Smart factory adoption could be catalyst for automotive industry

21 June 2018 Authored by Consultancy.uk

A new study has found that adoption of smart factory technology is set to add up to $160 billion annually to the global auto industry in productivity gains by 2023 onwards. However, while many companies are subsequently scrambling to upgrade their operations, spending substantially in the process, just 4% can consider themselves “masters” of the topic.

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 has already poured into such initiatives, with spending on smart factories expected to hit at $4.5 trillion by 2020, but according to a report in 2017 by Capgemini, this spending would boost the manufacturing sector, to the tune of a 5.52% improvement in Compound Annual Growth Rate (CAGR) over the coming five years, compared to 0.42% over the years since 1990.

One year on, a new report by the Digital Transformation Institute, Capgemini’s in-house think-tank on digital matters, has shown that the automotive industry can expect to achieve $160 billion in annual productivity gains and hit average growth of 7% as of 2023 by adopting smart factory models. According to the study, an average global top ten automotive manufacturer would realise even more impressive figures as a result, with an additional $4.6 billion or a 50% growth in operational profits annually within five years of a full smart factory implementation.

The automotive industry has the highest share of struggling smart factory initiatives

As a result of this substantial promise, by the end of 2022 24% of automotive manufacturers expect that their plants will be smart factories, while nearly half of automotive companies (46%) already have a smart factory initiative, behind only industrial manufacturing (67%) and aerospace (63%). Meanwhile, at a further 43% of automotive companies, smart factory initiatives are currently being formulated.

Researchers found that, the automotive sector has the highest share of organisations which have invested more than $250 million in smart factories. 49% of automotive manufacturers have exceeded this level of spending, compared to the 45% of all other industries. Just 17% of automotive representatives meanwhile spent less than $50 million, compared to 19% of everyone else.

The figure varies between different countries, however the major economies of the EU are steadfastly in the lead when it comes to the adoption of smart factories in the automotive sector. France leads the way with 63% of respondents in the nation stating they had an ongoing smart factory initiative and a further 34% adding they were formulating one. Germany follows with 59% and 27% respectively, and the United Kingdom completes a European top three, at 56% and 36%, ahead of the US.

Auto manufacturers across the world are pursuing smart factory initiatives

Along with America, which under its current administration is placing a heightened importance on home-grown manufacturing, manufacturing hubs of India and China also lag behind Western Europe’s main players. This may relate to the reduced labour costs of the respective nations, whose industrial captains likely feel less pressure to replace employees with machinery as a result.

Just beginners

In spite of the growing clamour for smart factories, however, few manufacturers have actually translated their enthusiasm into concrete results. Only 4% of automotive manufacturers, while the vast majority, 85%, are still languishing in the beginner category.

Those classified as beginners typically boast both low levels of digital intensity and transformation management intensity, compared to conservatives who are keen to engage in transformation management – but steadfastly reject an increase in digital intensity. While fundamentalists such as this prefer to concentrate on succeeding through traditional methods, their declining number, at 5% of the manufacturing sector, suggests that the potential of smart factory technology is permeating all but the most steadfastly resistant business plans.

Few auto manufacturers have translated their enthusiasm into real progress

Once more though, Capgemini’s paper reinforced that the possible benefits are rarely being glimpsed by companies so far. A sizeable 42% of automotive manufacturers accept they are not on track to realise the full potential of smart factories and are struggling with the technology move. On top of this, around a third of automotive suppliers, or 32%, claim to have been successful in their transformations.

Commenting on what may be going wrong for many in the industry, Nick Gill, Chair of Automotive Council at Capgemini said, “Digital maturity holds the key to realizing the full potential of smart factory initiatives. This study clearly demonstrates the enthusiasm among automotive organizations to invest in smart factories and the awareness of the long-term benefits. However, more can be done for automotive suppliers to take a collaborative approach with OEMs to optimize their smart factory initiatives.”

Grégoire Ferré, Chief Digital Officer at Faurecia and a Capgemini client added, “By using smart factory technology in our business, we have seen great benefits with regard to our employees’ productivity. They use sophisticated tools such as smart robots to create a safer environment, which in turn provide them with more time to focus on other important tasks.”

News

More news on