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Cash Flow Best Practices for Manufacturing

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Managing cash flow effectively is crucial for any business, especially in the manufacturing industry where various financial challenges and uncertainties can arise. Poor cash flow management can exert significant pressure on manufacturing operations, making it difficult to meet expenses and potentially leading to insolvency and liability for company debts. Considering rising inflation, post-pandemic supply chain issues, and the Australian Taxation Office (ATO) intensifying efforts to recover outstanding debts, it becomes essential for manufacturers to have strong control over their cash flow. By gaining a comprehensive understanding of cash flow dynamics, manufacturers can proactively manage liquidity and address potential concerns early on. This blog will look to discuss this topic in greater detail.

Cash Flow Forecast

A detailed 13-week cash flow forecast is a valuable tool for monitoring both cash inflows from debtors and cash outflows for the payment of creditors. This forecast should encompass various elements such as employment entitlements and historical debt repayments. By continuously monitoring existing and upcoming expenses, manufacturers can ensure that financing for growth is sustainable. Failing to meet certain payments, particularly those related to employee entitlements and the ATO, may result in a director penalty notice and potential claims of insolvent trading. Having a cash flow forecast enables business owners and operators to prioritise payments and plan ahead, thereby avoiding penalties.

Debtor Management Processes

Once a cash flow forecast is in place, it is crucial to focus on debtor management and expedite the conversion of invoices into cash. Establishing robust cash collection processes is essential for timely payment collection. This includes promptly sending out invoices, following up on overdue payments, and implementing clear policies for credit terms and collections. Heavy steel fabrication companies should also identify key performance indicators (KPIs) for debtor management, such as average collection period and debtor turnover ratio, to measure the efficiency of their collections process.

Budgeting and Overhead Reduction

Implementing a comprehensive budgeting system for expenses is a vital practice that enables effective cash flow management and ensures desired profit margins are achieved. Creating a detailed plan of expected outgoings and regularly comparing them to actual expenses allows manufacturers to identify specific areas of concern promptly. By aligning expenses with revenue projections, manufacturers can control their costs and maintain a healthy cash flow. Budgeting should involve a thorough examination of all expenses, including raw materials, labour costs, overheads, and ways to tackle expenses such as reducing steel scrap. Manufacturers should analyse historical data and market trends to make accurate revenue and expense projections. Regularly reviewing the budget and comparing it with actual performance helps identify any deviations and enables timely corrective actions.

Preparation and Review of Budgets/Forecasts

Budgets and cash flow forecasts are dynamic documents that should be continuously reviewed and adjusted based on changing circumstances and business objectives. Depending on the current conditions, it may be necessary to review and update these forecasts and budgets on a regular basis, such as monthly or quarterly. By regularly comparing budget forecasts with actual results, manufacturers can identify any cost overruns and take appropriate action. It is crucial to maintain accurate and up-to-date data within accounting systems to generate reports that facilitate effective decision-making processes.

Summing Up

By adopting a proactive approach to cash flow management and implementing the recommended strategies, manufacturers can position themselves for success even in challenging economic conditions. Prioritising cash flow stability not only ensures the business’s financial health but also enables manufacturers to take advantage of opportunities for growth and innovation. It is an investment that pays off in the long run by safeguarding the business against potential risks and uncertainties.

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WHS Duties for Manufacturing Industry

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SafeWork NSW, the workplace health and safety regulator in NSW, acknowledges manufacturing as a cornerstone of a strong Australian economy. The regulator has an ongoing commitment to manufacturing which ensures a safe work environment for all workers — achieved by working with NSW businesses to reduce work-related fatalities, serious injuries, and illnesses. As part of its education outreach, the regulator will be attending Australian Manufacturing Week, given that the expo attracts diverse manufacturing industries and heavy steel fabrication companies. “It also attracts a large variety of WHS duty holders,” says Natalie Martin, Director of Investigations, Engineering and Enforcement at Safework NSW. “We want to connect and engage with the various WHS duty holders across manufacturing.”

Regulatory Priorities

SafeWork NSW’s Manufacturing Sector Plan was developed to influence safety improvements in NSW manufacturing. In 2023, SafeWork identified specific regulatory priorities across risk types and sectors which includes fire safety in manufacturing. Martin says, “Our regulatory priorities were designed to ensure employers and workers understand their WHS duties so all workers have healthy, safe and productive working lives.” SafeWork has been notified of multiple workplace incidents involving collisions between mobile plant, inadequate guarding, bypassing of safety devices and ineffective energy isolation. “We find there is usually more than one factor contributing to an incident,” says Martin. At the moment, the regulator has a strong focus on people and plant, with forklifts in the spotlight.

Duties and Obligations

All duty holders must be aware of their work health and safety duties, which are not transferable. One person may have more than one duty and more than one person can have the same duty. A strong culture of safety is integral for business. This is underpinned by strong leadership and a genuine commitment in promoting a safety culture in workplaces. “When Safework is making enquiries, we consider every duty holder, this includes designers, manufactures, importers, suppliers, installers and the end user”, says Martin.

Consultation and Hierarchy of Controls

Consultation is essential in managing WHS risks and is a legal requirement under the WHS Act. All duty holders need to collaborate to develop ways to manage risks. Designers, manufacturers, importers, suppliers, installers, officers and persons with management or control roles all have responsibilities to provide information to help other stakeholders minimize safety hazards in manufacturing and fabrication. When it is not reasonably practicable to completely eliminate risks, a ‘hierarchy of controls’ must be used by duty holders to minimise risks. Eliminating the hazard and risk is the highest level of control, followed by reducing the risk through substitution, isolation, and engineering controls. Reducing the risk through administrative controls and protective personal equipment (e.g., mining plant and equipment) is the lowest level of control as these controls’ effectiveness relies on human behaviour and supervision. Administrative controls are not enough on their own and should only be used to supplement higher level controls. “Some incidents indicate a lack of awareness of the hierarchy of control, often a control that’s too low level has been implemented, such as providing instruction, training and supervision only”, says Martin.

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Decarbonising Manufacturing – A Long Term Game

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Manufacturing relies on processes requiring intense heat, the carbon-intensive extraction and refinement of resources and huge power requirements to keep process lines humming. It is estimated that industrial processes, such as mining and manufacturing, consume 44% of Australia’s energy and 40% of electricity each year. While advances are being made, such as the development and use of green hydrogen and green ammonia, these are far-off initiatives. Many manufacturers have completed the early stages of decarbonisation — the quick wins. These have shown the world, their investors, stakeholders, and employees they are doing everything in their power to decarbonise. The next stage of decarbonising is dubbed ‘hard-to-abate’ but it can be done.

Achievement of Quick Wins

Many manufacturers have declared their net zero intentions, as part of mandatory emissions reporting. It creates an impetus to ensure a declared public target is not another act of greenwashing. This external pressure is acting to push manufacturing companies to stay on track, either meeting or exceeding targets. While many have enacted meaningful change, they have done so at a smaller scale so that failures could be mitigated and isolated.  For example, one global food and beverage manufacturer identified several pilot locations in each region with a good level of engagement and readiness from site-level management, and used these to build a proof-of-concept for low-carbon operations before scaling up across its global footprint. Additionally, many have either begun or completed the replacement of end-of-life equipment or mining plant and equipment with more energy efficient equivalents. These include implementing heat pumps, changing lighting from halogen to LED and switching to smart technologies which automatically power down equipment. NCI Packaging, for one, installed 500kW of rooftop solar at its site in Preston, Melbourne, reducing its energy consumption from the grid by 22%. While it may only decarbonise a production line or robotics, it is a key step towards decarbonisation as well as a proof-of-concept for future rollouts across the rest of its sites. Research reveals that 75% of organisations globally have achieved most of these quick wins. They are now tackling the harder-to-address challenges often associated with implementation.

Next Steps

Manufacturing is hard to abate but it is incumbent on companies to achieve their targets, while remaining financially viable and competitive. Short-term wins are great for the morale of the team, but projects with timelines stretching anywhere from 2-15 years make it harder to see the light at the end of the tunnel. Forward-thinking heavy steel fabrication companies are embracing long-term goals and those that are not risk falling behind. Furthermore, new technologies and advances such as green ammonia and green hydrogen are emerging and, while not yet mature, they should be part of any holistic decarbonisation strategy. One of the biggest aspects of net zero is something that seems out of control, but must be considered. Scope 3 emissions may fly under the radar for now, but there is a responsibility incumbent on organisations to begin aligning with suppliers focused on sustainable practices. Scope 3 emissions are set to increasingly make up a key pillar of decarbonisation reporting and research needs to be started on a sustainable post-pandemic supply chain. Meanwhile, offsets should not be deployed in isolation to authentically reach net zero, but the use of offsets for residual hard-to-abate emissions can help organisations decarbonise around the edges.

Final Thoughts

It is acknowledged that manufacturing is a hard-to-abate sector due to its reliance on industrial processes and what is next beyond the quick wins is complex. But hard-to-abate does not mean impossible-to-abate and it is incumbent on organisations to ensure they do their utmost to meet their targets, both for the future of the planet and the future of their business.

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Automation in Intralogistics

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From the perspective of a warehouse CEO or executive, the importance of streamlining operations via intralogistics automation to create an efficient distribution centre cannot be overstated. Warehousing firms are always looking for ways to improve productivity and meet customer demand using means such as business process integration. Automation is one tool that can help to achieve those goals, but it may be unclear exactly how the intralogistics process can be improved by adding automated solutions. Intralogistics automation refers to the use of automated systems and technologies within a warehouse or distribution centre to improve efficiency, accuracy, and safety of processes like pipe fabrication. In this blog post, we will look at why intralogistics automation matters to warehouses, and steps to get started with facility automation.

Benefits of Intralogistics Automation

One of the main benefits of intralogistics automation is increased productivity. Automated systems can work faster and more accurately than human workers, which can lead to a significant increase in the amount of goods that can be processed in each time period. Additionally, automated systems can also reduce the number of errors that occur during the picking and packing process, which can lead to a reduction in the number of returns or customer complaints. Another benefit of intralogistics automation is improved protection from safety hazards in metal fabrication. Automated systems can reduce the need for human workers to perform dangerous tasks, such as climbing ladders or operating heavy machinery. Additionally, the use of automated systems can also reduce the risk of injuries caused by repetitive motions, such as picking and packing. Automated systems can also improve the accuracy of inventory tracking. It can help to ensure that the correct products are picked and packed, and that inventory levels are accurate. This can help to reduce the number of stockouts and overstocking of items such as pressure vessels, which can lead to cost savings.

Steps To Get Started

  1. Evaluate facility’s suitability for automation

Before jumping into automating material handling equipment, assessing the facility’s readiness is essential. Intralogistics automation works best in multi-shift workplaces because the schedule leads to a faster return on investment. Facilities larger than 200,000 square feet will see a more rapid payback than smaller installations. Because the distances are longer in a larger plant, the time-savings of decentralised automation are more significant. The optimal performance of automated forklifts, tuggers, and pallet jacks requires Wi-Fi and a Warehouse Management System.

  1. Consider material transportation workflows

It is necessary to focus on workflows that have well-established automation practices. Case studies and success stories from similar industries are valuable resources and provide insight into the workflows that are easiest to automate and yield the most rapid results.

  1. Reach out to vendors who have relevant experience

Intralogistics automation has many moving parts, and it makes sense to take advantage of other people’s knowledge and experience in this area. Look for vendors that have the specific know-how to help an organization with a proven track record of quantifiable results.

  1. Identify the best use cases

Warehouse owners need to look for applications that represent easy gains and that are scalable. It is better to start with an intralogistics solution in one location and let it prove itself. With the concept thus demonstrated, it can be easily implemented in other locations and large rewards can be reaped. Vendors can help to determine areas that represent easy successes and they can also assist with calculating the return on investment.

The Last Word

History has shown repeatedly: technology creates far more jobs than it displaces. Other studies show companies that invest in robotic automation grow faster than companies that do not. Thus the time is ripe for warehouse owners to dive into the world of automation and transform their intralogistics operations!

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Ladd Partners and Cloudteam Company Join Forces as Gold Sponsor at the Rooted-In Manufacturing Conference

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In a significant move that underscores their commitment to innovation and collaboration within the manufacturing sector, Ladd Partners (a consulting services firm for inventory management on Salesforce) and Cloudteam Company (a leading provider of Cloud CRM and ERP solutions across EMEA) will announce their joint Gold Sponsorship at the upcoming Rooted-In Manufacturing Conference, taking place in New Orleans from March 25-27. This strategic partnership highlights their shared vision for delivering technology solutions to help customers drive manufacturing excellence and efficiency using Rootstock and the Salesforce Platform.

“The joint Gold Sponsorship with Ladd Partners and Cloudteam will be a notable highlight at our Rooted-In Manufacturing Conference,” said Matt Wolf, SVP of Global Alliances at Rootstock Software. “Ladd Partners’ unparalleled expertise in inventory management on the Salesforce Platform combined with Cloudteam’s innovative approach to leveraging Rootstock ERP to overcome steel fabrication challenges represent a cutting-edge combination. In addition, with Ladd Partners responding to customer needs in North America and Cloudteam in EMEA, it’s the type of global synergy we strive for in our partner ecosystem.” “Partnering with Cloudteam at the Rooted-In Manufacturing Conference is our first step in enabling our ability to deliver inventory management solutions globally,” said Krista Ladd, Co-founder, and Managing Partner of Ladd Partners. “We take great pride in our ability to effectively deliver salesforce solutions that truly transform our customers’ operations. This partnership allows us to showcase those strengths, and when combined with Cloudteam, we help manufacturers leverage the tools and strategies they need to drive quality management and to achieve new levels of efficiency and growth across both United States and EMEA.”

“Our alliance with Ladd Partners embodies our shared commitment to innovation,” said Gert-Jan Ter Weeme, CEO of Cloudteam Company. “Today, the manufacturing industry faces complex challenges, particularly in demand, supply, and order fulfilment. At Cloudteam, we take our manufacturing clients on a digital transformation journey, helping them to leverage a holistic CRM and ERP solution on the Salesforce Platform. Our Rooted-In sponsorship is a significant step forward in our mission to deliver Salesforce solutions to customers globally, expanding our reach and enhancing our service offerings to meet the dynamic needs of the manufacturing sector.”

The 2024 Rooted-In Manufacturing Conference will include:

  • Ladd Partners and Cloudteam Company customer success stories that demonstrate how manufacturers have benefited from the combined power of their technological expertise.
  • An exhibit area where attendees can meet the companies to better understand their consulting services.
  • Keynote presentations on Manufacturing Mega Trends, Signal Chain Vision, and Accelerating Value with the Power of Salesforce.
  • A Business Track featuring manufacturing leaders driving success in various areas, such as financial management, team empowerment, and reimagined business processes.

A Technology Track to discuss top manufacturing technology trends such as AI, enabling data-driven decisions, integration, and managing data governance.

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3D Metal Printing – Future of Aerospace Engineering

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When fabricating aerospace components, it is essential to follow rigorous standards for safety and performance. Traditional manufacturing processes, such as casting and machining, have long been the backbone of the aerospace industry. However, these methods have limitations, especially at the forefront of creating complex, lightweight, and highly customized components. 3D metal printing, also known as additive manufacturing, has emerged as a game-changer for the aerospace fabrication industry. This innovative technology allows manufacturers to create three-dimensional objects by adding material layer-by-layer, rather than subtracting from a solid block. Let us examine the exciting potential 3D metal printing has for the future of aerospace manufacturing.

New Possibilities Unleashed

Here is a closer look at four ways 3D metal printing is propelling aerospace engineering into the future:

  • Complex Geometry: Aerospace components often require intricate designs to optimize their performance and efficiency. Traditional manufacturing methods, such as casting and machining, have limitations in producing complex shapes. 3D metal printing, on the other hand, excels at creating intricate geometries that were once deemed impossible or economically unviable.
  • Lightweight Structures: Weight reduction is a crucial factor in aerospace design. Lighter aircraft consume less fuel, produce fewer emissions, and are more manoeuvrable. 3D metal printing allows engineers to create structures that are up to 60% lighter with optimized internal geometries, reducing the overall weight of components without compromising strength.
  • Reduced Material Waste: Conventional manufacturing processes often produce significant material waste due to the need for subtractive machining. In fact, aircraft manufacturers cut away up to 90% of the material when fabricating metal parts. However, 3D metal printing is an additive process, so it only uses the material required for the final component, minimizing waste and conserving resources.
  • Rapid Prototyping: The aerospace industry thrives on innovation and iteration. 3D metal printing offers rapid prototyping capabilities, enabling engineers to design, print, and test components quickly and smoothly. This accelerated development process significantly reduces time-to-market and production costs for new aircraft and technologies.

Design Challenges of 3D Metal Printing

While the rapid rise of 3D metal printing has ushered in a new era of innovation and possibilities in the fields of aerospace and engineering, this transformative technology comes with its own set of unique design challenges. Aerospace engineers face four key challenges in 3D metal printing:

  • Heat Management: The layer-by-layer additive process using heat induction bending services can create thermal stresses within the component. Ensuring proper heat management during the printing process is crucial to prevent distortion or cracking.
  • Residual Stress: Residual stress in 3D printed components can affect their mechanical properties. Design modifications and post-processing techniques are necessary to mitigate these stresses.
  • Support Structures: Complex geometries often require structural steel fabrication during printing to prevent deformation. These support structures must be carefully designed and removed after printing.
  • Quality Assurance: 3D printing quality assurance in aerospace is of paramount importance. Ensuring that printed components meet the required standards for strength, durability, and safety is a continuous challenge.

The key to overcoming these challenges is innovation, problem-solving, and determination. With each challenge, we come one step closer to mastering 3D metal printing, revolutionizing industries, and reshaping the future of design and production.

Closing Comments

The aerospace industry is at the forefront of adopting 3D metal printing for the creation of complex components. This technology has revolutionized the way aerospace engineers design and manufacture critical parts, providing opportunities for lightweight structures and intricate geometries while reducing waste and production costs and improving lead time. With material innovations continuing to evolve and design challenges being addressed, we should expect 3D metal printing to play an increasingly pivotal role in the future of aerospace manufacturing.

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Jebsen and Jessen Buy Major Shareholding in Safetech

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Industrial conglomerate Jebsen and Jessen Group is acquiring a majority share in Australian dock and lifting products company Safetech as part of a strategic partnership which the two family businesses say will benefit the Australian materials handling industry. Jebsen and Jessen is an ASEAN-focused conglomerate with businesses spanning manufacturing, engineering, and heat induction bending services and 11 manufacturing facilities in Indonesia, Malaysia, Myanmar, Singapore, and Vietnam. Its core businesses are cable and other technology, ingredients, life sciences, and packaging. Safetech invented the successful Palift pallet leveller in 1984 and the company has since developed a range of world-class materials handling equipment which includes dock products, freight hoists, scissor lifts, pallet loading and mining plant and equipment, and vehicle lifts. Today, more than 80% of Australia’s supermarkets use Safetech equipment as do manufacturers, warehouses, miners, and commercial builders.

Safetech and Jebsen and Jessen will combine their expertise to provide a broader product range and exceptional customer service in materials handling. The deal is expected to be completed on 28 March 2024. The partnership builds on Jebsen and Jessen’s growth strategy which saw the acquisition of MHE-Demag’s Industrial Products (IPD) business in February 2023 (MHE), as well as Electro-Mechanical Services (EMS) in Australia — the two together form Jebsen and Jessen’s material handling division. ​The partnership creates further synergies for Jebsen and Jessen’s materials handling division in Australia. It will bring together product portfolios from MHE, EMS, and Safetech’s established sales, engineering, and structural metal product manufacturing operations in Australia, as well as access to Safetech’s Australian-designed and manufactured products for Jebsen and Jessen’s key markets, including Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Jebsen and Jessen’s Group CEO Per Magnusson said the partnership aligns with the company’s ‘advance and build’ strategy, to drive accelerated growth and its presence in Australia. “Building upon the foundation laid by the acquisition of EMS last year, our strategic partnership with Safetech will significantly enhance our footprint in Australia’s dynamic and thriving market and deliver enhanced value for customers.” Karl Tilkorn, Regional Director of Jebsen and Jessen’s materials handling business said Safetech is a major force in Australia’s material handling industry. “And our ambition is twofold – to empower its growth by utilising Jebsen and Jessen Group’s resources and to uncover synergies across the material handling business in Australia and beyond.”

In a joint management structure, Lindsay Wakefield, Founder and Managing Director of Safetech, will retain a stake in the business as a minority shareholder and continue to serve in the business. “From Safetech’s founding, we have continually invested in Australian engineering and manufacturing. Our journey — from a single outsourced product to 180 staff with four factories in regional Victoria — has been driven by the ingenuity and creativity of a talented team and a strong belief that Australia needs local steel manufacturing. Safetech’s partnership with Jebsen and Jessen will help us maintain that legacy as we continue to grow and strive to provide our customers with outstanding products backed by national service and support,” added Lindsay Wakefield. Safetech’s commercial operations, personnel, offices, and factories will remain after the deal is finalised. Honouring its long heritage of Australian-based engineering and manufacturing capacities, Safetech’s branding will continue to market its Australian-designed and manufactured products.

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Why Decentralised Automation?

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What does the skipper do on a racing yacht? The traditional view of a seafaring captain or skipper is that of one person who makes every tactical and operational decision and who then issues commands to the crew to make it happen. On a racing yacht there simply is not time for all that rigmarole. Each member of the crew has specific functions they perform, and they have trained as a group to work in precise harmony to achieve their common goal using their individual areas of expertise. In these terms, traditional centralised automation is the skipper standing on the quarterdeck (control room) while decentralised automation is the racing yacht where all the crew members (machine modules) perform their functions quickly and efficiently in perfect synchronisation. So, how does decentralised automation work in heavy steel fabrication companies? Let us find out further in this blog.

Rationale for Decentralised Automation

Traditionally, automation systems had rigid hierarchies that were based around centralised control, as per the well-known automation pyramid diagram. The sensors and actuators were always connected to the PLC (Programmable Logic Controller). The PLC was always connected to some other system and so it went. Unfortunately, this well entrenched automation model can be limiting. It requires lengthy decision-making paths, and it also ties all the automation together to a single, central point. This means that a single fault or maintenance activity can bring an entire plant to a halt. As technology has advanced, the previously rigid levels have had to become more flexible. We now have sensors that detect machine wear, RFID (radio frequency identification) tags that tell the machine it is correctly configured for heat induction bending services and what it must do, and I/O modules that can decide independently to operate an actuator. It is no longer possible to place the present and future of automation within the constraints of a traditional automation system because it is simply not able to deal efficiently with all the extra capabilities that are now achievable.

Benefits of Decentralised Automation

Decentralised automation lays the foundation for a new era of automation. It enables maximum flexibility, and it creates numerous benefits such as:

Fast and easy commissioning – Each different machine, or each individual module is capable of fully independent operation.  They can be pretested before installation and issues with one section will not delay the progress of other sections. Wiring is easy thanks to IP67 components and standard industrial quick connectors. Control cabinets can be scaled down or eliminated altogether so that significantly less wiring is required.

Lower machine costs – There is a significant reduction in the necessary central control capacities. By reusing existing modules design costs are also reduced and the reduced wiring and mechanical requirements mean lower personnel costs (such as automation of tube bending).

Higher machine availability – There is a significant reduction in the risk of failure because decentralised automation has a much lower dependency on a central control system. A good example of this is factory automation driven by electromechanical cylinders. On-site machine condition monitoring allows early intervention when issues are detected before failure occurs. Module replacements in the event of a failure are fast, simple and require minimal configuration.

Short time-to-market – Decentralised automation allows users to respond dynamically to changing requirements. They can fine tune their equipment and process, even during production. Decentralised logic enables the testing of machinery and machine modules offline before delivery.  By reusing existing modules, the design phase is shortened.

Closing Thoughts

Decentralisation may not be perfect for every situation, but in most cases, it reduces wiring and hardware and cuts design time. It also reduces manufacturing and installation time, improves efficiency, and minimises downtime. As demonstrated with the racing yacht, having a single central control is often less efficient than having a well-trained and coordinated team of experts on the job. Centralised automation? It looks a lot like that outdated ship has sailed!

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The Shift to PaaS

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It is a sobering fact that the future for manufacturers over the next 2 – 3 decades lies in selling consumption of outcome-based services, not in sales and ownership of manufactured goods. This is because manufacturing in the digital age is dynamic and the industry cannot compete solely on quality and cost any longer. This shift – Servitization – is a natural response to increased competition, fluctuating demand and rising market costs and, in some cases, sustainability pressures/drivers. A servitization model offers B2B manufacturers the potential to grow recurring and sustainable revenue streams. What are the opportunities and challenges facing manufacturers as they consider shifting from a make – sell business model to Product as a Service (PaaS) revenue streams? This blog will delve deeper into this subject.

Re-inventing Sales Revenues

In the automotive sector, manufacturers like Mercedes-Benz, BMW, Fiat and Volvo all offer car-as-a-service subscriptions, with the option for customers to change models over time when they wish. A study by Aston Business School found a 5 to 10% increase in growth rates and 25 to 30% reduction in costs for companies adopting a servitization model for their business. Servicing and repair have traditionally been seen as a secondary part of a heavy steel fabrication company’s operations. Products are invariably sold with warranties, and customers can also take out optional service contracts for service and maintenance. Service interventions are typically field repair for failure (reactive), maintenance-based (preventative) or, where a product is digitally connected, predictive. Servitization, however, sees a fundamental shift in the approach to, and shape of, service offers. In a servitized model customers can subscribe to business-related services that directly and pro-actively address their own strategic and operational needs. This is a world apart from focusing on product-related or technical issues alone – for example, the repair of pressure vessels. Recent research compared the financial performance of B2B manufacturers providing industrial services. It found that organizations offering predictive and proactive services, such as optimizing business processes and delivering business outcomes, generate the highest gross margin and enjoy increased recurring revenues and contract penetration rates.

Role of Technology

The business transformation required to introduce servitization is technology enabled and requires careful investment in digitalization and digital service eco-systems. It also requires a cultural shift to embrace unfamiliar business challenges. The way a manufacturer captures value is changing: it is no longer about producing products well; servitization is about engineering outcomes that create greater value for customers, whilst also collecting real-time data that can then be monetized. Manufacturing CFOs, for instance, are faced with the dilemma of pricing and selling an entirely new product as a service value proposition. The commercial aspects and the data monetization can be difficult to scope and product management software can help in that regard. Rigid manufacturers are used to cannibalizing the revenues of physical products. Whilst service revenues will take time to build, they will eventually outperform revenue from hardware sales. An effective corporate IT platform, with the ability to leverage data and digitalization, is a pre-requisite of any pivot towards PaaS offers. A service-based model also means that maximizing product performance and longevity becomes more important than minimizing the cost of production.

Finishing Touches

Manufacturers and fabricators are gradually understanding that when they start selling outcomes, it allows organizations to differentiate and move away from commoditized saturated product sectors. Solutions are expected to emerge where manufacturers can manage production, distribution, maintenance, and service operations on a single platform, all informed by a unified database. It is time to find higher value, and more difficult-to-replicate products and services – and manufacturers need to bring their A game to the table!

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Open IIoT Demo at APPEX 2024

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Open IIoT will be unveiling four new demo units at APPEX 2024, marking an exciting departure for the group, which had previously combined all of the member companies’ technologies into one single automated system. The event marks the first time the group, originally founded in 2018 and consisting of member companies SMC Australia and New Zealand, Beckhoff Automation, ARGUS, Balluff Australia and Nord Drivesystems, will showcase their cutting-edge new demo units to the general public. While the previous demo unit was able to demonstrate the seamless integration and interoperability of revolutionary IIoT concepts in one physical system, their decision to showcase the power of automation through various Industry 4.0 applications opens up the group to a number of new possibilities.

“We have taken a more decentralised approach this time round”, said Jozef Ceh, SMC’s group manager ANZ for Integrated Solutions and Open IIoT member. “Fast broadband internet connections and sophisticated network protocols will enable all our demo units to operate both independently and in unison. With the new approach, we have combined the power of today’s network infrastructure and cloud connectivity to operate individual processes in remote locations.” Ceh added, “This gives users and visitors to Open IIoT’s APPEX Stand #D040 enhanced access to our demo units, right down to the sensor level.”

SMC’s new EXW1 compact wireless system coincided perfectly with this build. It features EtherCAT and IO-Link Master connections and is the ideal way to highlight SMC’s pipe fabrication architecture in a live application. “It underpins the power of networking when it comes to remote control and data accessibility.” The unit also makes use of an EXW1 IO-Link master wireless remote unit – a product Ceh believes is a gamechanger. “It integrates all the standard features and benefits of IO-Link into a wireless network while offering both Class A and Class B port specification — making this product a logical choice.” The JXC servo motor controller with IO-Link network interface and safe torque-off feature is integrated in this unit. “The direct-input step motor controller is designed for general machine builders who rely on accurate speed, position or force but at the same time look for improved flexibility and stronger security.”

As to the motivation behind Open IIoT’s new exhibition direction, Ceh explains that the separate demo units demonstrate a more decentralised approach to automation in metal fabrication through the utilisation of high-speed broadband connections and sophisticated network protocols. “These create connectivity between individual processes that, while operating individually in separate physical locations, are accessible and controlled through a central user interface and deployed via the cloud,” he continued. All four Open IIoT’s new demo units are connected by member company ARGUS’ advanced SYMBIONT Cloud Deployment Software, an industrial automation and data management platform tailored for medium to large-scale enterprises in the manufacturing industry and other related sectors invested in digital transformation. With its intuitive design that offers a low barrier to entry and straightforward interfaces, Symbiont places advanced system configuration and data contextualization directly into the hands of end-users, thus optimizing performance with asset resilience. This approach is transformative, reducing implementation costs and enhancing flexibility, making it a powerful ally in the digital transformation journey.

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