Making factories smarter could bring a lot of profit to the automotive industry. Smart factories could add more than $160 billion in value to the global automotive industry from 2030.
This is what Capgemini predicts. The consulting firm conducted the 2017 study 'Smart Factories: How can manufacturers realise the potential of digital industrial revolution', which found that investments by car manufacturers in smart factories could generate $1,500 billion in profits over the next five years. The automotive industry is identified in the report as one of the sectors investing the most in making factories smarter. In a new study, Capgemini now looks at the benefits that smart factories have brought to the automotive industry so far.
Smart factories deliver productivity gains
Managers from the automotive industry expect to increase the productivity of their factories by 30% on average thanks to the deployment of smart technologies. They also expect that 24% of all factories in the sector could be classified as smart factories by 2023. Looking at the productivity of the entire automotive sector, these figures translate to a 7% increase in productivity in the entire sector. Given that in 2017, the global turnover of the automotive industry was $2.290 billion, investments in smart factories could total $160 billion in additional value for the sector by 2023.
For individual manufacturers in the automotive industry, the benefits of smart factories can translate into substantially higher operating profits. On average, these parties realised annual sales of $158 billion and a 6% margin in 2017. An OEM in the automotive industry could see its operating profit increase to $4.6 billion thanks to smart factories, Capgemini's report shows. This is 50% more than the revenue increase that OEMs managed to achieve on average in 2017. A top 10 supplier in the automotive industry is expected to be able to increase its operating profit by USD 1 billion on average thanks to smart factories, representing a 30% productivity gain. Smart factories are also expected to reduce these suppliers' logistics, material and administrative costs by 0.5% to 7%.
Payback period of just one year
Those who want to make their factories smarter need to make the necessary investments to do so. Capgemini therefore also looks at the payback period of these investments for both the top 10 OEMs and top 10 suppliers in the automotive industry. The consulting firm expects smart factories to reach their full potential by 2023. Capgemini predicts that OEMs and suppliers will recoup their investments in smart factories in just one year from this year.
The payback period, incidentally, differs for OEMs and suppliers. OEMs invest an average of $3 billion to $4 billion in setting up smart factories. They can recoup these investments within a period of 8 to 11 months thanks to the USD 4.6 billion of extra profit they can realise on an annual basis using smart factories. Suppliers invest an average of $540 million to $780 million in setting up smart factories. Thanks to the USD 1 billion in extra profit that suppliers can realise on an annual basis thanks to these investments, the payback period for this is only 7 to 9 months.
Automotive industry leads the way
The automotive industry is ahead of other sectors when it comes to investing in smart factories. 46% of all companies in the sector have already invested in smart factory initiatives. 49% of organisations say they have invested $250 million or more in such initiatives in the past five years. In other sectors, the figure is 45%.
In addition, 46% of automotive companies say they have embraced a smart factory initiative. Only in industrial manufacturing and aerospace are these percentages higher at 67% and 63% respectively. 11% of companies in the automotive industry say they plan to launch smart factory initiatives in three to five years.
42% struggle to realise full potential
However, companies do not always benefit from the full potential of these investments. For example, 42% report difficulty in realising the full potential of smart factories. This is the highest percentage of all sectors surveyed. Among suppliers, the percentage is 45%, while 40% of OEMs say they are not taking full advantage of the potential of smart factories.
The figures also show that companies that invest more often have less trouble exploiting smart factories to their full potential. For instance, it appears that companies that achieve the best results with smart factories have on average invested 2.5 times more in these initiatives than those that struggle to take advantage of them. Companies with the best results also involve management teams more in these initiatives, put more effort into talent development and invest in components of smart factories that are critical for the future such as manufacturing process insight and predictive maintenance.
Report
More information about and all the results of the study can be found in Capgemini's report 'Automotive Smart Factories'.
Author: Wouter Hoeffnagel
Source: Capgemini
Source photo: Pixabay / Bilderandi
