Manufacturing in the Digital Era: Winning the Race Requires Investment

  • August 15, 2017
  • Siemens
  • Feature
Manufacturing in the Digital Era:  Winning the Race Requires Investment
Manufacturing in the Digital Era: Winning the Race Requires Investment

By Bill Lydon, Editor,

The dramatic influx of connected industrial automation and manufacturing technology is providing the opportunity for manufacturing companies to drive their industries forward, while surpassing the competition.   Yet, it if investments are made too late, competitors may overwhelm your company. The timing is absolutely crucial. Yet with money seemingly always being tight, how does an organization manage the necessary expenses to push forward?

Financing, in order to acquire new machine tools and other major equipment, has been a common manufacturing practice for many years.  These investments in the past have been the primary engines for manufacturers to improve quality, productivity, and efficiency and just as important as we enter into the era of digitalization. Recasting manufacturing facilities using Industry 4.0, Industrial Internet of Things, Cloud Computing, Distributed Control, and other digitalization tools represent significant investments both in an organization’s present and future.    During the 2017 Siemens Automation Summit, held from June 26-29. Siemens’ Peter Austin, and P.J. McElroy, described new options for financing automation, control, and digitalization in order to help manufacturing companies move forward into the future.


Siemens’ Value-Added Financing Effort

Austin, the Vice President of Commercial Finance Americas, started the discussion by talking to the smaller enterprises. “For us the whole industry 4.0 and the push in that direction is absolutely on point particularly with the small and medium enterprises,” Austin described.  He explained how Siemens Financial Services does work with larger companies but in many cases, they have their own of funding sources, whereas the smaller companies may not.  “Our goal is to help our customers to achieve greater efficiencies and we have a number of financial tools and instruments...”

He believes that this Siemens’ effort can bring the biggest value to Small and Medium Enterprises, who may gain an advantage on their larger competition by working with Siemens Financial Services.   P.J. McElroy, National Business Development Lead of Siemens Financial Services, added that with the aging equipment base, they can help manufacturers refresh operations to be more profitable and competitive.  “Making these investments can be revolutionary for a manufacturing plant,”  noted McElroy, “As you look over the next 5 years as digitalization trickles down throughout the entire plant there will be ways to collect data for machine centers in equipment that you can’t do today.”   They described how projects can be based on entirely guaranteed savings, They described projects based on guaranteed savings as one of the methods available, and how the company’s wealth of experience and knowhow with performance contracting, in the Siemens Building group, will be used to structure some of these financial programs and broaden the types of programs that can be offered to customers.  In concert with digitalization Siemens Financial Services will also finance new machines and other equipment in addition to automation.

Austin and McElroy also discussed their efforts to partner with Siemens groups that assist manufacturers and provide subject matter experts to understand and recommend how clients can achieve digitalization and estimate the benefits.  This should distinguish Siemens Financial Services from other financial institutions, since they factor the expert knowledge and knowhow of Siemens experts in their financing risk assessment.


The Digitalization Productivity Bonus

This is not an off-the-cuff effort by Siemens. Their goal of helping companies to invest in the latest technology, is based off in-depth research.  In one of their recent white papers, The Digitalization Productivity Bonus, Siemens sites estimates that potential annual manufacturing productivity gains from a digital transformation will total between 6.3% and 9.8% of overall revenue by 2025.  Further, the whitepaper suggested that a new mindset is required of manufacturers, in order to fully embrace digitalization and adjusting their strategic thinking to benefit from digital capabilities.   By working with the company’s industry groups, Siemens aims to help manufacturers understand the benefits and practical application of digitalization.


Bill’s Thoughts & Observations

The manufacturing and process industries are somewhere along the path of dramatic change driven by today’s advanced technology.  There is a growing realization throughout the world that simply having low labor costs is not a winning strategy. Throughout multiple industries, countless organizations have foundered due to an inability to comprehend and act on these revolutionary new technologies.

Industrial digitalization is a specific set of these new concepts and technologies that, properly applied, will dramatically improve manufacturing profitability and competitiveness. Traditional capital investment methods are typically not geared to appropriate analysis of these investments, in my opinion, and the fact that Siemens Financial Services are providing value-added financing for the smaller enterprises in the industry should prove very intriguing for the future.


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