Expertise Beyond the Numbers

Industry 4.0: How to Budget for Innovation

Region’s manufacturers and business leaders hear from experts at event hosted by SC&H Group and Maryland Manufacturing Extension Partnership

Budgeting for innovation is shaping up to be one of the biggest challenges facing manufacturing executives today. Advances in technology have opened doors to opportunities that were unimaginable even a decade ago, and the options are multiplying quickly. Add in other drivers — like time, manpower, training, supplies and space constraints – and it’s hard to know how or where to start.

“We work statewide with manufacturers of all shapes and sizes, in all industries, and this is one of the questions that we constantly get asked,” Mike Kelleher, president of the non-profit Maryland Manufacturing Extension Partnership (MD MEP), told the audience at Manufacturing a Smarter Future: Innovation on a Budget, an actionable information session co-sponsored by SC&H Group and MD MEP.

Kelleher moderated the panel discussion, which featured Jeff Bathurst, Director of Technology Advisory Services for SC&H Group; Mick Arnold, CEO of Arnold Packaging and its new consulting division, Arnold Automation; and Kevin Taylor, director of operations of Baltimore Fabrication.

The panelists “have a wealth of experience and insights on how to embrace Industry 4.0 without breaking the bank or building a brand-new smart factory,” Kelleher said.

Some takeaways from the forum:

The key word is ‘augmentation.’ The competition and cost of human labor drives many technology investments, but your labor force is not going away, Bathurst said. The goal of Industry 4.0 is “to increase efficiency and output, reduce cost, reduce risk, and improve the quality of the product overall,” he said. “Technology, automation and robotics are designed to augment the workforce, not to replace it.”

Arnold underscored the point. “You don’t plug in a robot and take out a human; that’s not the way it works,” he said. For example, current-generation “collaborative” robots (designed to work alongside human workers); and autonomous guided vehicles (which deliver materials from point to point) can be programmed to perform the lowest “value-added” tasks, freeing up humans for higher-value roles, he said.

Define your endpoint first. Before you start looking at all the things technology can do these days, consider what you want it to do. As Arnold put it, “What keeps you up at night?” Is it quality, cost, turnaround times? Whatever you want to do, you’ll find the technology to help you do it – but technology is a tool – a means to an end, not the end itself.

Once you’ve identified your goal, identify what’s keeping you from getting there, Bathurst said. This includes examining current processes with a critical eye.

“Before you look at a technology solution, you need to evaluate what it is that you do every day – and take a really hard look. Is this the most efficient way?” Bathurst said. “You can implement technology, but if the processes are wrong, you’re just making mistakes faster.”

In fact, “innovation” does not always involve technology; it can center on company policies and processes. At Baltimore Fabrication, “we are looking at ways to increase the pool of potential employees and to make those we’ve already hired more satisfied with their jobs,” Taylor said. For example, the company’s younger workers welcomed a four-day, 10-hour work-week, and 10-hour shifts “allow more flexibility for training,” he said. Management also meets with staff monthly to get their ideas on processes and equipment.

“They’re the ones that are using it every day, and they help us identify what we can do, today, to help us be better for tomorrow,” Taylor said.

Weighing your options. The growth of cloud-based or subscription services should fundamentally shift the way we think about investing in technology, especially as the pace of its evolution quickens, Bathurst said.

“Determine what differentiates your business, what makes it unique, and own that,” Bathurst said. “For other technology, like email servers or ERP systems, it often makes more sense to subscribe to it and treat it as an operating expense, rather than as a capital investment. If you outgrow it, you don’t own it.”

The good news is that costs of Industry 4.0 improvements are coming down as a result of competition and other factors, Arnold said.  And while interest rates are in flux, financing is still available for technology improvements, he said.

Finally, in weighing the cost of innovation, it can help to break it into cost per shift-hour. “A $100,000 investment is a large amount of money,” Arnold said. “But if your plant operates a single shift, then a $100,000 loan, at 5% for five years, works out to about $11 per hour, per shift. And if you have a second shift, it’s just $5.50 per hour.”

The bottom line. Summing up, Kelleher said that whether a manufacturing company is planning, evaluating or implementing new technological advances, help is at hand.

“Don’t feel you have to go it alone,” he said, noting that MD MEP, the state Commerce Department and county-level agencies all have resources and programs to support manufacturers, and that networking events like SC&H’s offer insight and a chance to ask questions and share information.

“Find a trusted advisor,” Kelleher said. “Reach out to those who have been through the process, or those who have helped them through it. You’ll hear some horror stories, but you’ll also hear what worked.”

Mack McGee, vice president and chief marketing officer of SC&H Group, said that SC&H is looking forward to the next chapter in their Manufacturing a Smarter Future series. The series focuses on topics of lasting impact and education for the region’s vital network of manufacturers. SC&H Group believes it is a fundamental aspect of their businesses to help grow the manufacturing industry.