Consulting and global services provider Capgemini says that the automotive sector could benefit from up to $160 billion in annual productivity gains by 2023, by adopting smart factory technologies.
A top-ten automotive company could expect to realise 50 percent growth in operational profits annually within five years of a full smart factory implementation, it adds. Meanwhile, any manufacturer should expect to break even within one year of completing a smart upgrade programme.
The Capgemini report, Automotive Smart Factories: How Auto Manufacturers can Benefit from the Digital Industrial Revolution, has been produced by its Digital Transformation Institute think tank.
It predicts that average productivity growth from smart factories within the automotive sector will be seven percent in 2023. By the end of 2022, automotive manufacturers expect that 24 percent of their plants will be smart facilities, adds the report.
“The auto industry has grasped the significant potential of smart factories and has a head start over other sectors in terms of adoption,” it continues. “Nearly half (49 percent) of automotive organisations have invested $250 million or more in smart factory initiatives over the last five years.”
Capgemini surveyed 326 senior executives from the automotive sector between February 2017 and January 2018. Respondents were drawn from director level or above, and closely associated with their organisations’ smart factory plans. The survey covered executives from eight countries: China, France, Germany, India, Italy, Sweden, the United Kingdom, and the United States.
Who is doing what?
The report highlights several examples of successful smart factory initiatives in the automotive sector. For example, Audi invested $1.3 billion in building a smart factory in San José Chiapa, Mexico. The plant employs centralised production control, RFID, smart logistics, and an electronic quality-control process, leading to “very high productivity and efficiency levels”, says Capgemini.
Toyota Transmissions overhauled its Durham, North Carolina, facility to turn it into a smart factory and recouped $1 million of the cost in the first nine months, thanks to maintenance savings, according to the report.
Meanwhile, BMW is investing $1 billion in expanding one of its most flexible and automated plants in Spartanburg, South Carolina. The factory, which is BMW’s largest production facility, started deploying collaborative robots as early as 2013. BMW plans to further invest a $600 million at the site between 2018 and 2021.
Faurecia, one of the world’s largest automotive parts manufacturers, has multiple smart factories in its portfolio. For example, its $64 million facility in Columbus South, Indiana, employs automated material handling via 30 guided vehicles, and has helped reduce inventory storage space by 60 percent.
Its Caligny plant in France is a highly digital, state-of-the-art facility, and has been recognised as an ‘Industry of the Future Showcase’ by the French Industry of the Future Alliance.
Grégoire Ferré, chief digital officer at Faurecia – a Capgemini client – said, “By using smart factory technology in our business, we have seen great benefits with regard to our employees’ productivity. They use sophisticated tools such as smart robots to create a safer environment, which in turn provide them with more time to focus on other important tasks.”
Meanwhile, Harley-Davidson’s smart factory in York has reduced its fixed, 21-day production cycle down to six hours, and slashed operating costs by $200 million, thanks to its smart factory programme.
Magna Styer, one of the world’s largest auto suppliers, produces vehicles with conventional, hybrid, and electric powertrains on the same smart production line, turning out 200,000 vehicles a year.
And Kuka, a supplier of industrial robots, has connected 60,000 devices to record every component and quality check at its Ohio automotive plant, says the report.
Laggards versus masters
In France, Germany, and the UK, a majority of auto manufacturers (63 percent, 59 percent, and 56 percent, respectively) have ongoing smart factory programmes, opening up a considerable lead over other countries in the survey, according to Cap Gemini. However, Chinese and Italian automotive manufacturers plan to catch up, with around 70 percent formulating strategies for smart factory programmes.
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Nearly half of all automotive companies (46 percent) already have a smart factory initiative, behind only industrial manufacturing (67 percent) and aerospace (63 percent), while smart manufacturing programmes are being developed at a further 43 percent of automotive companies.
However, few automotive manufacturers have translated their enthusiasm for smart factories into real progress as yet, cautions the report: 42 percent of initiatives are struggling and the digital maturity of their manufacturing operations is below par.
This gap between the industry’s enthusiasm and its lack of progress could reflect the high expectations for smart factory initiatives, says Capgemini. “We also looked at some of the specific challenges they face at different stages, from strategy to implementation,” explains the report. “At the strategy stage, lack of coordination is the key barrier. At the implementation stage, it is lack of investment.”
Those who are making the best progress invest 2.5 times more than the companies that are struggling. Additionally, they typically involve their leadership teams, are developing their talent, and are investing in the “right areas”, such as manufacturing intelligence and predictive maintenance, says Capgemini.
More manufacturers could make a success of the opportunity if they follow in the footsteps of what Capgemini calls the ‘digital masters’.
While a large proportion (46 percent) of original equipment manufacturers (OEMs) have been successful in their smart factory initiatives, less than one-third of automotive suppliers (32 percent) claim to have been successful as yet.
The report highlights that while OEMs are leading the way in smart factories, they can do more to help suppliers adapt. For example, the report explores the opportunity for OEMs to contribute through financial support, and by working closely with suppliers on innovation, via startup schemes and academies.
When OEMs and suppliers work together to create smart factory processes, problems can be minimised early on in the production process, says Capgemini.
Nick Gill, chair of the Automotive Council at Capgemini, said: “Digital maturity holds the key to realising the full potential of smart factory initiatives. This study clearly demonstrates the enthusiasm among automotive organisations to invest in smart factories and the awareness of the long-term benefits.
“However, more can be done for automotive suppliers to take a collaborative approach with OEMs to optimise their smart factory initiatives. The next few years will be critical as OEMs step up their digital maturity, accelerating outcomes to maximise business benefits.”
Internet of Business says
The global trend towards smart factories is part of a wider movement away from monolithic, low-cost-labour-based processes, and towards more personalised, automated, and localised (PAL) manufacturing and value chains – a concept explored by transformation consultant Sean Culey in his report for Internet of Business.
For example, why make one million items in China and ship them across the world over a period of weeks, when an automated, local factory could custom-make one to order and deliver it the next day at no extra cost? That’s the thinking behind PAL manufacturing.
Other benefits of smart manufacturing include predictive maintenance – pulling together a range of technologies, including sensors, the IoT, enterprise asset management (EAM), and digital twins, to create a smart supply chain that minimises downtime and helps organisations plan for upgrades and repair rather than waiting for critical failures.
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