Market drivers

Robotics

The share of manufacturing tasks performed by automated robotics is forecast to rise from a global average of 10% today to c.25% by 20251.

Although countries with high-wage rates have the highest rate of adoption of automation technologies, the use of robotics in emerging economies has surged in recent years as upward pressure on wages begins to erode competitive advantage and firms look to counter rising labour costs.

However the use of robots and other types of automation is not only driven by these cost efficiencies, but also by higher quality requirements and the need to increase flexibility. In particular companies can realise impressive gains in labour productivity due to the increased use of robotics for manufacturing tasks. This will lead to shifts in competitiveness among economies as fast adopters reap significant gains.

Human-robot collaboration will also be a significant trend over the next few years. Robots will increasingly collaborate with humans in areas such as electronic products and other small parts assembly. Higher deployment of robotics will enable significant savings in labour costs, and higher robotics utilisation will also result in freeing skilled workers to focus more on higher-value tasks.

 

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Internet of Things (IoT)

The concept of using sensors and other technologies to link products and services to the Internet has become a powerful force for business transformation as the drive to connect devices, and then share and transmit the collected data and information, accelerates.

The digital shift instigated by cloud and mobile technology threatens many existing businesses which urgently need to pursue strategies built around IoT concepts. Many ordinary objects are being reinvented with digital sensing, computing and communications capabilities. For instance, in factories this can include sensors installed inside equipment to monitor whether parts have exceeded their useful life or safety thresholds.

It is estimated that IoT will support total services spending of €239bn by 20202, while c.13 billion connected things will be in use across the consumer sector alone by 2020.

Industry 4.0

The vision of future manufacturing in which ‘intelligent’ factories, machines and products all communicate with each other, is fast becoming reality. For instance, by 2020 German industry is planning to invest approx. €40bn annually in Industry 4.0 applications.

Industry 4.0 technology results in significant economic benefits. It has been estimated3 that in Western Europe alone the technology could be worth as much as €420bn in net profits, and also increase return on capital employed from 18% today to 28% in 2035, raising overall plant utilisation from 65% to 90%. It is also forecast that output per worker in manufacturing industries will be 10-30% higher in 2025 than today.

This vision becomes even more attractive as manufacturing switches from mass production to mass customisation, no longer based on scale and volume but on flexible and localised production.

Complete customer solutions

Manufacturers are looking to acquire businesses which allow them to provide complete customer solutions. This has recently included manufacturers buying systems integrators which have historically been viewed as a distribution channel rather than as an area for M&A appetite.

This strategy then links into manufacturers also seeing opportunities to provide operational services akin to a rental payments model. For instance, instead of selling operational IT such as SCADA – a control system that uses computers and networked data communications for process management – manufacturers sell a complete platform of a process line automation package (hardware and software). This may ultimately lead to industrial outsourcing where data – and possibly people – are also managed by the supplier to provide a service.

A good example was the recent acquisition of systems integrator Maverick Technologies by Rockwell Automation. The deal strengthens Rockwell’s expertise in key process and batch applications to help its customers realise greater productivity and improved global competitiveness through contemporary process control and information management solutions.

The acquisition supports Rockwell’s strategy of helping customers increase competitiveness by adopting ‘The Connected Enterprise’ – a vision that connects information across the plant floor with the entire enterprise to drive new business value.

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E-commerce and warehouse systems

Retailers, manufacturers and logistics providers around the world are continually looking for ways of improving productivity and lowering costs, and developments in supply chain and warehouse solutions are helping to meet these needs. In particular, automated material handling solutions are today facilitating the vision of the smart warehouse and factory.

Related to this is the exponential growth of e-commerce. Customer demand for faster delivery times creates the need for warehouse, logistics and fulfilment solutions that can increase productivity and lower costs for consumers. This in turn leads to customised solutions for the automation of logistics in warehouses.

1 BCG
2 Gartner
3 Roland Berger

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