June 28, 2016 Insights The Current Scene The Industry Forum Manufacturing Advisory Group (MAG) met recently to consider current trends in the development of new manufacturing models in New Product Introduction (NPI). MAG reported that NPI timescales including the timetable for ramp up to volume production continue to be more and more compressed. MAG also observed that NPI these days increasingly includes a revamp of the underlying business model as well as the development of new physical product. Business strategies more and more are seeking competitive advantage through being the first to introduce a new technical concept or practice even though this may involve serious cost control challenges and other significant risks. Fundamental product and business model reassessments can also be triggered by a sharp market adjustment such as the recent crisis with Tata Steel in the UK. MAG reported that the core discipline of engineering is expanding to encompass an increasingly wide range of issues. Technologies which have proved effective in a few sectors, such as composites and 3D printing in aerospace, are being picked up elsewhere in manufacturing but the supply chain processes and arrangements for sharing learning and best practice between sectors are not keeping pace with this spread. A New Manufacturing Innovation Competition from Innovate UK The dynamism of the current manufacturing scene is typified by Innovate UK who have just launched a new-style competition to fund projects for the development of more flexible processes, greater product customisation and the development of novel services opening up new sources of revenue from manufacturing. The priorities include innovation in manufacturing systems, technology, processes and business models including supply chain management, new product introduction processes and remanufacture. Innovate UK are looking for innovation in materials development, materials integration and reuse including light-weighting, energy generation and storage and electronics and sensors or for demanding environments. Materials innovation can include nano-materials, ceramics, metals and inter-metallics, polymers, composites, coatings, smart materials and joining of dissimilar materials. A further competition for additive manufacturing is to be launched shortly. Industry 4.0 and revised national manufacturing competitiveness rankings Industry 4.0 is a term which is gaining currency to describe the large scale step change which is anticipated in manufacturing thanks to digitisation presenting particular opportunities for established economies. In fact, Industry 4.0 (known in Germany as Industrie 4.0) started as a strategic programme to shape the development of German manufacturing up to 2020 and beyond but it is now attracting serious attention in other major manufacturing economies such as the United States, China and the UK. Members of MAG see this development as a potential game-changer. The emergence of this broad manufacturing innovation agenda globally has led to a sharp upward revision in the assessment of the UK ‘s relative manufacturing competitiveness. The US Competitiveness Council has just published the third round of its Global Manufacturing Competitiveness Index (GCMI) prepared with Deloitte Touche Tohmatsu. The UK has risen dramatically in the rankings to sixth place behind China, the US, Japan and Germany . The UK scores a GMCI of 75.8, less than one point behind South Korea at 76.7 . The UK was ranked 17th in 2010 and 15th in 2013 so the current score and ranking in 6th place indicates a step change improvement in the UK’s prospects. The UK’s university sector with its increasing output of STEM graduates and top quality research are recognised in the rating, as is the strength and innovativeness of the UK’s aerospace and automotive manufacturing sectors. Additive Manufacturing, Predictive Analytics and the way forward Although additive manufacturing (3D printing) is several decades old, the technology continues to develop and the UK research base is very active in the field. The technology has made the greatest inroads in new product development where it is very well adapted to the agile product development methodology. The agile method involves frequent rapid cumulative iterations of prototypes each of which is tested ideally on real customers in a kind of joint development process. Some commentators have suggested that the agile approach is so powerful that it will eventually lead to a substantial reallocation of responsibilities within manufacturers. In terms of progress towards digital manufacturing, the key point is that when the prototype is fixed and becomes the final product, a digital model of that product is available for use downstream within the value chain making a potential digital bridge between development and manufacture. In some military applications the additive manufacture of replacement parts in the theatre of operations is being trialled thereby reducing stockholding and downtime for repair. MAG report that the introduction of additive manufacturing downstream from product development can in certain instances generate very substantial cost savings. In theory a digital model of the product might feed into volume manufacturing using other processes than 3D printing such as a new level of artificial intelligence within industrial robots. This kind of digital interoperability across an organisation requires an IT infrastructure which can handle very large quantities of data, a strategic investment for any firm. Many of the relevant standards required by this way of working have yet to be agreed and there also serious security considerations. This decade the global volume of data has been increasing more rapidly than either world GDP or world trade. It follows that firms need to develop a strategic approach to exploiting this expanding resource. MAG suggests that a good place to start might be the development of a predictive analytics capability given that maintenance costs are significant part of most manufacturers’ operating costs. As manufacturing becomes more capital intensive, profitability depends on achieving very high availability of manufacturing assets. The familiar TPM approach can be supplemented by predictive analytics whereby data from the manufacturing equipment such as temperature, pressure and vibration is acquired and added to a large historical database in real time. Analytics is used on the database to predict when various maintenance interventions are necessary to keep the equipment operational. The term ‘just-in-time maintenance’ has been coined for this approach which is also of potential value to equipment manufacturers in developing improved machinery. The power of this approach and its potential returns has prompted the development of new offerings by major companies such as SAP and IBM. Management of Change The digitisation of manufacturing and the development of associated business models with a more prominent service element require significant organisational change and should be managed as such with top level support, a senior champion plus capable programme leadership and management. If there is to be a revised or extended business model then good customer buy-in is also essential. Customers must understand the new offering and see it as providing a credible solution to an existing problem especially if a new payment model is involved. Delivering the new benefits to the customer is likely to involve a large scale communications programme within the company including better communication across the company. This will mean a major training programme both to build up the necessary capabilities and to generate the particular mind-set that can deliver high value services properly. Some skills may well have to be acquired by recruitment where they cannot be quickly developed within the company. Implications MAG believe that this wave of change in manufacturing will require companies to decide how they will compete in future. To manage this strategically, manufacturers should include the new digital manufacturing technologies in a strategic roadmap and should define what they expect their factory of the future to look like in 10, 15 and 25 years-time from the point of view of process, people and supply chain. MAG suggest that NPI is getting to be as much about process as it is about the final product. Firms that succeed in securing a leading position via NPI will do so by focusing on the human dimension, creating the right culture and securing the right skills. There is a risk that the new generation of technologies involved in ‘Industry 4.0’ might lead people to feel disconnected from the factory floor. Accepting there will be such issues and preparing for them including budgeting can eventually save costs overall. NPI leaders need to prepare the expectations of the new approach to NPI of all stakeholder, the workforce, suppliers and customers to with care. For example, early identification of major potential issues may be perceived by senior management as a failure in the project, whereas that is exactly what high performing agile NPI should do. The ‘don’t bring me problems…’ mentality can hinder the early recognition and early correction of NPI problems. For example, there are occasions where the supply base tends to be common across an industry sector so NPD in one OEM or assembly manufacturer may impact on other OEMs as suppliers commitments become stretched. Management tools like Advanced Product Quality Planning need to be applied in a disciplined realistic fashion. Although new technologies will continue to be introduced, manufacturing leaders must never lose sight of the basics of performance measurement and methodology. The risks will increases exponentially with increasing volume of production which is why the iterative agile development approach is so important to solve problems thoroughly during the introduction process.
