How disruptive manufacturing firms are riding the wave of tech evolution

Over the past two years, UK manufacturing has faced unprecedented challenges, not least from Brexit and COVID-19. Cloud9 Insight's SAOIRSE JACKSON looks at how the sector is evolving in the face of these seismic shifts in the industrial landscape.

Coronavirus was a leading factor in the fall of manufacturing output in February 2021 of 4.2% compared to the previous year.

But the pandemic, along with Brexit and various other potential hurdles, have also had an upside: it has catalysed a transformation of the sector, speeding up the UK's ongoing automation of traditional practices with modern smart technology.?

This transformation is becoming known as The Fourth Industrial Revolution and it will increase efficiency and productivity, helping boost the competitiveness of UK manufacturing.

So let's look in detail at the factors that are driving digital transformation in manufacturing.

COVID-19

The pandemic’s assault on the economy has created disparities in demand across the UK manufacturing sector, caused in part by changes in consumer behaviour ushered in by lockdowns. This has played to the strengths of some firms, especially those with a focus on household products, with many having seen a surge in sales. Other firms have not been as fortunate, for example wholesalers.

One emerging trend, as highlighted in this Barclays report, has been the increase in direct purchasing from manufacturers,with consumers bypassing distributors in the hope they will secure better and faster service and lower prices.

This has presented the opportunity for many firms to tweak their business model from B2B alone to a mixture of B2B and B2C so they can sell direct to consumers. As a result, many firms have gained greater price control of their products and more/better feedback from consumers, enabling them to improve the quality of their products.

The future for UK manufacturing looks bright. Growth in the sector will outpace growth in the economy as whole in 2021.

Changes in consumer behaviour are not the only hurdle manufacturers have had to overcome. Much of UK manufacturing sector has faced disruptions in their supply chain. Whilst, at first this issue caused a decrease in efficiency and productivity due to the increase wait time and reduced supply of some products, in the long run, it is likely to increase the resilience of UK manufacturing. Many firms have been forced to either diversify their supply chain or source from closer locations, reducing the risk of disruption.

Over all, the future for UK manufacturing looks bright. Growth in the sector is expected to outpace growth in the economy as whole in 2021, with the latter forecast to return to pre-pandemic levels by the end of 2022. One of the factors contributing to this is the introduction of the corporation tax super deduction, which was set up by the Government as part of the 2021 budget in an attempt to speed up the recovery of the UK economy.

The scheme enables companies that invest into either qualifying new plant or machinery assets over the next two years, to reduce their tax bill by 130% of the cost of the investment. So it incentivises firms to invest in their company - which is likely to lead to an increase in productivity and efficiency, reducing costs and increasing profits.

Although the pandemic has caused many disruptions and changes to the manufacturing industry, it has also catalysed the evolution of the industry to great solid foundations for growth.

Brexit

The impact of Brexit has been widely felt across the UK economy, especially in the manufacturing sector which saw the largest drop in exports from the UK to the EU since 1997.

That said, this slump is likely to only be short term. It was caused largely by stockpiling in December 2020 ahead of the introduction of new Brexit rules and regulations. The emergence of the new variant of COVID-19 added fuel to the fire by causing greater delays and complexities in transporting the goods across the border to the EU, adding on to the already increased time taken from greater custom inspections and regulations.

Despite this, Brexit is not all doom and gloom there’s a silver lining: the UK has gained the competitive advantage of lower export prices caused by a fall in the relative value of the pound. This incentivises foreign firms to buy more UK exports. The fall in Sterling has also led to an increase in the price of imports of intermediate goods used in the manufacturing process, which could lead to an overall increase in the price of products.

In the face of all the difficulties that Brexit has thrown at the manufacturing sector, since the UK’s slump in exports in January 2021, they have since grown by?46.6% proving there is hope for the future of UK manufacturing.

Future trends in manufacturing

The UK manufacturing sector has been continuously put under pressure from the increasing competition from developing countries, such as China. These nations are attempting to manufacture higher value goods to receive greater returns, pressuring western countries, like the UK, to be one step ahead by digitalising the production process.

Time spent using advanced technology may increase by as much as 41% in Europe by 2030.

The race to increase productivity has led to the Fourth Industrial Revolution, which has been accelerated by the pandemic where many firms have been forced to digitally transform. Many firms have adopted smart factories, which streamline production by connecting sensors to the internet, and this is expected to generate up to ￡3.7 trillion of increased value according to the World Economic Forum.

Many firms, including Ford, are using Virtual Reality to work out how their products could be modified and improved. This avoids the wasting of time and resources caused by having to build new physical models of the product repetitively.

Due to the Fourth Industrial Revolution, time spent using advanced technology may increase by as much as 41% in Europe by 2030, a report from McKinsey suggests. This highlights the need for workers to develop digital skills, of which there is already a huge shortage in manufacturing. In fact, some 40% of UK workers in the sector do not have adequate qualifications for their current jobs.

The consumption of manufactured products is also becoming increasingly digital, as the way manufacturers charge for their products and related services is changing. Firms increasingly want to shift from just selling products to offering services wrapped around products (such as maintenance packages) and enabled via cloud and IoT technologies.

For manufacturing firms open to disruptive change in their business models and how they create, market, sell and service their customers, they will reap the benefits now more than ever.

So it is undeniable that the UK manufacturing sector has faced endless challenges from sudden changes in demand due to COVID-19, disruptions in the supply chain caused by Brexit and more.

Even with all these hurdles facing the sector, it has become more resilient and has helped accelerate the transformation of the manufacturing sector, which has put the UK manufacturing on a promising path for a prosperous bright future.

Cloud9 Insight is an award-winning Microsoft Dynamics 365 Gold Consultancy, specialising in CRM and Power Platform. We work with manufacturing firms, helping them to grow and scale profitably.

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