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Pharmaceutical Manufacturing and Packing Sourcer

Growth Spurt

The global industrial automation market is set to reach $200 billion by 2015. Automation success stories can be identified around the globe, from Japan’s record-breaking robotics industry to the German-led Industry 4.0 concept that has taken the world by storm.

Global Market

IMS reports show that in 2012, the automation market grew by 3.7% – and the figure was approximated at more than 6% for the following year. Based on indicators such as machinery orders and manufacturing activity, estimates show that almost half of global investment in automation is from the Asia-Pacific region, with 46% of global investments in 2012 originating from this location – equivalent to $76.6 billion.

North America accounts for 13% of overall shipments, followed by BRIC giants India, Brazil and Russia. China is head and shoulders above its sister BRIC economies when it comes to manufacturing volumes and industrial automation purchases. Despite a recent reduction in momentum, BRIC economies are continuing to grow at above average rates, according to the ARC Advisory Group. The BRIC states are predicted to go on improving manufacturing technologies and increasing their uptake of automation in years to come.

Automated China

Over the last few years, China has been the leading destination for automation purchases. In 2012, the country manufactured machines and systems worth €678 billion. The Chinese market has matured, becoming more competitive and price-oriented, and has successfully designed, manufactured and sold a huge quantity of sophisticated products, including high-speed trains, computers, machinery and automobiles.

Furthermore, as Credit Suisse figures show, China has seven times more workers in the manufacturing sector than the US. Even so, the output of these two manufacturing giants is roughly similar, with the US producing $1,732 billion, and China $1,612 billion. This means that the US efficiency per worker is seven times greater than that of China.

China overtook Japan to become the world's largest and fastest growing robot market in 2013, with more than 35,000 units of industrial robots sold in the former last year, according to the International Federation of Robotics. However, automation encompasses a much wider range of technologies than just robotics.

In the last decade, China began the transition from low-cost labour in the manufacturing sector to efficient automated processes and extensive technical expertise. There are many examples of Chinese companies making impressive headway in product development and production. Automation solutions are becoming increasingly important in complex industry applications, and the country’s labour resources no longer seem limitless.

UK Automation

In the UK, the signs are encouraging: according to the sales statistics collected by GAMBICA from its member companies, uptake of automation is on the rise across sectors – both factory and process automation sales have been on a positive trend for the last five years. Although the UK automation market is not quite at the world average rate, it is growing faster than the European average.

The Manufacturer’s 2014 Annual Manufacturing Report reflected growing confidence levels regarding the role of automation in manufacturing. Eight out of ten respondents identified automation as a means of driving business forward, and seven out of ten have already implemented a major automation project – worth more than £100,000 – within their companies over the last two years. Even taking into account economic cutbacks, smart investment in technology and equipment is considered to be one the best ways to gain a competitive advantage and drive company growth.

According to the Boston Consulting Group, the UK is the most cost-effective place to manufacture in Western Europe, with average costs significantly below those in Germany and France (1). The same study revealed that many countries traditionally classed as low-cost manufacturing havens have seen sharp wage rises that have, in turn, decreased their manufacturing competitiveness.

A recent Engineering Employers’ Federation (EEF) survey has also found that one in six companies has re-shored production back to the UK in the last three years. This slow but steady trend is an exceptional opportunity for the manufacturing sector. To exploit it, however, further investment and government support is needed to create a favourable environment for manufacturers.

Skills Gap

Despite the profound differences between them, China and the UK are currently facing similar challenges when it comes to fast and smooth large-scale automation implementation. One of the common barriers is the engineering skills gap and lack of appropriate training. Simply investing in the latest manufacturing hardware and software does not guarantee success – it needs to be supported by competent and skilled personnel.

To make the most of complex industrial automation solutions, companies need a new range of skilled workers able to purchase, implement, operate and service them. However, nearly half of the UK manufacturers surveyed in the 2014 Annual Manufacturing Report confessed they lack the in-house skills required to implement automation projects.

Reliance on external suppliers can severely limit the speed and efficiency of production levels. Only the ability to source a wide range of engineering skills in-house can help companies minimise their dependency on suppliers. These skills should include, but are not limited to, an in-depth knowledge and understanding of control systems, variable speed drives, servo motors and robotics, as well as programmable logic controller awareness and programming capabilities.

As the industrial automation market continues to evolve, identifying the right talent with the appropriate skills will be an ongoing challenge. Governments, education providers and manufacturers alike will have to adopt creative strategies that attract and retain talented people. Training programmes will also have to be constantly adapted according to the fast-paced advances in cuttingedge technologies.

Economic Uncertainty

A second challenge for widespread automation solutions is the investment cost associated with its implementation and the rate of return on such an investment. The cost of purchasing and implementing an advanced automation solution can be a barrier for companies, even when payback periods are short. Economic uncertainty has increased the aversion to risk and many are still wary of investing.

For China, rising wages, energy and raw materials costs have meant that the country needs to find an alternative route to manufacturing success. To remain competitive, it must invest in industrial automation and robotics. Once implemented, the new technology will allow Chinese manufacturers to increase product quality standards and create more flexible, intelligent production lines. However, the initial investment is a significant one.

What is more worrying is that the total cost of ownership (TCO) for industrial automation goes well beyond the initial investment. The TCO includes added capital costs like acquisition, design and implementation, plus operating costs such as maintenance, improvement, adaptation and operation – not to mention the costs associated with system security.

As a general rule, acquisition and installation costs should represent 50% of the TCO. A number of factors can also impact upon the lifecycles of control systems – usually between 5 and 25 years, depending on the industry.

Ironically, if you compare the TCO of a variable speed motor-driven application that uses a variable speed drive (VSD) with one that does not, energy (and therefore cost) savings involved in powering the motor dwarf purchase and upkeep expenses. So, without question, VSDs are a great example of a technology that pays for itself.

Strategic Integration

The consensus in industry and the trade media is that automated systems reduce energy usage, increase manufacturing flexibility and volume, while ensuring better control and quality standards. However, the purchasing decision and implementation needs to be made knowingly and integrated into the strategic vision of the company, because automation brings a fundamental change in the way a business operates.

Lack of information, specifically allocated budget and management involvement are some of the biggest causes for uncertainty when it comes to industrial automation purchases. In order to overcome these challenges, companies need to be well-informed, and work with authorised partners and trade bodies to understand what automation success could look like for them.

Energy Costs

The rising cost of energy is not a new issue for the manufacturing industry. However, the pressure has increased exponentially during the last decade. According to an EEF report published in 2013, energy prices for UK businesses are rising faster than in any other country (2). This slippery slope is squeezing manufacturers' margins and threatening to choke off investment.

In China, the situation is more complex. For the last decade, the government has effectively subsidised the industrial sector to ensure low electricity prices – but this situation is now changing. The three-tiered electricity system launched by the Chinese National Development and Reform Commission in 2012 was expanded to industrial applications the following year, meaning slightly higher energy costs for certain industries – for example, the aluminium sector.

Although relatively modest so far, reforms to electricity pricing are likely to lead to higher costs for industry in the near future. This will represent additional challenges for a manufacturing sector already struggling with rising labour, capital and exchange rate costs.

Under the pressure of spiralling prices, the most efficient way of cutting costs is by using less energy in the first place. Through the use of intelligent automation and control systems, VSDs, switches and controllers, manufacturing processes or industrial plants, companies can slash their energy bills, while also improving efficiency.

Going Forward

The range of complexity of industrial automation technology varies from simple pick-and-place mechanisms to multi-axis robots with vision systems and real-time adaption. Despite its challenges, industrial automation remains one of the best solutions to become or remain a key player on the global manufacturing scene. It is no longer an option, it is a necessity. Research, long-term strategies and collaboration between governments, trade bodies and manufacturers are essential for taking full advantage of the benefits new technologies can offer.

There is still low-hanging fruit to be exploited in terms of industrial applications – such as installing VSDs – and simple solutions that can be implemented to cut costs and raise manufacturing efficiency and product quality. In the race for smarter, more sustainable manufacturing, industrial automation is a tool you should not be without.


1. Visit: economics/11042217/britain-is-nowthe- lowest-cost-manufacturingeconomy- of-western-europe.html
2. Visit: gradual-re-shoring-of-manufacturingcontinuing-% E2%80%93-eefsquiresanders- survey.htm

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Steve Brambley is a Deputy Director at GAMBICA, the trade association for instrumentation, control, automation and laboratory technology in the UK. He is responsible for representing the industrial automation sector to a diverse range of stakeholders, including UK and European governments, national and international standards bodies, the media, other industry associations and institutions, and end-users. Steve brings experience from the automotive industry, having worked in roles across manufacturing, quality, logistics and engineering. He has a degree in Mechanical Engineering from Loughborough University.
Steve Brambley
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