The Dairy Products Industry and the Digitalization Productivity Bonus – productivity gains from Industry 4.0

Siemens Financial Services (SFS) has released a new research paper that investigates the value of digitalization for Dairy Products manufacturers. New-generation digitalized technology (also known as Industry 4.0) is enabling manufacturers to improve performance through increased manufacturing productivity, improved planning and forecasting, enhanced competitive capabilities and greater financial sustainability.

Increased manufacturing productivity – the ability to either produce the same number of products for less, or more products for the same – has a clear and calculable positive effect on costs and margins. The new paper has named this positive effect the Digitalization Productivity Bonus, and offers estimates of the potential financial gain for the Dairy Products industry, along with sub segment estimates for Yoghurt and for Cheese.

Capturing testimony from international industrial companies, expert management consultancies and academic specialists, the paper has built a model that estimates the Digitalization Productivity Bonus for different industries. The Global Digitalization Productivity Bonus is estimated to be between 6.3 percent and 9.8 percent of total revenue.

This ‘bonus’ can only be realized when a manufacturer has upgraded production technology to new generation digitalized systems and equipment. Specialist financing techniques have been developed to fit the technological platforms and new mindset of Industry 4.0, allowing Dairy Goods manufacturers achieve digital transformation in a sustainable fashion. These techniques allow companies to harness the future benefit of digitalized equipment in order to fund the acquisition of that enabling technology.

The paper examines these specialist financing methods, including pay-to-access/use, technology upgrade finance, pay for outcomes, transition finance, working capital solutions, and more. They cover a range of requirements from the acquisition of a single digitalized piece of equipment, right through to financing a whole new factory.

“Intelligent financing arrangements tend to be offered by specialist providers that have a deep understanding not only of how the digitalized technology works, but also of how that technology can be practically implemented,” comments Natalie Jameson, Head of Food and Beverage Finance, SFS Commercial Finance (UK). “They are critical in enabling organizations to access cutting-edge technology and start benefiting from the Digitalization Productivity Bonus.”

Methodology
Over 60 international industrial companies, expert management consultancies and academic specialists were interviewed over the phone in February and March 2017. They were asked to estimate the potential financial benefit that conversion to digitalized technology could deliver to manufacturing organizations, specifically in terms of increased manufacturing production productivity. Manufacturing productivity is defined as a reduction in the cost of production – or conversely an increase in margins. Respondents gave their assessment of this reduction of production costs –the Digitalization Productivity Bonus – expressed as a proportion of total revenues.

To obtain a copy of the report, readers can visit: www.siemens.co.uk/sfsdairyreport