Technology, governance and risk: Navigating the evolving challenges of the manufacturing industry
The ever-changing manufacturing industry requires flexibility and an open mind to face both the current challenges and those that the future brings. With the uncertainty of Brexit, this becomes more apparent as companies must reassess their financial management and adoption of digital technologies.
To this end, national and international manufacturers can benefit greatly from premier restructuring, global valuation and corporate finance advisory on disputes and investigations, real estate, regulations and compliance.
Allan Graham, Managing Director at Duff & Phelps’ London office, has been working on the corporate recovery market for over 25 years now. Notably, he worked for one of the ‘Big Four’ accounting firms for 19 years as a Restructuring Partner prior to joining Duff & Phelps, where he acquired a vast knowledge of the manufacturing base in the Midlands.
Currently, he works to assist mid-market corporates and provides advisory support to manufacturing, recruitment, printing and packaging businesses.
“UK manufacturing is thriving, it’s the world’s eighth largest industrial nation,” starts Graham, “some projections indicate that by 2021, we could very well be in the top five, which is staggering. Its contribution to the UK economy is equally impressive, as it makes up 44% of all UK exports, 70% of business R&D investment and directly employs 2.6mn people”.
Graham has good reason to support this belief. “According to the Office for National Statistics (ONS), that means the UK’s industrial sector has grown 1.4% year-on-year since 1948,” he says. “The ONS itself puts that down to a better-skilled workforce, a shift in production from low to high productivity goods, improvements in technology and increased investment in R&D”.
For Graham, this idyllic picture is counterbalanced by the forward-looking and inter-related challenges manufacturers face in today’s market. “The UK manufacturing sector is not as productive as some of our competitors. On every measurement, the UK productivity levels have been a consistent challenge over the past decade, and this is not just in the manufacturing sector, but services too. In recent months, this does appear to be reversing but it remains a major challenge all the same”.
Competitiveness is at the core of this issue, as manufacturing in the UK is “no longer predicated on producing huge sheets of steel at the lowest possible price” but, rather, how to better implement technology and talent to produce better products for the world.
“There is no doubt that there is a skills gap – anyone in the manufacturing sector will say the same. The UK Government Office for Science reported last year that a larger working population with increased skills at the core of the manufacturing industry will increase the talent pool to help drive the sector forward, for the long-term future of the UK manufacturing”.
Technology will be a key player in propelling the industry forward for its survival, for which most manufacturers are realigning their operational strategies through deploying interconnected and intelligent manufacturing systems. Nevertheless, Graham identifies the success of these strategies in a company’s ability to “distinguish between what is new and what is useful”.
The success of operational manufacturing processes is directly linked to how manufacturers deploy their technology-based strategies and implement innovation, which has a great impact on the businesses’ finances. “Manufacturing in the 21st century is no longer about mass-production. Instead, it involves the constant monitoring and modification of the production process to make a company as efficient as possible while delivering a premium service to the consumer,” analyses Graham. “Making solid expenditure decisions based on a combination of historical trends and real-time information is vital, and here technology can play a critical role”.
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For this, Graham identifies cash flow as a mission-critical aspect to forecast and plan carefully. “It never fails to surprise me how many businesses we encounter don’t put enough emphasis on cash flow forecasting, both long term and short term,” he observes. “This basic financial control is too often overlooked until a business is forced into it due to a crisis.”
This is one of Duff & Phelps’ core activities as a consultant, as “many of the assignments we undertake for all types of businesses are to design and implement cash flow procedures for companies experiencing stress or distress,” highlights Graham.
The company certainly has a lot to say on how to turn businesses in crisis around, helping them to recover and become solvent again based on years of experience. “We will always strive to find the most innovative and practical solution to resolve issues affecting business performance – we have worked on some of the most challenging turnaround and crisis management situations. Discrete and determined, we work with underperforming businesses to restructure them and maintain enterprise value,” summarises Graham.
“We are committed to supporting the Rescue Culture adopted by all responsible lenders and corporate recovery professionals. This means that we aim to help our clients implement change early enough to prevent their businesses from having to face insolvency,” assures Graham. “When it’s too late to restructure or rescue a business, we have established relationships with a wide range of banks, asset-based lender and business angels through which we can source rescue funding to either support the troubled business or find a business under new ownership.”
The uncertainty of Brexit and how this will impact the industry will in turn have a huge influence on how Duff & Phelps works with its clients/or companies. “This uncertainty is causing anxiety across multiple sectors, not only in the UK, but across Europe,” states Graham.
“What certainties do we have? Well, I would argue that UK manufacturers will see an increase in demand from the so-called BRIC countries (Brazil, Russia, India and China), that the US and the EU will remain our major export markets, and that our hi-tech and high-value products will continue to be our main export strength.”
For this, it is important to be proactive and take advantage of some of the market trends and opportunities this will bring and how it could change the way goods are manufactured. “With a growing world population and increased demand for materials, water, energy and land, supply chains will become much more volatile and manufacturing closer to home will make the country more resilient to these effects,” explains Graham.
“Reshoring production – manufacturers who had previously moved their production overseas bring it back to this country – is already a reality and it is now much easier for Britain to compete with lower cost locations on quality, delivery speed and customisation”.
With regards to technology and the important role it will play in the Industry, Graham sees individuality as a key characteristic. “Mass personalisation of low-cost products by methods such as 3D printing will enable everyone to become their own manufacturer and, increasingly, manufacturing will become more urbanised and less based around large factories with many workers.”
This will be embedded in a strategy where technology becomes customer-centric: “Companies that do well will be those that make use of ‘big data’ to learn more about their customers and use it to their advantage, to improve their products and enhance their competitiveness”, concludes Graham.
Siemens: Providing the First Industrial 5G Router
Across a number of industry sectors, there’s a growing need for both local wireless connectivity and remote access to machines and plants. In both of these cases, communication is, more often than not, over a long distance. Public wireless data networks can be used to enable this connectivity, both nationally and internationally, which makes the new 5G network mainframe an absolutely vital element of remote access and remote servicing solutions as we move into the interconnected age.
Siemens Enables 5G IIoT
The eagerly awaited Scalance MUM856-1, Siemens’ very first industrial 5G router, is officially available to organisations. The device has the ability to connect all local industrial applications to the public 5G, 4G (LTE), and 3G (UMTS) mobile wireless networks ─ allowing companies to embrace the long-awaited Industrial Internet of Things (IIoT).
The router can be used to remotely monitor and service plants, machines, as well as control elements and other industrial devices via a public 5G network ─ flexibly and with high data rates. Something that has been in incredibly high demand after being teased by the leading network providers for years.
Scalance MUM856-1 at a Glance
- Scalance MUM856-1 connects local industrial applications to public 5G, 4G, and 3G mobile wireless networks
- The router supports future-oriented applications such as remote access via public 5G networks or the connection of mobile devices such as automated guided vehicles in industry
- A robust version in IP65 housing for use outside the control cabinet
- Prototypes of Siemens 5G infrastructure for private networks already in use at several sites
“To ensure the powerful connection of Ethernet-based subnetworks and automation devices, the Scalance MUM856-1 supports Release 15 of the 5G standard. The device offers high bandwidths of up to 1000 Mbps for the downlink and up to 500 Mbps for the uplink – providing high data rates for data-intensive applications such as the remote implementation of firmware updates. Thanks to IPv6 support, the devices can also be implemented in modern communication networks.
Various security functions are included to monitor data traffic and protect against unauthorised access: for example, an integrated firewall and authentication of communication devices and encryption of data transmission via VPN. If there is no available 5G network, the device switches automatically to 4G or 3G networks. The first release version of the router has an EU radio license; other versions with different licenses are in preparation. With the Sinema Remote Connect management platform for VPN connections, users can access remote plants or machines easily and securely – even if they are integrated in other networks. The software also offers easy management and autoconfiguration of the devices,” Siemens said.
Preparing for a 5G-oriented Future
Siemens has announced that the new router can also be integrated into private 5G networks. This means that the Scalance MUM856-1 is, essentially, future-proofed when it comes to 5G adaptability; it supports future-oriented applications, including ‘mobile robots in manufacturing, autonomous vehicles in logistics or augmented reality applications for service technicians.’
And, for use on sites where conditions are a little harsher, Siemens has given the router robust IP65 housing ─ it’s “dust tight”, waterproof, and immersion-proofed.
The first release version of the router has an EU radio license; other versions with different licenses are in preparation. “With the Sinema Remote Connect management platform for VPN connections, users can access remote plants or machines easily and securely – even if they are integrated in other networks. The software also offers easy management and auto-configuration of the devices,” Siemens added.