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Digitalisation has potential to add £2.1 bn to manufacturers’ revenues in Wales

Research from Siemens Financial Services (SFS) estimates the potential value digitalisation offers manufacturers in Wales.

Entitled the Digitalisation Productivity Bonus: Manufacturing in Wales, the report estimates that manufacturers in this region stand to gain £ 2.1 billion from digital transformation and the resulting improvements in manufacturing productivity. This equates to around 6% of total revenue for manufacturers in the region. These efficiencies, although not estimated here, can also be realised throughout the supply chain. As the UK faces a period of sustained significant economic crisis, this greater productivity and agility will help manufacturers in the region cope with the market disruptions.

Digital technology (also known as Industry 4.0) is enabling manufacturers to improve performance through increased manufacturing productivity, improved planning and forecasting, enhanced competitive capabilities and greater financial sustainability.

Wales has a strong manufacturing presence, with global investment continuing in sectors such as food and drinks and chemicals.[1] In 2019, the food and beverage sector achieved a record turnover figure of £7.473 billion;[2] while the chemicals industry accounts for almost 11% of manufacturing output in the region.[3] Together these industries generate billions in sales and represent countless jobs.

Although the exact building blocks of productivity differ between industries and regions, increasing that productivity – to either produce the same number of products for less or more products for the same – has a clear and calculable positive effect on costs and margins. This positive effect has been labelled the Digitalisation Productivity Bonus.

The paper draws on a statistical model, developed by SFS, which estimates the Digitalisation Productivity Bonus in Wales to demonstrate the potential gain from Industry 4.0 for manufacturers in the region – even through the current economic difficulties. The average ‘Bonus’ percentage range was applied to the total annual revenue of the manufacturing sector in Wales (revenue data derived from official third party sources).

To overcome the obstacle of investing in Industry 4.0 technology, specialist financiers have developed a set of smart financing tools that enable the transition to new-generation digital technology in a way that is affordable, sustainable and is designed to alleviate the manufacturer’s cash flow and working capital pressures. Aligning payments to commercial outcomes is particularly important during an economic period where all expenditure has to deliver an exceptionally clear and tangible link to business benefits.

The paper explores these specialist financing methods, including machinery & technology financing, retrofit finance, software finance, outcomes finance, digital enterprise finance and working capital solutions.

“Despite a large manufacturing presence, Wales is at risk of falling behind competitors in terms of productivity,” comments Neli Ivanova, Sales Manager, Industrial Equipment at Siemens Financial Services in the UK. “Today’s technology uses a wide range of data to improve production efficiency, such as real-time predictive maintenance to prevent unplanned interruptions. Welsh manufacturers must begin investing in Industry 4.0 technology if they wish to improve productivity through time and cost reductions.”

For further information, please see: https://assets.new.siemens.com/siemens/assets/api/uuid:2169e42e-f0fe-4104-8ce5-2cc29a82acdd/sfs-uk-wales-digitalization-sector-manufacturing.pdf

 


[1] Make UK, Regional Manufacturing Outlook 2019, 2019: https://www.makeuk.org/-/media/eef/files/reports/industry-reports/make-uk-bdo-regional-manufacturing-outlook-2019.pdf

[2] Business News Wales, Record Turnover of Over £7.4bn for Wales’ Food and Drink Sector, 6th February 2020: https://businessnewswales.com/record-turnover-of-7-473-billion-for-wales-food-and-drink-sector/

[3]   Make UK, Regional Manufacturing Outlook 2019, 2019: https://www.makeuk.org/-/media/eef/files/reports/industry-reports/make-uk-bdo-regional-manufacturing-outlook-2019.pdf

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