FEATURE Industry 4.0 & Smart Factories 

Migrating to smart factories: key to surviving and thriving

By Brian Foster, Head of Industry Finance, Siemens Financial Services, UK T

he current health and economic crises have aff ected all industries, with manufacturing being no exception. The agility, cost-

effi ciency and productivity benefi ts that stem from transforming into a fully- digitalised factory fl oor can be critical in helping manufacturing businesses withstand times of change and to better adapt to a fl uctuating demand in either direction.

Understanding the cost of not transforming to Industry 4.0 is the topic of the latest research from Siemens Financial Services (SFS), which estimates the size of the investment challenge and looks at the potential organisational and fi nancial gains from migrating to smart factory technology that late adopters might miss out on. Seizing digital transformation can constitute the diff erence between falling behind or surviving and thriving, even more so in the light of recent economic uncertainty.

Transformation challenges The SFS report “Industry 4.0: Rising to the challenge” – the fi rst of a series – conservatively estimates the global transformation challenge for smart factory migration to be in excess of $400bn over the next fi ve years. This is after predictions have been reduced to just half of the available market, thereby off ering a highly conservative view of the magnitude of the fi nancial investment required even to reach 50% market penetration. Europe alone accounts for $137.4bn of this total. While the productivity benefi ts of digitalisation are potentially accessible to all manufacturers, the window of opportunity to transform and thereby gain competitive advantage is limited, making this an urgent issue. Currently just 10% of global manufacturers can be classifi ed as “digital champions”, with almost two- thirds in the early stages of their digital journey. If manufacturers continue on this current trajectory, they are unlikely to withstand the competitive realities of

14 June 2021 | Automation

manufacturing both now and in the future. Previous research from SFS has shown that the window of opportunity to get ahead of the competition has a tipping point of between fi ve and seven years. Once 50% of manufacturers have made substantial investments in Industry 4.0, those that have not yet implemented digital transformation will be playing catch-up. Challenges to implementing digital transformation tend to pivot around the issue of fi nance – particularly during this time of economic turbulence. These barriers, however, can be overcome using smart fi nance techniques – known as “Finance 4.0” – which cover the full range of requirements, from acquisition of a single digitalised piece of equipment to fi nancing a whole new factory. Smart fi nance solutions tend to be

off ered by specialist fi nanciers, where the funding party understands the technology, markets, applications and operating pressures and where fi nancing is an integrated part of the discussions with technology vendors. Using this knowledge, they create and align fi nancing structures focused on achieving recognisable and clearly-identifi ed desired business outcomes, through access to the

right technology, services and advice. Looking ahead

Looking ahead, with technology innovation and upgrade periods shortening, smart fi nancing techniques off ered by specialist funders can protect manufacturers from technology obsolescence by incorporating upgrades into a total fi nancing package. This allows the life of the technology platform to be extended as well as the value and capabilities it delivers to the manufacturer. There is a consensus among global analysts that it is critical to maintain new technology adoption even in times of economic diffi culty. As the pace of digital transformation gains momentum and the window of opportunity for competitive advantage from investment continues to shrink, manufacturers are increasingly making use of integrated fi nance options to facilitate their Industry 4.0 adoption, accelerating their journey toward digitalisation.



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