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Finance 4.0

23 March, 2018

Brian Foster, head of industry finance at Siemens Financial Services in the UK, takes a look at digitalisation in the plastics industry and the role of asset finance.

Employing approximately 170,000 people and with an annual sales turnover amounting to more than £23.5 billion, the UK plastics industry is a global leader in the three core segments that make up the plastics sector: material and additive manufacture, material processors and machinery manufacture.1

At the heart of the UK plastics industry today is cutting edge technology, which plays an important role in helping the UK maintain its global reputation. For example, forward thinking companies are taking advantage of additive manufacturing or 3D printing technology, which allows manufacturers to deliver new products to market at a faster rate. Additionally, with as much as a 30%-70% reduction in required materials, 3D printing technology typically results in lower production costs.2

Industry 4.0, or the new industrial revolution, is starting to create efficient, interactive and flexible ‘smart factories’. Plastics processing systems, for example, are equipped with an increasing amount of automated technology—such as sensor systems that function as self-governing intelligence units—to enable them to communicate and process data autonomously. Intelligent machines, in combination with machine-to-machine communication technology, are leading to more automated processes, self-monitoring and results in real time.3

To compete in an increasingly expanding and competitive market, however, plastics manufacturers require access to modern technology with adequate capacity to meet rising global demand. Production can be dependent on custom-made machinery of high specification which can be expensive to acquire. Those companies that defer investment may be at a disadvantage if they don’t prioritise necessary upgrades and technology acquisitions.

Although harnessing technological innovations can help realise cost savings through improved production processes and increased automation, keeping pace with such advancements requires considerable capital expenditure. Companies may be reluctant to commit large amounts of capital to equipment and technology upgrades due to other pressures, such as staff costs and the need to maintain cash flow. As a result plastics manufacturers are looking to access a broader range of flexible financing tools in order to acquire competitively critical technology.

Against this backdrop, more and more manufacturers are turning to a range of smart and appropriate financing techniques – known as Finance 4.0 –to help them to sustainably invest in the new fourth-generation of digitalized technology and automation equipment. Finance 4.0 covers a range of requirements from the acquisition of a single digitalized piece of equipment, right through to financing a whole new factory. These financing methods can seek to align payments for the new generation technology with the benefits they produce.

Innovative new technology that is changing the shape of the plastics manufacturing industry will continue to impact the sector into the future. Plastics manufacturers will need to invest in the latest equipment to stay at the forefront of an increasingly competitive and technologically advanced market. Though some may find the potential costs of technology acquisition challenging, there are financing schemes available that enable investment while preserving working capital. If manufacturers defer investment in new technology, however, they may ultimately be left behind.

1: British Plastics Federation website

2: GLOBAL MACHINE TOOLS MARKET 2016-2020 (17 February 2016)

3: Plastics Today, Industry 4.0: The factory of the future (2016 Whitepaper), www.plasticstoday.com/content/industry-40-factory-future

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