Posted By Muthukumar Viswanathan, April 05, 2016 at 12:29 PM, in Category: Factories of the Future
Change is inevitable in manufacturing. The future of manufacturing is often defined by doing more with less, re-ordering the world to create more compact products, and re-aligning enterprise strategies to provide more value.
Europe has been one of front runners in the race to manufacturing excellence. The manufacturing sector currently accounts for 15.0% of its GDP and provides about 33 million jobs. However, global transitions such as declining energy prices, diminishing resources, new competition from emerging markets, and an aging workforce have resulted in a slower growth trend. Rejuvenation of the existing manufacturing base is Europe’s key initiative to continue to boost its industrial growth in an effective, efficient, and sustainable manner. Frost and Sullivan has identified seven transformative forces in its upcoming research, "Future of Manufacturing in Europe", that are poised to change European manufacturing.
Factories of the Future: With digitization and Informationand Communication Technologies (ICT) infrastructure being core focal points in Europe’s 2020 Agenda, the vision of smart and connected factories is swiftly becoming a reality. The €17 billion budget (2014-2020) for the “Industrial Leadership” category in the Horizon 2020 R&D funding program is one such example of how the EU plans to evolve current manufacturing operations by leveraging key areas such as advanced computing, sensor technologies, and robotics. As manufacturers look towards a more connected and collaborative ecosystem, the 5G rollout plan across Europe between EU and Japan (2015-2020) will pave the way for increased connectivity for both fixed and remote assets. The subsequent data deluge will lead to a significant increase in data storage infrastructure, with data stored on the cloud to rise to 40.0% by 2020. Finally, the ability to maximize overall plant efficiency through sensors with bundled functionality, state-of-the art predictive analytics, and control-on-the-go across a diverse array of manufacturing processes will ensure that Europe’s industrial production index continues to see an upswing.
Nearshoring in the East: While over the years Western Europe has always been in the limelight from a manufacturing standpoint, Central and Eastern Europe is fast-becoming a major hub for manufacturing innovation and value-addition owing to high-quality labor, strong infrastructure, and enhanced R&D support. Countries including Poland, Czech Republic, Hungary, Romania, and Turkey are growing hotspots for vertical markets such as high-end machine production, electronics manufacturing, automotive manufacturing, food and beverage processing, and pharmaceutical production. Resulting from the advanced digitization of factories, Poland remains the largest and strongest growing economy in the region, with its advanced manufacturing market growing at 2X when compared to the EU-15 region. The availability of cash grants and tax incentives, the establishment of public-private partnerships, and the availability of skilled researchers are some of the key factors that will continue a manufacturing transition to the East.
Energy and Geopolitics: One of the big talking points from a political standpoint is the lifting of the Iran sanctions, which will allow the EU to reduce its energy dependence on the Russian Federation. As Iran’s natural gas and crude oil reverses account for 15.8% and 9.0% of the total world reserves, respectively, the lifting of the sanctions will allow the EU to resume its oil and gas imports as well as invest strategically in oil and gas production technologies. In addition to the oil and gas industry, European firms are expected to invest close to €133 billion over the next three years for infrastructure development and across specific manufacturing industries. Some sizable opportunities include Iran’s requirement for more than 600 aircraft by 2018 and the EU trade agreements to transfer technology for naval equipment and shipping building in Iran; initiatives that are likely to bolster growth in aviation and shipping industries.
Carbon Neutral Manufacturing: In conjunction with the EU making significant strides to ensure that member states reduce 40% of their carbon and greenhouse gas emissions by 2025 and 2030, respectively, the recently concluded COP21 climate change forum in Paris is further expected to have a significant impact on manufacturing. A key outcome of the COP21 in relation to mitigation is that enterprises should ensure that during the rapid reduction of emissions, the temperature rise is maintained well within 2°C. In order to adhere to such a mandate, manufacturers have two viable options: (i) optimize current energy consumption in the plant, or (ii) focus on electricity from renewable sources. A number of vendors are embracing carbon neutral manufacturing. One is Siemens, which accepts the initiative as a profitable business case and has a four-tier strategy towards de-carbonization. Its unique strategy includes using intelligent distribution systems at their sites using photovoltaic cell installation, enforcing sustainable power generation through wind farms and hydro power plants, and incorporating low-loss power transmission systems.
Skills 4.0 (Human-centered Manufacturing): The pressing need for cost optimization and advancements in ICT is resulting in a decline of low-skilled manufacturing jobs across Europe. While manufacturing employment across EU-28 countries is expected to decline by 4.1% over the next decade, Europe is expected to undergo a structural shift with a spike in demand for highly skilled work. Labor productivity is expected to increase by nearly 10.0% and reach EUR 60 thousand/person by 2025 owing to the demand for a highly efficient workforce that has a cross-functional expertise in multiple areas including ICT, simulation, analytics, and virtual reality. The concept of human-centric factories will take center stage and will include the following attributes – (i) dynamic work environments where work profiles will be defined by context, (ii) skill development becomes a core part of operational policy, and (iii) factories aligned to social environments.
Additive Manufacturing: While additive manufacturing, a.k.a 3D printing, is not a new theme, its entry into the manufacturing domain through applications in consumer electronics, automotive, and aerospace, to name a few sectors, is expected to create a €6.3 billion opportunity by 2025. While the market is witness to a number of technology advancements, F&S has identified four strategic business opportunities in the area of 3D printing. First is the idea of 3D printing as a service model, where manufacturers can minimize high maintenance and service costs of purchasing equipment by outsourcing operations to a service provider. Second is a leasing-based model that is highly applicable to small and medium enterprises who want to reap the benefits of 3D printing. Third is a technology-related trend termed as closed loop systems, which helps achieve higher accuracy and speeds further resulting in a better quality of print. Last is the design element, an acute focus on software, wherein customized computer-aided design (CAD) is designed to suit free-form additive manufacturing technologies and will offer new opportunities across multiple manufacturing environments.
Nano-Disruptions: In order to make it big, Europe needs to go from a micro to a nano-strategy. Nano-technology is one of the key enabling technologies in Europe’s Horizon 2020 plan that could potentially fuel the “Made in Europe” agenda with its extensive R&D funding and support. At the nano-scale, materials such as nano-scale polymers can prevent oxygen from spoiling food, while machines such as nano-bots can be used to detect infrastructure deficiencies. Traditional industries such as the chemical industries are also poised to benefit from the nano-world with developments in sustainability, energy efficiency, emissions waste, and waste treatment. While the possibilities are plenty, Europe is focused on taking a safe and integrated approach to nanotechnology. This includes the development of safety laws, information sharing between stakeholders, and monitoring the use of nanomaterials and technologies. About 10% of the total nano-technology funding in Horizon 2020 attributes to nano-safety and includes projects such as NANOREG, a regulatory testing of nano-materials through a collaboration between the commission, member states, and international partners.
Europe has already started its journey into the realms of the Industrial Internet of Things. With significant support from the European Commission and FDI inflows, new strategic partnerships are emerging and technology is moving from being in the lab to being implemented on the plant floor. The culmination of all the aforementioned transformative forces will help transform Europe into a manufacturing powerhouse over the next decade and further ensure the manufacturing sector accounts for 20.0% of Europe’s GDP by 2020.
Written by Muthukumar Viswanathan
Practice Director, Industrial Automation and Process Control and Measurement and Instrumentation, Frost & Sullivan