The smart factory trend arises when pervasive use of technology in manufacturing makes the entire process more intelligent and dynamic. This article aims to stress out the importance of this trend and explain how readers can invest in it with Crea8.
Realising the smart factory vision may be a tall order. However, management teams of large manufacturers recognise the transformational change that smart factory initiatives can bring.
In a Deloitte survey with over 600 executives of manufacturing companies with headquarters in the US and with a global footprint, more than 85% of the respondents said that they believe smart factory initiatives will be the main driver of manufacturing competitiveness in the next 5 years (Wellener and Dollar, 2019). Further, 83% said that smart factory initiatives will transform the way products are made within the next 5 years.
This shows that manufacturers globally have an appetite to invest in smart factory initiatives. This is unsurprising given the measurable results that some companies have already experienced by incorporating smart factory initiatives into their existing processes. Executives of companies that have incorporated smart factory initiatives into their existing processes reported a 10% average increase in production output, 11% average increase in factory utilisation and a 12% average increase in labour productivity over 3 years (Wellener and Dollar, 2019).
According to one study, major economies are accelerating the transformation of their factory floors to “smart” (Buvat and Puttur 2019) .
The smart factory adoption index in figure 4 shows the future smart factory adoption plans in each country. A value >1 means the country has more aggressive future plans compared to average, vice versa.
The adoption index shows China, Germany, and Japan are aiming to aggressively adopt smart factories in the next five years, closely followed by South Korea, the United States, and France. There is also a considerable increase in the proportion of factories that will be made smart over the next 5 years vs the last two years, across all major economies.
A report by boutique investment bank, GP Bullhound, also reviewed the value of smart factory investments, noting that between 2013-2018, up to EUR17.4 billion was invested in smart factory initiatives. The U.S. led in investments, with American start-ups receiving EUR11.4 billion, compared with EUR3.9 billion in Asia and EUR2.1 billion in Europe (“Smart Manufacturing: The Rise Of The Machines” 2019).
With manufacturers recognising the benefits and planning to turn their factories “smart”, countries pushing for smart factory adoption and capital flowing into such initiatives, the push towards smart factory trend will likely propel earnings for companies behind these initiatives.
With so many moving parts, investing in the future of manufacturing can be overwhelming. A complete portfolio centred on the future of manufacturing should include firms that are creating a more holistic and well-connected ecosystem for companies that focus on manufacturing and supply chain management.
Through Crea8’s Factor Based Thematic Investing Service, you get the opportunity to invest in this trend.
Buvat, Jerome, and Ramya Krishna Puttur. 2019. “Smart Factory @ Scale”. Capgemini Worldwide. https://www.capgemini.com/research/smart-factories-at-scale/.
“Smart Manufacturing: The Rise Of The Machines”. 2019. Gpbullhound.Com. https://www.gpbullhound.com/insights/smart-manufacturing/.