Could an acceleration in digital transformation be the one upside of the energy cost crisis?
UK Plc has long grappled with the question of how to boost productivity. For our SME manufacturing base, part of the solution hinges on increasing the adoption of industry 4.0 technologies, but it has proven to be a hard sell.
With this in mind, energy price inflation is a major opportunity to illustrate just how effective digital transformation can be in having a positive impact on the bottom line for our small and medium sized manufacturers.
The benefits of digitisation are clear. A 2019 report from Accenture found that digital technologies have the potential to add £455bn in value to UK manufacturing over the next decade. Add to that the fact that we will only be able to encourage more OEMs to invest and grow here if they can plug into a supply chain that is digitally enabled, and the rationale is compelling.
And yet, anyone involved in digital transformation will tell you that boosting adoption in our sector is challenging, particularly when it comes to smaller firms. According to the OECD, the gap in digital adoption between businesses with 10-49 employees and larger firms has grown over the last decade. Because digitalisation is an important driver of productivity, and in turn wage growth, these gaps have contributed to increased inequalities among people, places and firms.
It’s not because our SME manufacturers are lacking in innovation or ambition, far from it. Rather, the technology sector has a habit of shrouding itself in a level of jargon and complexity that can be alienating. This sense of confusion was highlighted by research undertaken by the University of Liverpool. Among the biggest barriers that SMEs said were preventing them from going digital, was a lack of understanding about what is appropriate technology (25%) and fears about the financial implications of making the wrong investment (21%).
Sadly, this means for smaller firms lacking in CAPEX or resources, the argument to invest in digital technology just isn’t cutting through.
The current energy crisis is therefore an opportunity to show SME manufacturers the possibilities and benefits of digital adoption, through a lens that is meaningful.
It is an immediate and tangible challenge that almost all SME manufacturers are facing, which can be addressed quickly. If experts and technology providers seize this opportunity, digital transformation can be boosted to help lower operational costs, while driving forward sophistication and innovation in our manufacturing supply chain.
One clear pathway to how this can be achieved within SME manufacturers is through energy optimisation. Reviewing present schedules, equipment and processes to ensure they are being utilised in a way that optimises energy usage, can be a low-cost solution to how SME manufacturers can combat rising energy costs.
Cheshire & Warrington 4.0, an ERDF-funded digital innovation project, has been established to assist SME manufacturers by first helping to diagnose their specific challenges and opportunities and then working up a digital solution in partnership with them.
We recently worked with Devonshire Bakery, a 100-year-old family-run manufacturer in Cheshire to see how its processes and equipment could be transformed to optimise its energy usage.
Priding itself on its rich heritage of baking, it produces a wide selection of breads, from both traditional and modern methods, offering up to 200 different varieties of baked goods a day. This broad offering of products means the business utilises several different ovens and freezers.
Operating multiple energy-intensive units every day, meaning the business was particularly vulnerable to rising energy costs.
Benefitting from the forward-thinking management team, Devonshire Bakery is constantly developing new products to keep up with the latest trends and always welcoming recommendations from third parties, to constantly improve its processes. Meaning, the business understood the need to digitise.
After being introduced to the research engineering team at Liverpool John Moores University (a delivery partner in the CW4.0 scheme), the management team were advised on a number of Industry 4.0 technologies that would make a big improvement to their day-to-day efficiencies.
Output tracking devices were installed on each piece of equipment, providing the business with live data to monitor its energy usage in real-time, making it easy to identify wastage.
The team have since been able to identify energy-efficient equipment and make an informed on where to invest in more efficient equipment. This data has also allowed the team to make informed decisions on how to adjust day-to-day processes, including reducing stock in freezers and altering the times that machinery is turned on and off. This data is shared throughout the whole team, meaning everyone can buy into this evidence-based approach.
The immediate need to address energy costs provided a compelling reason to engage with CW4.0 and Devonshire Bakery is now planning a broader range of digital adoption projects as a result.
Taking SME manufacturers on this kind of iterative journey of digital adoption is key. For example, knitted mesh specialists Knitwire (another CW4.0 beneficiary) understood the need to digitally transform to remain competitive when it engaged with us, but the prospect of devising a five-or-ten-year digital roadmap seemed costly and daunting.
Working with a specialist team of research engineers through CW4.0, Knitwire’s management team were advised on gradual, cost-effective digital changes that would have a direct impact on its business.
For instance, by installing an MRP system to monitor stock control, Devonshire Bakery has saved storage costs, staff time, wastage and reduced the reliance on other, foreign suppliers that can be susceptible to long lag times.
Being provided with this specialist advice has empowered Knitwire, like so many other SME manufacturers, to make meaningful changes, gradually.
Engaging with SMEs on their own terms and with a focus on their immediate challenges – rather than bombarding them with the art of the possible – is the only way we will convince more businesses to start their digital journey. And in my experience, once they start they will continue. The first ten SME businesses to work with CW4.0 have gone on to invest a combined £91,390 in adopting new technologies with applications as diverse as rapid prototyping and testing of new products, to adopting immersive technologies to improve the customer experience.
CW4.0 is an innovation project helping Cheshire and Warrington manufacturing companies to identify and solve problems and improve products and processes, using digital tools and technologies.