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Industry 4.0 – embracing the smart factory

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Caroline Milton - Menzies Accountant

Caroline Milton – Manufacturing Specialist

Industry 4.0 presents the opportunity to generate value that business leaders will appreciate. To truly appreciate this though, more focus on digital transformation is necessary within the next 10 years. Business leaders must recognise the importance of not falling behind by remaining competitive and retaining their global reputation for excellence.

Currently, the trading and economic conditions have proved challenging, making SME manufacturers reluctant to embrace digital technologies. Capital expenditure has been the main hiccup, especially at a time of Brexit uncertainty, business leaders often report that when marking up digital tech, like robotics or AI systems, first estimates fall far short of the investment that is actually needed once other considerations of implementation are taken into account.

A business leader will typically seek advice about introducing robots to streamline production, while increasing dependability and making sure quality standards are met.

Initial quotes received might seem realistic, but when they discover more investment is needed to add on maintenance contracts and upgrade operating systems, this amount can increase. Careful thought is required for such investments.

Transforming manufacturing

manufacturing diagram

Many SME manufacturers have re-designed their business and embraced digital transformation fully to capitalise on the advantage of robotics, the predictive power of AI systems, big data analytics and other technologies. Upon visiting a smart factory, I discovered a company that was sourcing components based on their appropriateness for operating a grid-based manufacturing system and a robotic production line which made it simpler to alter technologies in line with advancements. To minimise the risk of downtime, the inventory control system was also made automatic.

To this day, the early movers have mainly been tech-led manufacturers, that lead digital transformation with in-house skills. Other manufacturers must look to the future and plan ahead as they can’t afford to sit back and do nothing. An extra incentive to do so is that Annual Investment Allowance is presently set at up to £1 million a year until December 2020. Therefore, investing in qualifying plant or machinery now could be a tax-efficient option.

What needs to happen?

manufacturing building yellow

To speed the route to industry 4.0, SME manufacturers will need more support from the government in the form of fiscal and other incentives. Incentives for investment in training and staff development are seriously needed to improve access to workers with skills in areas like data analytics and management and systems design and maintenance.

SME manufacturers must act now and improve their investment in digital transformation initiatives to obtain a more sustainable and profitable future. Using data-based insights and fiscal incentives whilst managing cash carefully, eliminating risk from the transition process should be attainable.

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Posted in Blog, Manufacturing

Caroline Milton - FCA

Partner

Caroline Milton is a Menzies Partner specialising in business audit and accountancy compliance advisory and heads up Menzies Manufacturing sector team.