While manufacturing companies are facing tricky macroeconomic headwinds, a survey of European manufacturers by teknowlogy Group found they are making progress with Smart Factory initiatives. Smart Factory is showing signs of increasing maturity, and most companies are continuing to increase their investment. Nevertheless, projects are not without challenges, and some have so far failed to deliver ROI.

Manufacturing companies are looking to technology, specifically what teknowlogy group calls Smart Factory or Intelligent Factory, to enable them to be more efficient and profitable. Global competition has put a lot of pressure on manufacturers to increase the efficiency of shop-floor operations to further reduce product costs, and to be competitive in global markets.

Smart Factory is a concept borne out of research around ‘Industry 4.0’ – the name given to the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of Things (IoT), cloud computing, Artificial Intelligence and more. The basic principle of the Smart Factory is that by connecting machines and other systems, businesses are creating intelligent networks throughout the manufacturing process that can control each other autonomously, or at least semi-autonomously.

Many Smart Factory initiatives have already come of age, and most companies are increasing Smart Factory spending

8% of respondents consider themselves to already be in the ‘advanced’ stages of deployment, where they have an organization-wide Smart Factory initiative supported by consistent architectures and best practices. As for the rest, 19% are at a ‘medium’ stage of deployment, 36% are at an ‘early’ phase and 37% said they are still in the ‘planning and evaluation’ stage.

An overwhelming 63% of companies said that they plan to increase their investment in Smart Factory in the next three years. 35% said their investment is likely to stay the same, leaving only 2% who said that they anticipate Smart Factory spending to reduce in the next three years.

Supporting quote: “Most companies continue to increase their investment in Smart Factory. Despite the macroeconomic challenges that manufacturing companies are facing, 63% still said that they plan to increase investment over the course of the next three years, although most said challenges remain particularly around the cost, lack of skills and building the business case,” said Jason Stamper, teknowlogy Group Research Director and the author of the report.

Primary goals of Smart Factory strategies

In terms of internal goals, companies said that they are primarily doing Smart Factory to improve product quality, support digital transformation and enable easier and more efficient customization of products. Other reasons given were to improve asset utilization and reduce downtime, drive down cost, simplify the IT layer outside the datacenter and increase agility and flexibility.

As for external goals, the number one external benefit of a Smart Factory strategy according to our survey respondents was improving customer satisfaction. Of course this is likely to be enabled by the other internal benefits outlined above – improved product quality, and easier and more efficient customization of products, for instance. After improving customer satisfaction as an external goal of Smart Factory, came improving supply chain management (51%) and better monitoring and management of products after they leave the plant (39%). A smaller group (23%) said that the goal was to create new connected products, services and business models.

The ROI of Smart Factory initiatives, and the challenges

56% of our respondents are yet to see ROI, but many are still in early stages of their roll-out. 44% have achieved an ROI already and of those, 45% in less than one year, while 52% answered between one and three years.

Nevertheless many manufacturers reported significant challenges with their Smart Factory rollouts, as shown in the figure below.

“What are the challenges of your Smart Factory initiatives?”

The study was based on interviews with IT and OT decision-makers at 204 European manufacturing companies with more than 500 employees, which have at least some Smart Factory initiatives in plan. The study was conducted in May and June 2019 – supported by premium sponsors Fujitsu and Stratus Technologies.

The executive summary and infographic relating to the study are now available for download. 

Please contact the premium sponsors if you wish to receive a full version of the study.