Britain’s manufacturers are accelerating their investment in digital technologies as the fourth industrial revolution gathers pace, driving increased productivity, creating greater demand for higher level skills, and improving their energy efficiency, according to a report published by Make UK and IT specialists Infor.
According to Make UK, the global pandemic, and the massive disruption to supply chains, as well as the UK’s exit from the EU are just some of the external drivers that have swayed larger cohorts of manufacturers to adapt their processes and digitalise their systems.
The current financial challenges and the increasing cost of energy are likely to drive this adoption even further, with the survey showing that manufacturers intend to increase their investment in digital technologies in the next two years.
As a result, more companies are moving to the ‘evolution’ stage of digital adoption which is where they are implementing changes to their processes, in particular to marketing, product design, manufacturing systems and finance.
However, the survey also shows that the biggest inhibitor to more rapid digital adoption remains a lack of technical skills within the business. In response, Make UK is urging the Government to set up a Regional Advisory Service for digital adoption and roll-out the successful Made Smarter initiative across the UK. According to Make UK this would help SMEs in particular develop digital skills and practices.
Nina Gryf of Make UK, said: “Our economy is undergoing a profound digital transformation with the potential to transform our lives and economy, making it more productive, resilient, and sustainable. Those countries that are better prepared for these changes will benefit the most, with the companies increasing their investment powering through the challenges that lie ahead with greater productivity, better skill levels and reduced emissions.
“The key now is for manufacturers to unlock their potential on digital adoption which will be key if we want to invest and grow.”
Andrew Kinder of Infor added: “It’s encouraging to learn that those who have invested in digital technologies, report that their investments have paid off and they felt better prepared to weather the storms. Looking forward, as smart products, automation and robotics are increasingly adopted, the data and insights these technologies drive out will yield yet further benefits for manufacturers who have put the digital foundations in place.”
According to the survey almost 80% of manufacturers have increased their spending on digital technologies in the last two years, with a similar number planning to do so in the next two.
These investments are bringing major benefits to companies’ operations with almost two thirds (39%) saying it has improved productivity, just over half (35%) saying it has brought better profitability and the same number saying it has brought greater labour efficiency. Almost one in ten companies (9%) said their productivity had improved by more than 50% as a result.
While the main investments are taking place in areas already well established such as e-commerce, finance and manufacturing processes, the impact of the pandemic can be seen in the increasing efforts to digitise supply chain management. Almost a third (30%) of manufacturers are using digital technologies for supply chain management and a further 40% are considering doing it.
This is improving the ability of companies to respond at speed to the changes in their supply chain and, improve visibility with their customers and suppliers. As a result, over a third of companies (35%) plan to have up to a quarter of their processes automated in the next two years and a further quarter plan to have up to half their processes automated.
These investments are also helping companies with their net zero ambitions with a third (34%) saying it had improved energy efficiency and a similar number saying they had reduced emissions as a result of digital adoption.
Furthermore, the survey shows that, in contrast to fears expressed in some quarters that increased automation will lead to jobs being replaced, the increase in digital technologies is creating greater demand for jobs, increasingly of a higher skilled level.
More than a third of companies (37%) said that job opportunities had increased within their business, while more than four in ten companies (42%) said they needed higher level skills as a result.
However, by contrast, the perennial issue of access to skills is the main barrier to companies investing in and, making the most of their investment in digital technologies. Almost a third (32%) of companies said that a lack of skills within the business for implementation was acting as a barrier, while a similar number (33%) said a lack of technical skills was holding companies back from maximising their investments.
To help maximise the digital potential of companies and boost the take up of fourth industrial revolution technologies Make UK has made the following recommendations to Government:
- Roll out Made Smarter across all regions: Government should commit to the full roll-out of Made Smarter and expand the scheme to include industrial decarbonisation as digital and green increasingly go hand-in-hand with digitising to decarbonise – a key focus for many manufacturers.
- Expand the R&D tax credit to include capital expenditure: The R&D tax credit should be expanded to include capital equipment within qualifying expenditure to spur further digitalised R&D.
- Expand Help to Grow Digital: This should be used to support those manufacturers aiming to use a complete package of systems and software.
- Establish a regional SME advisory service for digital adoption: Accept that the main delivery focus should be regional and appoint a lead delivery partner in each region, to create consistency and level up