Manufacturing in 2022 and 2023 - Part One - With Make UK

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Welcome to the Trend Detection podcast, powered by Senseye, an industry leader in using AI to drive scalable and sustainable asset performance and reliability.

For this three part series, I’m joined by Jim Davison and Nina Gryf from Make UK, who champion engineering and manufacturing in the United Kingdom. In the first episode of this series, we discussed the main challenges manufacturers faced in 2022.

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Transcript

Key topics covered (click to jump to the section)

  1. Key manufacturing trends 2022
  2. How technology helps to solve manufacturing challenges
  3. The importance of culture for technology deployments
  4. The issues surrounding skills shortages
  5. Implementing new technologies
  6. What types of technologies are manufacturers investing in?
  7. Subscribe to our podcast

Niall Sullivan, Senseye: So hello and welcome to this very special episode of the Trend Detection podcast. My name's Niall, the host. We've got two really interesting guests today from Make UK, who work very closely with Senseye, who have been a member for a number of years.

So we've got Jim Davison and Nina Gryf, who I'll ask to introduce themselves in a second. For those who've been listening to the podcast for a while, actually, we did a podcast with Jim last year as well where we reflected on the previous year. Well, I'm trying to get more years mixed up 2021 and looking ahead to 2022. And now we're doing the same, looking back at 2022, looking ahead to 2023, which obviously a lot's happened, a lot's still happening and a lot to come as well. And especially on the technology side, which Make UK have obviously... And also just released a report focusing very much on that side as well. So we're going to go into that as well. But without further ado, I'll ask Jim, first of all, just to briefly introduce himself. So hand over to Jim.

Jim Davison, Make UK: Yeah. Good morning. It's a pleasure to join you for the podcast today, Niall. My name's Jim Davison, I'm the region director here at Make UK.

Nina Gryf, Make UK: Hello. Thank you for inviting me. My name is Nina Gryf. I'm a senior policy manager at Make UK. Make UK is one of the biggest trade association and membership body representing 20,000 of manufacturers. Our main focus is to influence the government on policy making. We provide intelligence in evidence-based police recommendation that help manufacturing sector to grow. Yeah. Thanks.

Niall Sullivan, Senseye: Fantastic. Perfect. Thank you. And thank you both for joining as well. I'm looking forward to this chat. So if we just get started, I'm going to start very broad, if you don't mind. It's to get your very broad thoughts on where we are today.

So what I'd like to start with is, so what are the key trends affecting manufacturing in 2022? And I imagine there's some similarities to our last conversation, Jim, but it'd be good to... Yeah. Let's rechat that first and start with yourself, Jim, first of all, if we can.

 

Jim Davison, Make UK: Yeah. Okay. Interestingly now the challenges are similar but very different, if that makes sense. Last time we spoke, it was very much a recovery from the lockdowns relating to COVID-19, the fact that the economy had shut, the world economy had shut, and then it was very much the early stages of that recovery. This year, the challenges have been related but not the same. Actually, the majority of our members have very strong order books.

The challenge is that it's very difficult to get parts, particularly electronic parts on the back of the Russia, Ukraine conflict. Lots of base metals have become fast scatter and far more expensive. And then the other significant issues have been the energy price inflation that has happened since the Ukraine conflict kicked off. And just to give an order of magnitude for that, many of our members had to or ended their fixed term contracts on energy prices in October and they saw anything from a four to seven times increase in those energy costs. So that's had a significant impact.

And then the other massive impact post-COVID has been the labor shortage, and I specifically say labor shortage rather than just a skill shortage now. The reality is there are so many of our members that have open vacancies, long-term open vacancies, and that's probably a combination of two things. One is the early retirees. Manufacturing has been disproportionately impacted by that because the average age demographic is 51, and it's those mid 50 workers that decided through COVID that they were going to readdress or readjust their work-life balance and decided to change direction and leave full-time work.

So there's been a significant increase in the economically inactive people within our sector. And just again, to give you an order of magnitude, that's 260,000 people that left the jobs market earlier than plans. And then the other significant contribution is the workers that through COVID decided to go home and visit families in Europe and other places around the world and then couldn't come back as a result of the Brexit change. So I'll stop there and over to Nina.

Nina Gryf, Make UK: Yes. Exactly. And as Jim mentioned it earlier last year, we discovered when we had numbers, this was 95,000 of missing vacancies. So it's a huge number and huge impact on manufacturing sector as well. However, when we did survey for our report for the digital adoption, the missing link in productivity growth, we could see that despite these challenges, despite the running cost of business and the energy prices, manufacturers have increased investment in digital technologies and they're still planning to increase even more for the next 24 months.

What we have seen typically in that year that was slightly different to previous years is when we look at the different stages of digital adoption, when you have the preconception, conception, pre-evolution, and revolution stages, quite a lot of manufacturers, about 50% manufacturers were in that evolution state where they invested in some of the digital technologies, they're analyzing data, but they don't seem to be able to push into that revolution state when they get their profits on and when they change the way they work with their customers.

And what we think happened is exactly the challenges that they are being hit by this year about the lack of skills, labor shortages, and access to finance because it almost created like a bottleneck. They were pushed by pandemic possibly to invest in the technology, but because perhaps of some skills, labor shortages within the company, they are not able to optimize on that investment. And they got a little bit of start in that phase. But optimistically, the appetite is there. And I think they're aware that investing in digital technologies and transforming manufacturing from the digital point of view will make the companies more productive, resilient, and competitive. So it's something that it's worth doing.

Niall Sullivan, Senseye: Yeah. So no, that's really interesting, and thank you for outlining those challenges. I think what we'll do throughout this podcast is dive into those a bit more. But in terms of technology specifically, I guess, how is technology helping to solve some of those challenges that both you, Jim and... Both of you have just mentioned?

 

Nina Gryf, Make UK: So maybe I can just give a general overview from the members. We surveyed over 200 members this year and what they are hoping for while investing in digital technologies is that increasing productivity. They want to have, let me just quickly... Increasing productivity, flexibility of the production, agility delivering on time, but mainly they are hoping to have increase in productivity and efficiency. Some of them are willing to invest in technologies to manage the energy efficiency as well. So around 60% of manufacturers are hoping to get the productivity increased. And when we saw how it looks like in real life when the manufacturers are already invested in the digital technologies, we can see that almost 40% can see increasing productivity, which is a really good result.

Niall Sullivan, Senseye: Jim, your point of view, because what we see at Senseye is implementing technology is obviously a lot manufacture's agenda, but also it is not just implementing technology, it's actually on the culture to really ensure that it's successfully deployed and utilized, are you seeing that appetite from manufacturers from your conversations with members?

 

Jim Davison, Make UK: Yeah, Niall. The optimist in me recognizes that for a long-time manufacturers have been told they need to invest in digital technologies, automation, robotics, et cetera, but there's always been an excuse why not. And a lot of it is around the access to finance or actually making the commitment to invest in not insignificant capital requirements.

The reality is that the external factors now mean that they have no choice. If they're going to survive, they absolutely need to introduce automation and robotics because actually it isn't a short-term shortage of people. Fundamentally, those people have disappeared. So there is no choice but to automate equally, as Nina said, that the massive ramp up in cost of energy has been a catalyst to force companies to explore things like off-grid power generation, optimize the use of power consumption on their factory floors. Again, the payback has been shortened massively rather than taking 10 years, you're talking two, three, four years.

So it's almost a no-brainer to protect your business for the future. I think Nina picked up on a couple of really important elements, and one is that future skills requirement and making sure that you can develop skills of the existing people within your factories, but also attract the next generation of skills and make sure that those people have the skills that are required. And that is just a combination of understanding of how you can adopt these technologies, a positive culture so that you can embrace the technologies.

One of the fears has always been now that robots are going to displace human beings, and we're going to have a lot of people put out of work. Well, quite clearly, that isn't going to be the challenge. And actually, the people that are working within an organization have the opportunity to be up upskilled and actually have a more fulfilling role, either programming the robots, maintaining the robots, or doing another activity within the business that adds more value. And really, it's just exploiting technology where it's appropriate and utilizing human beings for the activities that human beings are good at.

Niall Sullivan, Senseye: Yeah. So I put it as technologies almost enhancing the skillset set. So it's giving opportunities people to learn more skills and develop their career. That's the way I would look at that or interpret what you were saying, Jim.

Jim Davison, Make UK: I, yeah, totally agree. That's exactly what I was trying to say.

Niall Sullivan, Senseye: And part of that skill shortage, I could really get that, yeah, you need to upskill existing workers, but is there an issue when people leave? There's definitely an issue in terms of knowledge transfer and knowledge being lost when people leave. But is there a lack of process in place for transferring that knowledge at the moment? Or is it simply because they're so busy with other things? It's difficult when there's lots of different differing business priorities.

 

Jim Davison, Make UK: So I think it's these two issues, Niall. One is actually if somebody like me who's getting to their late 50s and I leave the business, actually, a company isn't going to want to replace the capabilities that I have exactly. Yes, of course, they want to understand how production processes work and the intricacies of a product, but then there's this digital veneer that overlays the whole experience piece. So actually, you want people with my skills but and more because... And that's the piece that I think Nina was alluding to. It's very much how do we upskill and generate the skills that we need for future industries. The whole green technology piece. It's not just about green technology development, it's about how do you manage your business to be greener?

Actually, you need things like basic, not basic skills, but you need trade skills like plumbing and electrical installation engineering capabilities to enable us to roll out things like ground source heat pumps and float of the photovoltaic cells on the roof of buildings to generate power on site. It really is a very broad spectrum of skills that we need. So hopefully that helped fill in some of those gaps.

Nina Gryf, Make UK: On the skills as well especially around the net zero and decarbonization, with technologies, with sensors coming all over the factories everywhere and huge amount of data being produced by all the machinery, all different sensors, we will need a lot of data analysis. That's why it's kind of we... This is the skill is really needed and apparently non-existent on the market right now. So I think manufacturers will need, especially SMEs will need help from the government, from the institutions. And some manufacturers are lucky enough to be near the catapult centers that can help them in doing that or some really good universities in the innovation hubs, but not all manufacturers have that. So it's very important to have that help around that can guide and advise.

Niall Sullivan, Senseye: Yeah. And I guess on that note, you mentioned sensors and collection of data, which obviously is very close to what we do at Senseye. And something I've observed speaking to manufacturers of various events I attend is that they're collecting a lot of data but because of what you were saying earlier, Jim, about IoT and someone to collect all this different data, it's going to be really useful, but maybe they're in a position at the moment where they're not sure exactly what to do with it next.

We haven't got time to analyze, we've moved up the skills as we were saying to analyze that data manually. So technology is there, but is that still a disconnect there between, "Well, we've got this data, we're doing IoT initiatives," but what's the next level for that to get the most out of that data?

Jim Davison, Make UK: So one of the interesting findings that came out of the survey, Niall, is the fact that 45% of respondents said that they are now looking at their production processes. So it's all about early identification of defects, it's all about optimizing the uptime of machinery, it's all about optimizing the performance of machinery. So for me that's a significant step forward because, yeah, exactly what you're saying, you're capturing data. You can retrofit lots of sensors relatively cheaply to equipment and existing plant now, but it does appear that they're actually starting to utilize it, which was really good.

And a typical spends that our survey respondent said was it's between 50,000 and 500,000-pounds worth of capital investment, which is obviously not insignificant. And more encouragingly, 80% of the respondent said they're looking to spend more in these areas. So for me, that just gives us some real hard facts that back up the fact that anecdotally manufacturing and engineering businesses are seriously looking at and implementing a lot of these technologies, which is good to see it here.

Niall Sullivan, Senseye: No. Absolutely. And actually, I know you mentioned about installing new hardware, but I think what maybe is non fully understood is that there's actually a lot of value you can get from existing data you've already captured. because we say at Senseye, you can do a lot with actually quite a small amount of dating, get a lot of values. So maybe there's still a disconnect there. Maybe it's thinking in terms of volume rather than the right type of data. But again, that's maybe just a market thing as it's evolving and they're understanding that IoT and what's required to get that value out.

 Niall Sullivan, Senseye: No. It definitely does. And I wanted to touch on a... Well, it is an issue that's recurring with a lot of our customer and still with many manufacturers around the world is downtime. It's a little bit of a plug because we've just released a report ourselves on the true cost of downtime based on survey for our website. And you both noted a lot of very diverse challenges, and we all know some of those challenges personally ourselves as well as in a business context. But is downtime still a big factor, a big issue generally with manufacturers whether in survey terms or outside of that?

Jim Davison, Make UK: Sure answer is yes, Niall, because of the uncertainties with supply chain performance, companies are planning their workflows through the factory and then having to stop production because a part isn't available or a part is damaged and it has to be replaced. So yeah, the forward look of an order book and the supply chain into a company is performing very differently than it was in the good old days of just in time. And that has two effects. One, it means that you become far less efficient. You're having the start jobs, part jobs, pick them up again, reorganize, stop a machine, retool it to produce the next product. So yeah, downtime is a big issue.

And then there's the other side of it, which is the additional cost of work in progress, which again is because of inflation, but also the massive rise in the cost of raw materials and parts. So yeah, downtime is a big issue. I guess there's two elements to that. One is the downtime that's caused by a poorly performing machine and that's where Senseye type technology comes into its own because by optimizing a machine, making sure that it's maintained effectively means that you have far less of that unplanned, unscheduled downtime because a machine is not available. However, there are other factors that are also compounding the ability to flow products through a factory and that is around the supply chain uncertainty.

Niall Sullivan, Senseye: And Nina, in your survey, I don't know... So you see, Jim mentioned predictive items, which is obviously what Senseye was offering this, but are there examples of technologies that manufacturers are starting to look at in terms to solve some of these issues that we've discussed so far?

 

Nina Gryf, Make UK: So top technologies for manufacturers to invest in terms of when they think about increasing productivity, efficiency and become more competitive, it's still the additive manufacturing from our previous service where additive manufacturing IoT are having the biggest impact, but it's followed by AI and cloud computing. So we've had quite a bit on the webinar I was part of couple of weeks ago. This cloud has a huge impact on manufacturers and they're very excited about it and see the effects immediately of using it, implementing it within manufacturing company.

But what we've seen from the survey, it's like that cybersecurity advanced planning and scheduling applications are the kind of crucial priorities for manufacturers. This is something, it's almost like you want to have the digital infrastructure first before investing in more expensive technologies when they go into additive manufacturing, et cetera, that will make the biggest impact, the biggest return on investment. And as Jim mentioned, that is the average return on investment is between three to five years now. And for SMEs, they probably would even want to for small companies. But these are the top technologies that they're looking into in this one.

 

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