‘Lack of understanding of increased automation will hold back manufacturing’ - BDO

Increased automation, data exchange, technology and wider supply chain communications are being driven by Industry 4.0 which provides both huge opportunities and threats to existing UK manufacturing yet there remains a ‘gaping hole’ in the education and understanding of these changes.

Scotland has 17,485 manufacturing companies employing 194,520 people.

There are 860 manufacturing companies which employ more than 50 employees and these employ a total of 138,260 people and have a turnover of £30,151m. By employee numbers manufacturing is the second largest sector in Scotland after retail and by turnover it is the second highest sector at £34,918m after mining, quarrying and utilities which includes oil and gas.

According to the BDO/IMechE report, increased productivity, better data analysis, increased competitiveness and lower manufacturing costs are the main ways in which Industry 4.0 will affect UK manufacturing.

However, a third of manufacturers are at risk of falling behind global competition having not invested in Industry 4.0 related technology or processes in the last two years. Worryingly, a quarter say they have no plans to invest in this area in the next two years and 44 per cent of those not investing said this was due to a lack of understanding.

Of those that are increasing investment levels, 16 per cent of companies expected to spend over £500,000 before 2018, while 7 per cent plan to invest more than £5m.

64 per cent of those surveyed said that production would be a key area when investing in automation systems and Industry 4.0 related technology, with 45 per cent and 25 per cent respectively saying research and development and logistics were key areas of focus. Only 5 per cent said poor investment levels were due to the lack of external finance or grants.

From a security perspective, 73 per cent of those surveyed said Industry 4.0 will increase the risk of cyber security breaches in their business and 48 per cent of these felt they had an adequate IT infrastructure which could prevent breaches.

Martin Gill, Head of BDO LLP in Scotland, said: “It is surprising to see such low awareness of Industry 4.0 amongst manufacturers and clearly more needs to be done to educate, support and assist the sector as we make strides into what is likely to become the fourth industrial revolution. In Scotland manufacturing is a major employer and financial contributor to the economy. It is a central element in the economic structure of Scotland and must be encouraged at all costs.”

“It is essential that Scottish manufacturers push forward with implementing the most up to date and progressive means of production possible or they will be left behind, especially when it is evident that other countries are already moving ahead with education and investment programmes being much more clearly supported by government.”

“The lack of a clear strategy on what could be the most important development in manufacturing for some years is of huge concern. I would like to see the Scottish, and UK, Governments doing more to match manufacturers’ long-term outlook by developing a 15-20 years industrial policy that avoids the disruptions of the political cycle.”

Philippa Oldham, head of manufacturing at the institution of Mechanical Engineers, said: “The survey findings show that much more is needed to be done to help our manufacturers understand how technologies such as automation can add value to their businesses. By embracing this new revolution our factories will become much more intelligent, be able to detect and even predict faults in our production lines before they happen. This will not only lead to increases in efficiency and productivity but also drive out waste improving our global competitiveness.

“It is now time for Government to set-out a clear long-term strategy which empowers UK companies to invest in these technologies and UK manufacturing’s long-term future.”

Industry 4.0 is a term first coined in Germany to refer to the digitisation of manufacturing, allowing German manufacturing to build on its competitive edge. It is often referred to as the fourth industrial revolution.