Benefits of smart factory investment

5G has the potential to dramatically enhance productivity and encourage growth across manufacturing industries. Through increased connectivity, the technology is likely to accelerate smart factory initiatives and given its transformational promise, mobile technology is viewed as a crucial tool for post-pandemic recovery.

5G is between 10 and 20 times faster than its predecessors 4G and long-term evolution (LTE), while simultaneously capable of supporting a million connected units per square kilometer. It boasts a transmission rate of up to 20GB per second and consumes only one-thousandth of the amount of energy per bit transferred compared to LTE.

The COVID-19 pandemic has highlighted the increased need for manufacturers to be able to swiftly change production processes in response to shifting demand alongside labour shortages. With 5G, manufacturers will be able to dynamically adapt their production areas to current circumstances at any time, without having to make major infrastructure changes.

A report on the benefits of 5G in industrial operations found that 75% of industrial companies in the UK plan to invest in 5G in the first two years of its availability. Nonetheless, comprehensive smart factory investment is also essential for companies to stay ahead of competitors in the present.

Understanding the cost of not transforming to Industry 4.0 is the topic of the most recent research from Siemens Financial Services (SFS), which estimates the size of the investment challenge and looks at the potential organizational and financial gains – from migrating to smart factory technology – that late adopters of this technology will miss out on.

The report “Industry 4.0: Rising to the challenge” conservatively estimates the global transformation challenge for smart factory migration to be in excess of $400 billion over the next five years. Europe alone accounts for $137.4 billon of this total.

An urgent issue

While the productivity benefits of 5G and digitalisation are potentially accessible to all manufacturers, the window of opportunity to transform and thereby gain competitive advantage is limited, making the issue an urgent one. Challenges to implementing digital transformation tend to pivot around the issue of finance. These barriers, however, can be overcome using smart finance techniques – known as Finance 4.0 – which cover the full range of requirements, from the acquisition of a single digitalized piece of equipment, to financing a whole new factory. Smart financing techniques help manufacturers address the need to invest, to harness sustainable third-party capital to reduce the burden on corporate lines of credit, as well as to deploy cash flow management techniques that help maximize available working capital. All of these are playing a crucial role in helping manufacturers deal with the current period of volatile markets and economics.

Smart finance solutions tend to be offered by specialist financiers, where the funder understands the technology, the markets, the applications and the operating pressures and where financing is an integrated part of the discussions with technology vendors. Using this knowledge, they create and align financing structures which are focused on achieving recognizable and clearly identified desired business outcomes for the manufacturer, through access to the right technology, services and advisory. Currently, one of the greatest advantages of such an approach is the ability to flex and adapt rapidly to market challenges. More broadly, these financing techniques align payments to the expected rate of return-on-investment delivered through new technologies and equipment.

Increased production capacity, agility and productivity, while improving price competitiveness are just some of the examples of the benefits of smart factory transformation. While manufacturers eagerly await the arrival of 5G, measures should be taken to keep factory processes optimized to ensure a business is competitive, especially during these challenging times. Smart finance provides an avenue to investment in the present enabling manufacturers to realize long-term transformation goals in the future.

This article originally appeared on Control Engineering Europe’s website. Edited by Chris Vavra, web content manager, Control Engineering, CFE Media, cvavra@cfemedia.com.

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