Smart factories to significantly boost manufacturing productivity

01 June 2017 5 min. read
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Smart factories have the potential to boost key manufacturing output statistics over the coming five years, relative to gains over the past decades according to a recent Capgemini study. As it stands, implementation of the technologies involved continue, however, companies finds themselves continue to walk up against various barriers, from a lack of coordination to a lack of investment.

Smart factories focused on a range of technologies are touted to rapidly improve output efficiency and quality through increasingly advanced, often automated, production cycles. Considerable investment is flowing into such factories, estimated at $4.5 trillion by 2020. Examining the potential benefits of smart factories in a new paper, multi-national technology consulting group Capgemini surveyed 1,000 senior executives from the largest companies across a range of key sectors and locales.

Annual gains from smart factory implementation

The firm’s findings in the paper’s chapter ‘Smart Factories’ show that the development and deployment of smart factories is set to see considerable benefits flow to capital owners, but is also likely to displace considerable numbers of workers. While the potential for growing unemployment during this realignment is a concern for many, employers will see this opportunity to reduce labour costs as a major incentive to invest in the technology – particularly as the economies of scale reduce overall capital investment costs.

Smart factories meanwhile look set to see considerable improvements to various key output measures, relative to incremental improvements from 1990s management and technological developments. On-time-delivery is projected to see 5.52% improvement in Compound Annual Growth Rate (CAGR) over the coming five years, compared to 0.42% over the years since 1990. Quality & Scrap too will see strong improvements over the coming five years, estimated at 5.13% improvement, relative to the average 0.44% in improvements since 1990.

Capex & Inventory will see the rate of improvement grow eleven times, relative to the years since 1990s, over the coming five years, while labour costs and overall productivity are set to improve by 4.6% and 5.04% CAGR respectively.

Smart factory gains realised

According to the study, many of the industry players that have implemented smart factories have already made overall productivity gains. Industrial manufacturing, for instance, saw gains of 20%, while automotive manufacturers with smart factories have seen gains of 19%. Pharma, Life Science and BioTech noted the lowest levels of overall productivity gains according to the firm, at 17%.

The average realised quality gain from smart factories also varied somewhat between industries. Industrial Manufacturing took the number one spot, at 20%, followed by automotive, at 19%. Aerospace & Defence and Consumer Goods saw the lowest levels of quality gains, at 15% and 16% respectively.

Smart city implementation status

According to the results, the level of development and implementation of smart factories differs considerably by region. The US has the highest level of operational smart factories, at 54%, followed by Germany at 46%. The UK has around 43% of respondents note ongoing operational smart city initiatives. India and China have the lowest level of smart factory initiatives, at 26% and 25% respectively.

Large numbers of respondents also noted that smart factory plans are currently being formulated, at 24% in the US, 30% in Germany, 36% in France and 27% in the UK. Chinese and Indian respondents note considerable interest in smart factories, with 53% and 42% respectively stating that they are currently formulating implementation.

Investment in smart factories

Investment in smart factories remains broad in terms of both type and investment levels. Brownfield, upgrade, projects tend to have the highest relative levels of investment, although 11% of such projects are for less than $50 million, while around 13% of projects have a price tag of between $100 - $500 million and 7% for more than $500 million. Around 5% in all investment categories have investment profiles incorporating both green-field and brown-field project types.

In total 20% of projects have investment tags of more than $500 million, 18% have profiles of between $250 million and $500 million and 18% have investment profiles of $100 and $250 million.

Areas of challenge for formulation and implementation

The report notes that a number of challenges arise both at the level of smart factory strategy formulation and smart factory implementation strategy. In terms of formulation, a ‘lack of coordination among different organisational units’ is number one, at 32% of respondents, followed by a ‘lack of leadership commitment', at 28%. Other areas cited as problematic are a ‘lack of a clear business case’, at 28%, and a ‘lack of clear ownership’ of the project, at 23%.

In terms of implementation, a ‘lack of investment’ is the biggest noted issue at 29%, followed by a ‘lack of maturity in lean shop floor automation processes’, cited by 22%. Organisational inertia is noted as a problem by 21% of respondents, while 20% note a ‘lack of a road-map’ for the strategy is also an area of major concern.