A recent interview with a principal from the global, multi-industry consulting firm AlixPartners highlights some of the opportunities and challenges in the industrial machinery market, from growth in emerging markets to the impact of the on-going digital transformation in manufacturing.
“We expect to see the world machinery market grow in the next five years,” said Arun Kumar a director at AlixPartners in a discussion he and I had recently.
This includes robotics and general automation, as well as fabricating and machining.
While most of the existing market is in the western industrialized nations, “most of the growth will be coming from emerging markets, especially China,” he said. By 2020 he expects to see almost 50% of worldwide revenues coming from China and other emerging market nations.
What should really get people’s attention are the technical changes that are occurring right now that will have profound impact.
Three important disruptors that he pointed to in a presentation that Kumar shared with me I think are especially relevant for manufacturers: Digitalization, including the Industrial Internet of Things, or IIoT; 3D printing; and the growth of Artificial Intelligence technologies into “a manufacturing eco-system.”
Automation and the Growing Market
In the short term, automation is more important than ever. “Robotics will grow significantly in China as the cost of labor escalates there,” he said.
Yes, as labor costs escalate in China is what he said. The era of China being the lowest-cost producer in the world is ending if it has not already ended, and like the western industrialized nations, they are looking to automation and advanced capability in machinery for continued productivity growth.
While the current base of installed robots is relatively low in China and Asia-Pacific, AlixPartners expects that to change quickly. The firm calculated the compounded annual growth rate, or CAGR, of robot shipments from 2013 through 2015 exceeded 40% to China and 30% to Asia-Pacific. Clearly, these are places to look for new customers with offerings in automation. By contrast, North America will only see a 10% CAGR in robot shipments. Part of the trend is more than simple labor costs; an increased need for precision and quality that only precision automated manufacturing can provide is another driving factor in higher automation levels.
“For other emerging markets, the situation is a little different,” Kumar said. There, labor costs remain low in comparison to the rest of the world, and so automation is not as important. For countries like India or the Asia-Pacific countries, the challenge is finding a way to be profitable with equipment that does not use all of the advanced computer guided technology common in the industrialized world.
Digitalization and the Internet
Digitalization is the broad term applied to the fact that computers and software are becoming dominant factors in manufacturing. A facet of this digitalization is IIoT, implying not just computers and software but a vast array of inexpensive sensors collecting continuous data. “This is the top trend today because of its implications towards reducing manufacturing cost. And this digital transformation is undertapped,” claimed Kumar. “Using collected data for predictive maintenance, just as an example, will change the way the advanced world will do business.”
There are pitfalls in this new world to businesses doing things the old ways. While IIoT platforms promise intelligent production and integrated control, open systems threaten propriety hardware-only solutions. Software now becomes the major value driver, possibly relegating hardware to a commodity status.
One of the key points in this line of thinking is the fact that hardware such as machining centers, their electronics, and their software all march to different development time cycles. Machinery is very slow – it is hard to come up with physical advances in features like motor torque or cutting speed that match the speed in which electronic controls get faster or sensors get cheaper. Software advances even faster than electronics. “These development cycles will need to be decoupled, and software will have to be made continuously upgradeable,” Kumar said. Most importantly, future value will most likely be found in advanced algorithms that enable a base hardware platform.
Along these lines, the human machine interface will be especially important, as viewing data and controlling machinery moves to tablet computers and even smartphones.
Additive Manufacturing or 3D Printing is an especially exciting development for Kumar.
In a sense, this is a continuation of the Digitalization theme, but in a more fundamental way. With the growing use of these machines, the separation of hardware from software become even more pronounced.
Advanced knowledge in creating the 3D model data and the engineering know-how behind those models will become even more important. Just as important would be its future impact on the supply chain. Today’s centrally organized, worldwide supply chains could well be replaced with decentralized supply chains made of many, small-scale producers. This could be done by shipping CAD data from a buyer to any number of 3D printers close to the point of use, eliminating long-distance shipping, logistics, and warehousing. It could both reduce inventory while increasing customization, especially locally targeted customization for local markets.
He reminded me this is not theory. A host of companies, from materials suppliers like Alcoa to major aerospace suppliers like GE Aviation, are investing in 3D additive manufacturing technologies. He presented data that showed that in metal-based additive manufacturing, the number of patent applications grew from 24 in the year 2001 to 1525 in the year 2015. “The R&D focus is now on hybrid machines, with the additive-manufacturing process augmented by CNC machining,” he said.
Artificial Intelligence technologies in manufacturing was probably his most thought-provoking idea he presented to me in our conversation. If cars will be able to drive themselves, why not a “self-driving” manufacturing plant that can decide for itself how best to make a product?
“We can talk about individual machines or a collection of machines that can respond to demands for a product. They might be able to reconfigure themselves on the fly, creating the best process to create the product required, using the same AI technology that is being pioneered in automobiles and other industries,” he said.
Automation and the digitalization of manufacturing will be especially important in advanced countries, and among the emerging economies, in the rapidly advancing China. Other priorities will dominate the other emerging economies, such as low cost.