but also understand the importance of access to real-time data. With ERP (enterprise resource planning), manufacturers can think about their businesses from a fresh perspective, focus on core growth activities and drive efficiencies.
Nick Castellina, Vice President, Principal Analyst Aberdeen Group: “Top performers must select a solution that can combat manufacturing pressures and emulates a modern technology environment. This means selecting functional, collaborative solutions that support real-time decision making, agility, and collaboration through capabilities such as mobility and analytics. Indeed, top-performing manufacturers select user-friendly, but powerful, solutions that enable users to easily access the information they need, and convert that information to actions and smart decisions that enable growth.”