Circular economy to boost UK manufacturing
A report from Sage says the UK manufacturing sector is more advanced than many global counterparts in adopting new processes and driving growth. Katherine Williams attended a briefing.
Prior to the UK following Europe into COVID-19 lockdown, consumers saw climate change as the main driver in manufacturing change. Environmental issues have been pushing change with 96% of British discrete manufacturing companies questioned saying such trends have affected them. Robert Sinfield, Vice President of Product at Sage, says, ‘The UK is ahead of the curve’, noting companies have changed workflow to eliminate waste and recycle resources – entering the circular economy.
Most UK manufacturing professionals view the circular economy as a long-term net benefit from a brand reputation and profitability perspective. Sinfield expands, ‘On the global leader board, the UK stands quite high in pursuing the circular economy. Sage’s research Discrete Manufacturing in a Changing World, 2020 shows that lowering carbon footprint-related costs was more of a focus for UK companies (40%) than North American firms (24%) that took part in our survey. Indeed, only 35% of EMEA (Europe, Middle East and Africa) businesses and 38% of Australian firms said it was the reason that drove them to pursue a circular economy strategy. These variations could be down to political uncertainty and change across different regions and are in line with respective governments’ interests in improving their carbon footprint.
‘However, in the UK, three quarters of companies are in the middle of transforming and just 2% are completely transformed. So, we have a way to go yet, but we can do it. There are real trailblazers in this, such as SKF from Sweden that the UK needs to look to. SKF uses predictive technology to see how customers use their products, which helps them minimise wastage and downtime.’
Tim Figures, Director of Industrial Sectors, Technology and Innovation at MAKE UK, notes, ‘UK manufacturing is not a digitally native sector.’ Borne out by the 65% of respondents who said they face undertaking substantial transformation to benefit – especially in adapting supply chain practices and balancing sustainability with the bottom line.
Sinfield is keen to note that companies can learn from the experience of others, ‘from success stories like SKF, we can see that a focus on the circular economy truly helps to drive profit and efficiency. The UK stands in a good place, but we need to follow through on desire to change with action – businesses need to realise they stand to improve their customer offerings and relationships from establishing a recycling model. Organisations can acquire new operational efficiencies by driving down waste in the manufacturing supply chain and customer sites. In the long term, there are huge cost savings to be reaped from adopting more environmentally friendly practices’.
Manufacturing expert Professor Frank Piller of RWTH Achen, Germany, told report authors industrial manufacturing is arguably one of the largest emitters of CO₂, along with the transport and energy sectors. Changes made by manufacturers, he says, can have significant impact by making their industrial systems more efficient. This is a more rapid effect than changing consumer behaviour, which is far harder.
The report indicates that servitisation strategies are also seen as vital in driving opportunities. ‘The UK is responding rapidly to servitisation because of how it ingeniously benefits a product offering – it works off existing product ecosystems to add new benefits and attract new customers. The UK has noticed the close link that servitisation has with digitisation and how this presents businesses with new opportunities to expand their product lines with enhanced services and solutions. These include attractive add-ons, such as implementation, maintenance, upgrades and product lifecycle. Some 66% of our UK respondents said this is a trend that is impacting them. Of these, 92% said they are pursuing a servitisation strategy’, Sinfield notes.
‘However, that level of impact does differ across regions. We found the UK is ahead of its American friends. In the UK and EMEA, 62% of respondents said servitisation is impactful for them and in Australia this figure was even higher at 71%. On the other hand, the percentage was much lower in North America at 28%. It’s great to see the UK ahead of the pack on this especially as the US is, by far, leading digital services around products in consumer goods. Most of the connected product ecosystems and platforms are from big American companies and Silicon Valley types. So, to see that the UK is paving the way here is somewhat of a triumph’.
While the UK is performing well there is still much to be done. Sinfield believes that agile thinking needs further development in the sector. ‘There needs to be more agility in the c-suite – we’re seeing growing problems on a global stage around natural disasters and cataclysms – we’ve seen recently how events can cripple supply chains. Companies need to be quick on their feet and have contingency plans in times of crisis – initiating back-up plans and new routes for trade when one avenue falls through.
‘In addition, on the factory floor, agile thinking can help bring about further cultural change on adoption. Companies could give their manufacturing experts a whole new set of tools and train people on the shop floor in design thinking, so they can redesign processes and plan their future workplace, for example. It’s more about process development and innovation and how processes are managed and much less about product development’.
Sage sees itself as a technology catalyst in this change. ‘As things in the future become more interconnected, having the right tech, which gives you an overview of assets, is key’, says Sinfield. ‘Successful leaders will thereby make smarter decisions by linking what they do in manufacturing with what happens in the broader supply chain, and how users consume their products, using technology to connect the dots. That’s where emerging technologies like AI, automation, IIoT and analytics will really come into their own.’
The full UK whitepaper can be read here www.sage.com/uk/discretemfgreport