"Do it or die!" - The Urgency of Industry 4.0 with The Manufacturer

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[General intro omitted.]

Chad Perry:

Today is our very first episode, so I thought it would be helpful to start with a big picture look at the state of digital manufacturing and why it matters to small manufacturers. So to get this kind of broad perspective today, we’re hearing from two individuals who sit at the crossroads of the manufacturing industry primarily in the United Kingdom, but also with visibility into the global market as well, nick Peters and Henry Anson. Nick is the editorial director of The Manufacturer, one of the world’s leading publications and a fundamental resource for senior manufacturing leaders. Henry is the managing director of the Hennik Group, which is the research group that is responsible for publishing The Manufacturer. Nick, good to have you with us today.

Nick Peters:

Thank you very much, Chad. Good to be here.

Chad Perry:

Henry, you as well. Thanks for joining us.

Henry Anson:

Likewise, Chad. Thank you.

Chad Perry:

Now, gentlemen, the question on my mind today is why is it so important that small manufacturers embrace digital technology? And Henry, I was hoping maybe we could start with a little background on The Manufacturer, what your group is all about and why you and Nick are in such a unique position to answer this question.

Henry Anson:

So The Manufacturer has been in existence for what over 20 years. And our remit is, we are a board level C suite level resource for manufacturing companies of all shapes and sizes. And as you mentioned, primarily based in the UK, but with the ever increasing international audience, typically in mainland Europe and the U.S. And we believe here that the argument as to whether to digitalize or not has been won. But what people are still struggling with is the steps, the roadmap on how to achieve successful digitalization program.

Chad Perry:

Mm-hmm (affirmative). And so what puts you and Nick in such a good position to really address this? I mean, it seems like you guys, being at the crossroads, you’re kind of connectors in the industry and so you get a really broad perspective. Can you tell us a little bit more about what that looks like, what your role, how your role puts you in a position to get that kind of visibility?

Nick Peters:

The thing about The Manufacturer is that as well as producing a magazine, a very, very visited and popular website, we also lay on a series of events right across the year to which we invite manufacturers to come along and discuss best practice. It’s a thought leadership role that we have built progressively over the last few years to the point now where we have the biggest and the best manufacturing events in the UK, now beginning to expand into Europe and indeed into the United States. What it means is that we are constantly in contact with our core audience, which is UK manufacturers, both large and small. We, of course, are in touch with some the very largest companies via their board level executives, but we also encourage the most progressive, and by definition they’re the ones who are going to get involved with us, the most growth-oriented, the most progressive smaller manufacturers of which of course there are hundreds of thousands in the UK.

Nick Peters:

We’ve got, that’s part of the problem. We’ve got a lot of quite small companies in the UK. We get to meet the very best of them and get them to exchange best practice with their peers in the manufacturing sector. That’s why, as you so rightly say, we’re at the crossroads, learning from all of this, able to transmit it, put these people together in such a way that we have at our fingertips, some of the best experiences, some of the best practice there is in the UK manufacturing scene. And right now as industry 4.0 the need for digitalization becoming evermore urgent in order to improve our productivity. That is the focus we have at the moment and it is a fascinating picture that emerges. Looking forward to telling you more about it.

Chad Perry:

Great. Thanks, Nick. Yeah, and actually that kind of touches on the crux of the issue to me because I kind of want to play devil’s advocate here because you just painted a very rosy picture. And I was at Digital Manufacturing Week in Liverpool a month or two ago and it feels very exciting. There’s a lot going on, but at the same time I’d like to draw your attention to some research that I was doing earlier in the year when your annual report came out and there were some articles that also touched on some of the survey results that were associated with that research.

Chad Perry:

And two of the things that I found really interesting, if I could just pull it up here, there was one particular article where you have a list of two survey results. The first one is a survey about our place on the adoption journey. So where are you on the adoption journey? And a second is what is the response when I ask you what smart factory technologies will be used and how will they be used your business?

Chad Perry:

And what was really striking is that in answer to the adoption question, over 50% either have no plans or are unsure about how to implement it. And that’s really striking to me because it seems like, if this is really such an urgent matter, that there would be more urgency around it. And it seems like based on some of these individual responses… so here I’ll just quote one or two of these. “I’m not sure what you mean by digital manufacturing factory technologies. We have an ERP system and we have CNC robotic machinery.” And another response was, “We are too small for it to be cost effective.” And of course I have my own responses to that. That’s pretty shocking. But what do you think about that? And what’s going on that puts that in such opposition to the picture that you’ve just painted?

Nick Peters:

Well, the picture I just painted was of us talking to growth-oriented progressive manufacturers. I didn’t say how many of them there were that are like that. The point that you’ve just made is, and that’s why I, in particular, pulled that comment out. So I don’t know what you mean about digitalization. Okay. I’ve got an ERP system and we use CNC milling and so on. The fact is they are digital, they just don’t know it. And I think part of the problem is that what happens is perhaps a media issue, but it’s also a government issue. The government understands the urgency behind this and is putting millions of pounds into encouraging small businesses to adopt digital technologies through things like the Made Smarter project and currently there’s a pilot going on in the Northwest and they’ve got about 40 or 50 companies involved over the course of the first year of running it.

Nick Peters:

There are thousands out there that need this advice, need the support and need some kind of handholding. The point is that we sit here pontificating a lot about these things and a lot of it goes over the heads of small manufacturers who are down there in the trenches wondering how to get their next shipment out, making payroll, wondering about all kinds of day-to-day stuff while we’re talking highfalutin, high level theory a lot of the time. And I think we’re perhaps guilty in the media of being a little bit over the top. It’s only when you get down in the trenches and talk to people that you realize that actually, if you do this step by step, little by little and have some handholding, particularly from some of the very good software vendors out there, the ones who really do get involved and do desire to take manufacturers on a journey of several steps, not just lumber them with a great piece of expensive software and walk away. That doesn’t happen anymore. It used to happen.

Nick Peters:

There is a real sense of urgency out there. There is an information gap which we do our best to fill, but at the same time perhaps not always does media and government and academics, we don’t always speak in the right terms that will cut through to manufacturers who have got their hands full 12 hours a day just getting the next shipment out and as I say, making payroll and keeping their business going.

Henry Anson:

Can I also interject here, Chad, so the facts and figures that you quoted and the statements you reading out just a moment ago, those were taken almost exactly a year ago. The annual manufacturing reports survey is live now will be fascinating to see if and how much that dial has moved in the past 12 months. So what you’re quoting there is fundamentally 12 months old. So as I said, it will be very, very interesting when we release the report in February time to see how much that’s changed.

Chad Perry:

Yeah. And 12 months is a lot, especially at the pace that things are moving. So I would like to come back to something that Nick said a minute ago about the journey and handholding and primarily what the barriers to adoption are. But I do want to point out, so on the flip side of this, if you look at these numbers, understanding that they’re 12 months old, it could just be a case that we’re reaching an inflection point. And if you look at it and say 50% of manufacturers are, don’t really have any plans, but the other 50% definitely have plans. So perhaps they have plans, but they just don’t really know where to get started or the cost is perceived to be too high or the complexity is perceived to be too high, particularly if, as Nick said, they’re down there in the trenches worried about making payroll and you know other day-to-day fires that they have to put out.

Chad Perry:

So that actually talks a little bit to the survey results that were right beside that and that is that if you look at the top two results about how smart factory technologies will be used, the first one is to improve design and production processes and the second, at 77% and 74% respectively. The second is streamline internal company processes from shop floor to admin. And based on the conversations that I’ve had with other manufacturers, small manufacturers in particular, it seems like that’s where the understood best place to start is for the highest return on your investment. Nick or Henry, either one of you, can you speak to what you’ve been seeing with some of the projects that you mentioned out there in terms of where people are actually starting?

Nick Peters:

Yeah, I’m happy to pick up on that because oddly enough, I’ve just literally today, I’ve just been reviewing a video interview I did in Liverpool and that’s where we met Chad. And it was with a software provider that specializes in smaller companies. And when you dig down and when you get down to it, I said to him, “What questions are you asked by manufacturers that you get to visit?” And he was saying that their main concern is they don’t know where their information is. An awful lot of manufacturers still operate, believe it or not, on spreadsheets and people are entering data into spreadsheets multiple times in the course of a particular process.

Nick Peters:

And he said, “It’s not just that. I mean once you clear that up and once you have a direct information flow, people begin to understand how valuable that is.” And he said, “The other thing is an awful lot of leaders in manufacturing say, ‘I’m making money but I don’t know where I’m making money.’” They haven’t got the information and data. And again, once they realize where their profitability lies, where can tighten things up, then they don’t need, as he said, to have more people come in to fill out more spreadsheets to try and find things. The data tells them where their profitability lies.

Nick Peters:

And I should also add that I just also listened to an interview one of my colleagues did with a very progressive manufacturer in Norfolk, a guy called Will Bridgman from Warren Services. And this is a 30 year old company and they make parts, components for the auto industry and he is getting almost fully digital. They’re going to be having 4K screens at all their workstations. They got rid of paper 15 years ago, that’s how progressive they are. And he said, “The one thing I tell the workforce is that robots are your friends. Automation is your friend, digital is your friend. These are not processes that are going to take your jobs away. They are going to add value to your job, to your wages in particular, but also it means that you can be deployed doing much more valuable things in the business rather than just filling out spreadsheets and forms.”

Nick Peters:

And if I could bottle Will Bridgman and take him around to manufacturing companies in the UK, it is absolutely inspiring stuff. So again, to go back to our role, perhaps it is to find the Will Bridgmans of this world and pass that inspiration on to other manufacturers because, as this guy from the software company told me, when they go back after a year of having helped a manufacturing company progress gently down the digital journey, a step at a time, one piece of the puzzle at a time they say, “We’ll never look back. We’re never going back to the old way. This is our future.”

Nick Peters:

And in terms of your inflection point, you’re absolutely right because the 50% who perhaps are not thinking of going on this journey, when they discover that their competitors are beginning to race away with the orders because they’re more efficient, they can deal with their customers more efficiently, their supply chains are connected and transparent. Once they realize that, they’ve either got to do it or die and that will become the point, the inflection point that you said and I think it’s going to come a lot more quickly than people think.

Henry Anson:

I endorse absolutely everything Nick said. I mean, he and I would be very wealthy men if we had a pound or a dollar for every time we were asked, “How do I start? Where do I, what’s the first step?” And I do think there’s a fair amount of rabbits in headlights syndrome here at the moment, but once people set out taking these small steps, I think the whole momentum gathers pace quite quickly. One point that I’d like to raise… again, Nick’s very eloquent and he touched on is that it’s nothing to do with size. One of the greatest pleasures that he and I have is visiting world-class manufacturers up and down Great Britain. And I’ve been to, and Nick’s been to a place like Siemens in Congleton, which is an awesome, jaw-dropping facility. Accolade Wines in Bristol, likewise, but they’re both big businesses.

Henry Anson:

Again, the most impressive and the most digitalized factory I’ve been to is a company, again, based in Norfolk, which is not exactly a manufacturing hub, called [Lintot 00:14:54]. They turn over 7 million pounds and they make industrial sewage pumps. That is the most digitalized operation I have ever been inside of. So size isn’t everything and it shouldn’t deter the SMEs from setting out in the journey because of the perceived perception of massive costs.

Nick Peters:

The thing about Lintot as well is that they have been so successful in digitalizing their manufacturing processes that they’re now getting into the business of selling digital systems, the ones that help them get where they got. They made their own, they didn’t buy it off the shelf, they’re selling it to other companies. These are the golden examples of UK manufacturing. It’s just our job to get the message out there that others can take part in this.

Chad Perry:

Right. Yeah, and I actually had a chance to have a really lengthy discussion with William Bridgman of Warren Services recently, and your summary of that message is right on. And in fact, I think he is also potentially looking at opening up his digital tools that they’ve made custom in house for others. I don’t know if it’s going to be a product or if it’s just… I know that he’s very open in general, very forthcoming about the success that he’s had with going digital.

Chad Perry:

So it sounds like, to take this inflection point a step further, it sounds like they’re kind of two different reasons to go digital that really are kind of one in the same, but at this point, just because of timing, you could really have two separate conversations with a small manufacturer about this. One is do you want to be more productive just because that’s how you are? You want to be more productive, more efficient, earn more money on your existing assets.

Chad Perry:

And then the other, more urgent aspect of it is truly a competitive squeeze because we may not be feeling it right now, but there’s a lot of talk around… and we know how these things go with other industries and other technologies, that it’s something that happens overnight slowly. So everyone wakes up in five or 10 years and that bottom 50% or the bottom 20% or whatever it happens to be that didn’t get the memo and didn’t put in the effort and start today, they either have a real problem catching up or they don’t catch up. Does that sound right?

Henry Anson:

To me, very much so. When I look at it going back to, again, our remit is that the manufacturing community is like an iceberg and a third of it’s above water, embracing digitalization. Nick’s and my job is to get more of that iceberg above water, but I think I fear greatly for those that don’t embrace this industrial revolution. I think their future is very bleak.

Nick Peters:

Well, as far as I’m concerned, Chad, the two sides you mentioned, the competitive squeeze and the need for profitability, they’re of course the same thing because you’re not going to be competitive unless you’re productive. You’re not going to be profitable in unless you’re either. So Henry is absolutely right. This is not something that people can sit back and relax and think, “Well I’ll do it in all good time,” because somebody is going to come and eat your lunch if you don’t get on board this particular bandwagon. And for UK manufacturing, it’s very hard to keep telling people that they face a crisis if they don’t open their mind to this digital revolution. But the fact is that it sounds like we’re crying wolf all the time and I have a feeling that’s how some of them regard it. So we’re very like that in Britain, a little bit cynical a little bit, “Well, I’ll keep on doing it the way I’ve always done it. I’m making money, so who cares?” They don’t realize just quite how disruptive these technologies are and how they will be disrupted if they don’t get on board.

Chad Perry:

So if I could just take the devil’s advocate piece a little bit further as well. It seems to me like you could have a situation where you have perhaps a little bit older, later in career business owners who are already looking at retirement and they’re thinking, “Well, in five to 10 years I’m going to either wind down the business,” or I guess if they want to sell it, that’s a different story because then they need to be thinking about growth as well. But do you see, what is the response, the actual response boots on the ground, when you’re talking to and having these conversations with small manufacturers? Are they just kind of eyes glazed over or is it just a spectrum or how does that go?

Henry Anson:

So our audience is largely self-selected. They are people who are engaging with digitalization, so we don’t get the eyes glazed over response to what we’re talking about and when we’re out and about. But we’re only talking to, as I come back to my iceberg analogy, probably the most progressive third of the UK manufacturing communities. So there’s a whole gamut of manufacturers out there that we just don’t talk to us, don’t engage with us, don’t really understand what’s going on.

Henry Anson:

It’s a little anecdotal story. My daughter’s best friends father owns a [inaudible] factory in the Southwest of England, [inaudible] about six months ago and I said, “Isn’t it amazing about industry 4.0, Juergen Myers, Made Smart report?” All this various government initiatives. And he looked at me as if I was talking a completely foreign language, he had no clue what I was talking about and he employed 220 people. So yeah, a small manufacturer, but not insignificant, but none of this sort of hype or the conversation around digitalization and had even reached him.

Nick Peters:

That’s quite extraordinary, Henry, and as you say, it’s an almost impossible remit from our point of view to hit every single manufacturer in the country. We can try using all the tools at our disposal, but the fact that a company with 220 employees hadn’t got started to get his head around digital manufacturing technologies is extraordinary. And obviously you and I would both say to him candidly, if we have the opportunity, “You need to get on this, otherwise you’re going to be at risk.”

Henry Anson:

Well, that’s exactly what I said to him. But it’s old adage, you can take a horse to water.

Chad Perry:

Right.

Nick Peters:

You can’t make him think.

Chad Perry:

Right. I’d like to wrap up on a related note, which is what is it that we could say to manufacturers out there who are not the Will Bridgman’s of the world, but the ones of the Canyon factories and the ones who maybe are kind of on the fence, but they don’t really know where to get started because we talk about urgency, but there needs to be something concrete. So I think, for example, I think in terms of cost, so what can I do immediately to free up cashflow or make ourselves more productive without putting in a lot of upfront capital? And then in terms of complexity, so what would you say around that? And also what would be some good resources to be a go-to where you could start with this today?

Henry Anson:

It’s a very obvious statement, but start small, do it in pods. You don’t have to boil the ocean in one go. And most SME manufacturers simply don’t have the cash with which to do that. So take a pod, start measuring everything that’s going on in that pod and then extrapolate it out. So don’t, as I say, invest massive, massive amounts of the software or hardware or whatever it is. Put some sensors on some machines, get them talking to each other and measure the data.

Nick Peters:

Yeah, I think that’s absolutely right. This guy from access group was telling me when I interviewed him at SFE, the Smart Factory Expo, he was saying that perhaps the thing to do is just to set up a small MRP system, don’t go the full ERP thing, just start with one bit. Maybe think about later on adding your accounts system in there. Maybe eventually building an ERP system block by block over time. And of course the customer, the manufacturer is going to get more confidence as they begin to see the information informing their decision making much more efficiently, where they could see the inefficiencies in their business, when they can be sure that they’ve got correct stock controls in, when they could be sure that the information is getting out to their field service crews in a timely fashion, in fact immediately rather because they are able to use technology to get information from base immediately.

Nick Peters:

These are all things that, when you eventually talk to a manufacturer, just find out where the pain is. I mean, almost, if I was doing this, if I was tasked with going into a small manufacturer with the job of trying to “sell them on the idea of digital manufacturing,” I just ask questions like, number one, where does it hurt? If it hurts, where? Do you know where you’re making money? Do you know precisely where your profit is? Do you know whether every role you’ve got in your company is actually productive or just propping up an inefficient process?

Nick Peters:

And eventually when you could start getting answers to that, you could start saying, “Well, did you know that if you did this, then it would just remove that either time wastage or resource waste or whatever and would start to make you a better manufacturer?” That’s the only thing I could think of doing. I mean, it’s not my job. My job is to write articles in magazines and tried to do high level stuff. But as far as I can see, you’ve got to get in there and find out where they’re pain is and then gradually extrapolate from that to, “Well, did you know there is an answer?”

Chad Perry:

Yeah. Well that sounds like a good place to wrap up. So, guys, I really appreciate it. One last question for someone out there who is listening to this and they want to get in touch with you, what is the best way for them to get in touch with you and when can they expect the next round of updated information on this, whether it’s the annual report or any kind of research that you’re going to release?

Nick Peters:

Well they can get got to touch number one through the website, www.themanufacturer.com. Our email handle is @Hennikgroup, that’s H-E-N-N-I-K Group, all one word, hennikgroup.com. I’m N.Peters and Henry is H.Anson and take it from there. The annual manufacturing report survey, as Henry alluded to earlier, is currently live and it can be accessed through our website. So that link is going up later today. And the report from that will be published at the House of Lords in Westminster London on February the 24th 2020.

Chad Perry:

Great, thanks guys.

Henry Anson:

Thank you, mate.

Chad Perry:

Thank you.

Nick Peters:

Thank you very much, Chad. Cheers.

[General outro omitted.]