Financing Industry 4.0

Early adopters of digital transformation stand to gain the most competitive advantage from Industry 4.0. Siemens provides a complete package of cutting-edge technology, along with finance solutions to help manufacturers on their digital transformation journey and steal a march on their rivals.

Industry 4.0 machines, technology and equipment are revolutionizing manufacturing by digitalizing production processes, quality assurance, maintenance, planning, forecasting, innovation and discovery, time to market, supply chain efficiency, and many other aspects of the manufacturing eco-system. Digital data capture and data flow is enabling a degree of flexibility and efficiency that will dramatically lower production costs while increasing scale, agility and profitability.

 

Today’s debate is therefore now centred around ‘how quickly’ digital transformation can be sustainably achieved. Siemens Financial Services (SFS) is helping manufacturers – large and small – move to Industry 4.0 and grasp its competitive advantages as soon as possible, without incurring unsustainable debt or cash flow pressures.

The early bird catches the worm

In most marketplaces, early movers – the first 50 percent of players to invest in new technologies or business models – are those that will be able to make the most of this competitive advantage, at the expense of competitors that have not adopted. 

Early movers make the most of their competitive advantage.

For the ‘laggard’ half of the market, investment in the new technologies or models is still required, but the possibility to gain competitive advantage has fallen away as the ‘follower’ half of the market is simply aligning with the new market norm.

SFS Whitepaper “Countdown to the tipping for Industry4.0”

Latest research from SFS estimates how long it would take for this ‘tipping point’ of 50 percent deployment amongst manufacturers to be reached. This effectively forecasts the window of opportunity for manufacturers to gain the expected return on investment from their digital transformation initiatives. After this point, cost and efficiency can still be gained from Industry 4.0 investments, but not market advantage.

Research among manufacturers

SFS interviewed respondents across the globe – including manufacturers, trade associations, management consultants and academics. The results suggest that larger manufacturers were expected to take between five to seven years to reach this point; whereas SME manufacturers were expected to take longer – between nine to eleven years.

 

Starting the Industry 4.0 journey

Respondents were also asked about the proportion of manufacturers to have implemented a significant Industry 4.0 pilot. This is an important insight into the current rate of adoption. SFS is helping a number of manufacturers start their Industry 4.0 journey by piloting new technology or solutions before embarking on a full roll-out of digital transformation.

 

The research found that 70 to 80 percent of large companies have implemented a significant pilot project for Industry 4.0 production solutions, compared to 40 to 50 percent of SMEs. Whilst there is momentum behind the transition to Industry 4.0, for many manufacturers the pace of transformation could benefit from acceleration, especially as incumbent players look to compete with rival economies, stay ahead of new entrants, and manage disruptive change.

Gap between larger and smaller manufacturers

The findings therefore highlight a significant gap between larger and smaller manufacturers – and the two-tier race to digital transformation. Larger manufacturers often have invested more heavily in legacy production systems than their smaller competitors, meaning that although larger players have the advantage of scale and market power, their digital transformation may be more complex as a result. There may also be a perception amongst smaller manufacturers that specialist financing tools are only available to larger organisations*, even though this is not the case. In fact, SFS works with manufacturers of all sizes to help them on their journey to digital transformation.

Finance 4.0 enables digital transformation

Manufacturers across the same regions were also interviewed for their views on the role that specialist finance was playing in enabling their digital transformation. Challenges to implement digital transformation tend to pivot around the issue of finance. Manufacturers need to work with a financier such as SFS which understands the commercial benefits of Industry 4.0; and can make investments sustainable and cash-flow friendly. The financing techniques that enable sustainable digital transformation are becoming known as ‘Finance 4.0’.

 

Finance 4.0 enables sustainable digital transformation.

Finance 4.0 from SFS can help manufacturers ensure they are early adopters of digital transformation and benefit from a strong competitive advantage, before other companies in their sector take the lead. These specialist Finance 4.0 tools include:

Pay to Access/Use Equipment & Technology Finance

Whether starting a pilot or accelerating implementation, most manufacturers are looking for financial tools to help them acquire a piece of technology, machinery or a system from OEMs without the need to use up their own capital. Early engagement with the right financing partner will enable manufacturers to size and specify the pilot without unnecessary financial constraints; and help build the business case with the freedom to access the ‘best fit’ technology. Financial solutions will usually be based on a range of options – finance lease, operating lease, rental or hire purchase arrangement. 

 

Technology Upgrade and Update

Integrated equipment and technology finance options to upgrade during the financing period offer protection against technological obsolescence.

 

Software Finance

The journey to digital transformation necessarily means deploying combined hardware and software solutions which can deliver digital data streams of performance data that are the key to production optimization, predictive and remote maintenance, and more intelligent manufacturing. This is recognized by specialist financiers that can offer manufacturers integrated arrangements for financing requirements

 

Pay for Outcomes

Savings or gains from access to the technology are used to fund monthly payments. 

 

Finance to assist transition from pilot to mainstream

Financing arrangements are available that defer payment for a new system or scaled set up until it is reliably up and running.

 

Working Capital Solutions

Manufacturers are under increasing pressure to manage cash flow. Added-value financing services offered in partnership with a specialist financier – usually based on some form of invoice finance – are available to help manage the cash flow challenges that success through digitalization brings.

 

Financing solutions to enable OEM sales momentum

Vendor financing programs can offer OEMs further competitive advantage, as they drive their own businesses, or enable their own customers to become digital enterprises.

* See, for instance: Friedrich Ebert Stiftung, C Schroder, The Challenges of Industry 4.0 for Small and Medium-sized Enterprises, 2016

 

Contact:

Fraser McGregor

+44 7808 827282

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