The Fourth Industrial Revolution

The Future of Factories in the Digital Manufacturing Age

Engaging and Empowering the Workforce

Microsoft Dynamics

MICROSOFT MANUFACTURING

TECHNOLOGY IN UK MANUFACTURING

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F O R E W O R D

UK manufacturing and the global race for a technology-led industrial revolution

New technology has been helping UK manufacturers seize a global competitive advantage for almost 250 years. Back in 1785, Edmund Cartwright invented the steam powered loom and ensured Britain lead

the world’s first industrial revolution.

Today, the Internet of Things, artificially intelligent automation and cloud services, promise a similar seismic shift in production capability. Smart machinery, capable of autonomously assessing and adjusting manufacturing processes, could enable huge advances in 21st century manufacturing productivity.

New connectivity will enable far greater collaboration within supply chains. Where once production was an insular process, involving one manufacturer assembling components into finished goods. Now suppliers and customers will be brought live insight into orders via cloud- connected lineside technology. The future promises far greater manufacturing agility and product personalisation, with smarter equipment able to adjust instantaneously to order demands. Manufacturing is about to move from the analogue to the digital age.

UK manufacturers have great desire to lead the transition. This is a sector famed for its entrepreneurial spirit and innovation. They see the potential of new technology but do they know how to best put the digital age into practice?

To find out Microsoft and manufacturing trade publication, Works Management magazine, surveyed senior UK manufacturing managers on their approach to new technology. Download this insightful white paper and discover where UK manufacturing stands in the global race for the next, technology-led, industrial revolution.

C O N T E N T S

0 3 Foreword UK manufacturing and the global race for a technology-led industrial revolution. 0 4 Everything must go Factories are on the verge of sweeping upgrades to their IT. But they need more guidance from suppliers before ushering in the digital manufacturing age. 0 6 Bewildered by the pace of change The pro-technology talk doesn’t appear to be translating into practise just yet. 0 8 Embracing the age of the smart factory It’s a bold vision of Britain’s manufacturing future, but one that seems a long way off for many manufacturers. 1 0 “Adoption is often a leap of faith” Microsoft’s Pip Fox on boosting new tech adoption in industry. 1 2 “A point of resistance is getting people on board” Manufacturing business CEO, Chris Walker on the practical challenges of new IT. 1 4 “You don’t want to have to start all over again” Peter Bennet, a manufacturing MD, on the barriers to bringing in new technology.

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Faced with low cost rivals overseas and a dearth of skilled labour closer to home – UK manufacturers can’t afford to be anything but pragmatic about using new technologies to

drive productivity improvements. That practical reality shines through in our white paper research, which surveyed the 187 senior UK site managers attitudes to-wards new technologies. More than 90% were adamant that only through swift adoption of the latest tech could UK manufacturing have any chance of staying globally competitive (see question 4*). And there is innate desire among factory leaders to do just that. Enthusiasm runs high towards much vaunted new technology areas such as artificially intelligent lineside automation and the Internet of Things, the research shows. Around half of respondents said they were watching both these technology areas, and their potential for operational advantage, intently (see question 11*). Overall more than a third classified their factory as either a pioneer or fast follower of new technologies (see question 6*).

A further 48% of respondents say they keep at least a watchful eye over latest IT trends, and their potential impact on factory floor KPIs. The research indicated UK manufacturing management teams are in no mood to turn their back on new tech. “I’ve observed firsthand the advantages of computer, CNC and office management systems over 40 years,” one manufacturing respondent commented. “Failure to keep up with your competition is an extinction event.”

*Download the Manufacturing and Technology Survey 2016, in association with Microsoft and Works Management.

Everything must go

“ Failure to keep up with your competition is an extinction event.”

UK manufacturers have the will to get behind new productivity enhancing equipment, our white paper shows. But, in terms of frontline implementation, they are struggling to find a way. Max Gosney, group editor of Works Management, reports...

E V E R Y T H I N G M U S T G O

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Bewildered by the pace of change

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However, it would be overly simplistic to say it’s the price of the latest IT hardware and software alone, that is putting factories off upgrading. Manufacturing leaders

voiced a growing sense of bewilderment at the relentless speed of IT advances. “The speed of change” and “struggling to keep pace with changes” were comments by respondents that are symptomatic of the disorientation felt by the industry. Manufacturers also aired frustration over the lack of practical examples of performance gains surrounding new technology from IT suppliers. “There’s a lack of clear ROI and added value opportunities around new tech,” bemoaned one manufacturing manager respondent. “Technology is often deployed without clear added value to operators or the process. It is often driven by IT or the latest and greatest from suppliers,” said another. Overall, around 36% of manufacturers cited insufficient understanding of the benefits of new IT as the key barrier to adopting it. Yet, the door is wide open to winning factory management teams around. More extensive training from IT

vendors on the bottom line benefits of new products was ranked as the second most influential thing that could be done to boost technology upgrades (see question 18*). This supplier-led education programme( favoured by 31%) was pipped to first place by calls for enhanced capital investment incentives (36%) to encourage IT investment. A wave of government-funded partnerships with industry to prove new technologies like the Internet of Things was also a popular lever, with 30% of the vote.

All three options could pave the way for UK industry to develop the smart factory. The term is being used to describe an Internet of Things-enabled manufacturing facility of the future. In this environment, artificially intelligent equipment will step in to autonomously manage the efficiency, quality and agility of production floor processes. The semi-autonomous machinery will also keep customers and suppliers updated of progress live via the cloud.

But the pro-technology talk doesn’t appear to be translating into practice just yet. A scarcity of investment capital was identified as one standout reasons for the lag (see question 13).

B E W I L D E R E D B Y T H E PA C E O F C H A N G E

*Download the Manufacturing and Technology Survey 2016, in association with Microsoft and Works Management.

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In summary, this white paper clearly indicates a UK manufacturing sector with enormous work to do in harnessing new technology. UK factories can’t go on relying on antiquated IT and expect to compete in a keenly fought global productivity race. However, the hugely encouraging finding from this white paper is that site management teams recognise the fact. Some 82% of manufacturing respondents (see question 9) acknowledge that better insight into their production data could yield a significant business improvement. Technology holds the key and, within manufacturing, minds are open on how IT could be used to unlock the advantages. “Whatever provides us with the edge, we need,” as one survey respondent aptly put it.

Efforts must now be redoubled around identifying what those game changing technologies are and how we get the jump on them within our manufacturing sector. And that is a task best achieved in partnership with IT suppliers. UK manufacturers, in this white paper, have shown the will. Now, through better collaboration with the IT industry, we must find the way to bring new technology to bear in the global productivity race. *Download the Manufacturing and Technology Survey 2016, in association with Microsoft and Works Management.

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The research showed manufacturing sites making do with IT platforms available since the 1990s. PCs were by far the most dominant technology in use on factory floors, with

an overwhelming 92% using a terminal on their production floor (see question 1*). Tablets were present on just 13% of shopfloors, and smartphones 32%, in comparison. Manufacturers are not just gathering their data using more traditional technology, they’re storing it the old fashioned way too. A dominant 91% of manufacturing managers (see question 2) reported data captured from manufacturing processes being kept on physical servers. Almost half still use paper-based records. Cloud based storage, meanwhile, was being used by just 14% of respondents for shopfloor data storage and by 36% for company email services. The reticience can, in part, be traced to security

concerns. Nearly half of respondents (44%) cited intellectual property fears as a key turn off (see question 15*). But there’s also a notable communication gap to be bridged, in terms of convincing manufacturers of the key benefits of outsourcing to the cloud (see more in our Manufacturing and Technology Survey 2016, in association with Microsoft and Works Management). Until we do all those servers rooms won’t run themselves and sustaining ageing equipment was, unsurprisingly, named among the top daily IT challenges by manufacturing respondents (see question 8). Poor integration between multiple site IT systems was another primary concern, the research showed. Both hint of a sector that is tackling technology ad-hoc rather than as part of an informed strategy. And, it’s not just within the factory that IT planning is amiss. Almost six in ten manufacturers have no visibility beyond the first tier of their supply chain (see question 7*).

Embracing the age of the smart factoryIt’s a bold vision of Britain’s manufacturing future, but one that seems a awful long way off from the typical technology present day factories. “Generally in our industry we are still working in the last century,” was a salient comment left by one respondent.

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You’ve got to have a good business case before you get started and understand the ROI. A lot of the things we’re talking about here are things like machine learning and artificial intelligence. It’s really hard to predict the return you’re going to get. So, quite often people who are proposing these technology shifts are having to take what they can from what others have done and take a best guess. So the biggest issue is how to get past that and invest in technology. The ROI figures are going to improve, but one note of caution is that, with the way competition is now, some may be less willing to share ROI. Previously showing tangible ROI was a badge of honour, but now, some may be worried that if they show others they saved money, suddenly everyone will be

demanding unreasonable price drops. This is especially a problem for those in the supply chain. If an end consumer sees that one of their suppliers is making savings, you can see how that might lead to some awkward conversations. Size matters If you’re starting out now as a niche player in manufacturing, and you run all your systems on the cloud and only use new technology, you can be absolutely leading edge. Where we see problems is with big companies who’ve made massive investments in large operating equipment and software, especially best in breed software associated with that hardware. In that case it’s very difficult to get things to move. If you’ve invested a lot already in technology, you’ve got to look at ways to make further changes. But, the beauty of something like the Internet of Things (IoT) is you can actually add that as a layer on top of whatever you’ve got. So if you have got old technology and you’ve got old control systems that don’t talk to each other, you can add IoT on top and immediately get visibility of your processes in a completely new way. So there’s no excuse not to update. The new technology isn’t like it used to be where the improvement is a brand new production line where you’d have to rip out the old one and put in the new one. A lot of these improvements are to do with incremental changes. Something like augmented reality is used to look at existing stock. The only way we’re going to get the message out there really is to show examples of people using this new technology effectively. You can tell people as much as you like but you won’t change their mind that way.

“Adoption is often a leap of faith”

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This isn’t that surprising because manufacturing is such a big and diverse industry. You’ve got huge, lumbering manufacturers who have being going forever and do

what they do really well and almost pride themselves on not changing. Then you go to the other extreme where you’ve got new companies and everything is automated and about the ‘now’. They want to keep trying new things and have much more of a ‘fail fast’ and move on approach. Before return on investment (ROI) can be tangibly demonstrated, adoption is often a leap of faith. The leaders that are more risk-averse are less likely to take that leap of faith. They’re going to wait until the people who are happy to take the leap come back with some proper ROI. And only when those who were initially reluctant see ‘that company saved 20% by doing that, I can do that as well’ will we start to see some real movement. The price is right The main reason why a lot of people within the industry are starting to engage with smart technology now is the pricing. The price of the cloud, the price of storage and computing; all of those things have come right down. Because of places like China accommodating bulk production, the prices of parts like sensors have also come right down as well. So it’s a bit like a happy place where all of the costs have aligned. People have been waiting to do a lot of this for a long time. With the pricing coming to the right place and the level of interest coming to the right place, more people are starting to do it.

P I P F O X

Pip Fox Industry lead: Manufacturing, Utilities and Services, MicrosoftManufacturing has a very mixed attitude to adopting new technology. Some people are more risk-averse than others.

P I P F O X

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Another point of resistance is around getting the people on board and trained up. We had some in-depth training on our new accounting system recently and one of the people who was training with me was really keen to keep hold of his legacy system, which was essentially an Excel spreadsheet, because he knew it and felt it worked well. So one thing that really dictates the pace of adoption is how quickly you can bring people along with you. Because at the end of the day, people run the business and if they’re not brought into the new technology that’s always going to be a limiting factor for implementing new ideas. Instinctively a lot of people will initially reject a new idea, but then once they thought about it will come back to it. So culturally the way you introduce an idea and the way you sell it to people is key. We don’t have it so much in our business, but in a lot of places people are inclined to see new technology as a threat to their job. But in a lot of smaller companies like ours we all have to be flexible and often end up doing more than one job, so there’s more than enough to do in the day. So anything that ends up improving efficiency is generally quite well-accepted.

We’re very small so we have to bring everyone along, but even if you’re operating in a larger company you have to try and bring as many people with you as you can. There will always be some people who will resist and won’t want to change. What usually happens with this group is it becomes something they’re not familiar with and they have no interest in learning something new, they get uncomfortable and normally drift off after a while.

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Our customers don’t care whether we use the cloud or not, and everything is customer-driven. Having said that, there are one of two things we have recently

moved to a more virtual IT platform. So we recently moved our accounting system from the desktop to the internet. And that’s worked much more efficiently since we changed. Likewise, if there are things that help us to improve quality we will also adopt those types of IT measures as well. One big thing that I’ve only really become conscious of recently, and the roundtable really drove it home, is the need for data analysis. We’re doing quite a lot of data analysis on various production runs and so forth. It’s important we understand when we’re producing good components and when there might be an issue. Identifying what the issue might be through analysing huge amounts of data will become more important in the future. One example is that we’re now logging our processing conditions every 10 seconds for a run that might last several days. So when we look back to evaluate some process conditions which are unusual, we’re looking at a trend. Each individual piece of information can be useful so getting up to speed with tracking everything straight away is so important. We’ve got to keep the business functional while we implement new technology. If we implement some great new technology and the business falls over, then we haven’t got a business. And in previous roles I’ve seen that happen to competitors. One of them decided to adopt a new IT system and lost its production data for two or three months. It got so bad that their customers became very hacked off and we gained a considerable amount of business from them.

C H R I S WA L K E R

Chris Walker CEO, Diamond Hard SurfacesWhat drives change for us is the need for efficiency and trying to do the things that we’re already doing; but better. There are a lot of things you can improve through IT systems and we’re always looking to make progress, but we’re wary of technology for technology’s sake. We’re not suddenly going to adopt the cloud

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If you have a simpler in-house system that you’ve designed and worked with for a long time, and it does everything you want, there really is no need to change. The software

companies will turn round and tell you that they’ve made improvements to their products and that’s why you need to buy the latest packages. Okay you’ve made improvements, but I didn’t actually need them. A lot of the time when updates come they will do something that you weren’t expecting, and that’s when you run into trouble. It’s like my smartphone. I had to install an update to run a specific app. But when I ran my update it deleted things I needed and added things I didn’t want. One of the things I lost was nicknames in my address book, and that’s where I kept my passwords. So there are often consequences to updating systems that you can’t predict. I am very conservative, as are a lot of engineering companies. And whenever you try something new you’re always wondering where it’s going to go wrong. But, occasionally you do have to bite the bullet. With the cloud, for example, I can see how that could be beneficial because I can keep a large amount of data there. And if we move large amounts of information there that would free up storage space on our in-house systems. But, for me the real step change comes with the little things that come around every three months or six months. You get all your updates and you don’t want to put it on the computer because last time it look four hours to get everything up and running again. So you end up not doing it for more than a year, and when you do finally it knocks everything out for a long time. It sounds like an odd thing to be concerned about, but it can lead to long periods of time when you’re without data. I find it frustrating that people always assume I want to change and I don’t.

P E T E R B E N N E T

Peter Bennet Managing Director, Groveley Precision EngineeringOnce you get a system you’re loathe to change it, simply because it works. New software is introduced that you try and run something on, and all of a sudden it doesn’t work. And you’re left thinking ‘but I had it working, what happened?’

One area we are getting into is 3D technology for design. Some of the software available is absolutely brilliant and so innovative. We can definitely use that. But one of the questions is how much it will cost now and whether that cost will be frozen. One practice is software companies telling you that you don’t own the software and you’re only leasing it. If you don’t then pay them a certain fee every year, they stop you from using it. That’s an example of the kind of practice that winds people up and prevents them from updating. Training is another area that leads to resistance. You take so long to learn one system so you don’t want to have to start all over again, especially when you’re busy with your day job. The IT systems should really just be something you use to do your job rather than the main concern. You don’t want to have to keep re-learning what you’ve just done when it actually already works. It helps of course if you have a dedicated IT team, but not everyone at the smaller end of the scale does. I employ someone who is at university to come and help out on the IT side, so I’m a bit more fortunate than some others, but really for the real boutique micro-businesses it simply doesn’t make sense to have an in-house team.

“You take so long to learn

one system so you don’t want to have to start

all over again”

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E Y E B R O W

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What Next?If you’ve already implemented some or all of the policies and processes described, the next stage may be to identify and fill any gaps and/or make improvements. However, if you’re still considering what actions to take, the issue is about when and where to make a start.

At Microsoft, we can help you find some answers. Just as manufacturing moves towards a value-added model, so too does the software industry. As leaders in this field, we’re already more than an applications supplier; we work with our partners to implement enabling technologies, such as Dynamics AX and Dynamics CRM within manufacturing.

We understand that our software tools are not a solution in themselves – they’re a part of aholistic approach to helping you solve problems that will add value to your business.

For more information and the chance to talk about this new approach, get in touch – andget ahead of the curve.

microsoft.com/manufacturing

Enjoyed the TECHNOLOGY IN UK MANUFACTURING whitepaper? Download the Manufacturing and Technology Survey 2016, in association with Microsoft and Works Management