Digitalization has potential to add billions to manufacturers’ revenues

• Siemens Financial Services’ (SFS) latest study estimates the value of improved productivity, resulting from digitalization/automation across a range of industries
• Entitled the Digitalization Productivity Bonus: Sector Insights, the report estimates the potential value of digitalization for printing/packaging, automotive, machine building and plastic vertical markets
• Private funding sources enable manufacturers to invest in new or updated technologies required for today’s digital industry shift

Siemens Financial Services (SFS) has launched the Digitalization Productivity Bonus: Sector Insights, a new research paper which investigates the value of digitalization for printing/packaging, automotive, machine building and plastic vertical markets globally. The paper was released at SPS IPC Drives 2017.

Digital transformation, also known as Industry 4.0, is a widely recognized need in manufacturing. CFOs, however, require measurable outcomes on which to base their investment. Although the exact building blocks of productivity differ between industries and countries, increasing that productivity - to either produce the same number of products for less or more products for the same - has a clear and calculable positive effect on costs and margins. This positive effect has been labelled the Digitalization Productivity Bonus.

An earlier research paper from SFS pegged the Digitalization Productivity Bonus for manufacturers at between $34 billion and $53 billion. Sector Insights estimates the potential value of digitalization for the following industries as:

·         $68.6 - 106.7 billion for the global printing, packaging and paper industry

·         $173.3 - 269.5 billion for the global automotive industry

·         $103.2 - 160.5 billion for the global machinery and equipment industry

·         $39.3 - 61.2 billion for the plastic products industry globally

The paper draws on a statistical model, developed by SFS, which estimates the Digitalization Productivity Bonus to demonstrate reliable financial gain from digitalization and automation.

In the printing and packaging sector, for example, active and intelligent packaging that embeds RFID chips (tracking print technology) helps to meet regulatory requirements for traceability.

Industry 4.0 introduces what is called the “smart factory,” in which cyber-physical systems monitor the physical processes of the factory and make decentralized decisions. The physical systems become Internet of Things, communicating and cooperating both with each other and with humans in real time via the wireless web (Forbes). Next-generation digitalized technology enables manufacturers to improve performance through increased manufacturing productivity, improved planning and forecasting, enhanced competitive capabilities and greater financial sustainability.

To overcome the obstacle of investing in Industry 4.0 technology, specialist financiers developed a set of financing tools – ‘Finance 4.0’ – that enable the transition to next-generation digital technology in a way that is affordable, sustainable and designed to alleviate the manufacturer’s cash flow and working capital pressures.

Sector Insights explores these specialist financing methods, including pay-to-access/use equipment and technology finance, technology upgrade and update, software finance, pay for outcomes, transition finance and working capital solutions.

“The ability to increase industrial productivity is a universal starting point for measurable value and for manufacturers to make the business case for investing in digitalization. Intelligent financing arrangements are needed to enable manufacturers to make this transition in a sustainable way,” comments Gary Amos, CEO of Commercial Finance Americas at Siemens Financial Services. “Only specialist financiers have the understanding of Industry 4.0 technology, and how it is implemented, to enable investment while alleviating manufacturers’ cash flow and working capital pressures.”

Methodology

Over 60 international industrial companies, expert management consultancies and academic specialists were interviewed over the phone in February and March 2017. They were asked to estimate the potential financial benefit that conversion to digitalised technology could deliver to manufacturing organisations, specifically in terms of increased manufacturing production productivity. Manufacturing productivity is defined as a reduction in the cost of production – or conversely an increase in margins. Respondents gave their assessment of this reduction of production costs – the Digitalization Productivity Bonus – expressed as a proportion of total revenues. Interviewees came from the following countries and regions: China, France, Germany, India, the Nordics, Poland, Russia, Spain, Turkey, the UK and the US.

For further information, please see https://www.siemens.com/global/en/home/products/financing/whitepapers/whitepaper-the-digitalization-productivity-bonus-sector-insights.html

For further information on the Financial Services Division, please see www.usa.siemens.com/finance

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Siemens AG (Berlin and Munich) is a global technology powerhouse that has stood for engineering excellence, innovation, quality, reliability and internationality for 170 years. The company is active in more than 200 countries, focusing on the areas of electrification, automation and digitalization. One of the world’s largest producers of energy-efficient, resource-saving technologies, Siemens is a leading supplier of efficient power generation and power transmission solutions and a pioneer in infrastructure solutions as well as automation, drive and software solutions for industry. The company is also a leading provider of medical imaging equipment – such as computed tomography and magnetic resonance imaging systems – and a leader in laboratory diagnostics as well as clinical IT. In fiscal 2016, which ended on September 30, 2016, Siemens generated revenue of €79.6 billion and net income of €5.6 billion. At the end of September 2016, the company had around 351,000 employees worldwide. Further information is available on the Internet at www.siemens.com.