Manufacturing: – The digital revolution 2018 and what does it all mean

Brexit has created uncertainty for manufacturers. As a contributor of 10% of UK output, manufacturers’ concerns are an important consideration for those with a vested interest in the success of the UK economy. Artificial Intelligence (AI) and automation are transformational changes which could make or break manufacturers’ fortunes in this uncertain period. As manufacturers consider the outlook for this year, Legatus Law considers what may be on many manufacturers’ list of objectives this year.

According to figures released by EEF/BDO Manufacturing, UK manufacturers have had a successful final quarter in 2017, with growing global demand reducing the impact of challenging conditions at home. There has been an increase in investment in the UK by manufacturing firms. Brexit’s effects have not yet been felt but this will not last, and how manufacturing firms invest in the UK will change.According to KPMG, engineering and industrial product companies are those most likely to shift supply chains to EU countries where customs tariffs and barriers will be less costly post-Brexit. Most companies think Brexit will lead to rising costs (operating costs, profit margins and indirect taxation). 39% of mid-sized manufacturers are looking for new sources of finance and investment, to fix the costs of capital to offset anticipated longer lead times or payment periods in the future. One huge capital cost will be increasing automation.

It is hoped 2018 will bring certainty over what the post-Brexit world will look like, at least during the transition period. For now, there still remains much uncertainty but automation is likely to be a key consideration for any business, regardless of the outcome of any future trade deals with the EU and other trading blocs and countries.
What may feature on many manufacturers’ wish-lists this New Year?

  1. Financial support for R&D to increase efficiency and competitiveness in emerging AI/digital technologies:
  2. A boost in manufacturers’ workforces’ technological skills to help create stable workforce which will be able to thrive in a future where AI and automation becomes increasingly prevalent.

The digital revolution is known as “Industry 4.0”. Forbes points to four key ways that ‘smart’ factories will make a difference:

  1. Adaptive manufacturing: production lines are usually set up using robots which each perform a specific function. Changing this function is time-consuming and expensive. Smart robots which complement human workers can learn to adapt through experience and will therefore be able to work alongside human co-workers to perform multiple tasks. The downside may be that, by having to employ people as well as invest in robots, the costs may be prohibitive for many firms. The workers will also require further training to ensure safe collaborative robot/human working practices. However, savings could be made by avoiding the need to invest in adapting machinery.
  2. Predictive maintenance: machinery is traditionally serviced in accordance with a fixed timetable, based on past experience. For example, factories may shut at the same time each year. This can be inefficient where machinery is shut down and maintained when this is not actually required or where machinery requires service outside of the normal timetable. A robot can now be used to monitor another robot’s servicing needs and predict these before they actually occur, ensuring efficiency is maintained and the time human workers expend on tasks relating to servicing and maintenance is minimized and can be planned in advance.
  3. Automated quality control: low productivity (time it takes to make a single unit) and low yield (the number of units passing quality control) can now be increasingly monitored by robots which quickly and efficiently relay the areas where productivity and/or yield are experiencing problems, ensuring a timely response. Robots can then sometimes also be used to find solutions/fix the problem. This can save vital minutes/hours which can stop unnecessary production line delays and prevent significant loss of time and money.
  4. Demand-driven production: When production is too high or too low when compared with demand, there can be falls in revenue due to stagnation or over-supply. The rise in the Internet of Things, which will begin to link real-time demand to activity on production lines will lead to more efficient demand-driven production. Whilst this technology is still in its infancy, this is an area which will have growing relevance to manufacturers. Combined with adaptive manufacturing, this will result in a much more flexible manufacturing process which can respond to changing consumer demands more quickly.

Whilst sources of finance will need to be sought to cover the capital costs of investing in automation/AI, there will also need to be a significant investment in attracting people to develop and maintain such systems.

According to EEF, there are several important ways this should happen:

  • Identify the key new skills which manufacturers’ workforces will require to thrive in the changing digital world. Once identified, firms will need to consider retraining and upsklling of existing employees;
  • New employees will need to be found and this will involve working with other sectors, government and education providers to encourage a renewed interest in manufacturing amongst potential future employees, and appropriate courses and apprenticeships to help realise their ambitions. This may involve a thorough review of the national curriculum and clear new accreditation standards.

UK manufacturers face much uncertainty, but one thing is certain; AI/digital technology will transform the future of manufacturing and engineering and may help create a more efficient and attractive investment opportunity for new future trading partners at a time when the need to forge new partnerships, as well as strengthen existing ties, is essential.
Legatus can help protect your business protect themselves at every step when considering new contractual partnerships, how to review your employment practices and dealing with any disputes which may arise when adopting changes (both with suppliers, partners and stakeholders, including employees).

Please call Rashmi Dubé or Andrew Pickering on +44(0)207873279 or +44(0)1133021330