Digital transformation of manufacturing expected to improve efficiencies

29th June 2022 By: Schalk Burger - Creamer Media Senior Deputy Editor

The transformation of manufacturing processes and operations into connected, integrated, automated and smart operations, collectively known as Industry 4.0, will reduce the amount of low skilled positions but also create new skilled positions, assurance and advisory services multinational PwC South Africa's 'Insights into the I4.0 maturity of SA Manufacturing' report has found.

The report surveyed representatives across nine industrial sectors in South Africa during April and May and found that 35% of respondents predicted that throughput would increase between 10% to 20% owing to Industry 4.0 investments made over five years, and enable them to see a return on their investments.

However, some participants indicated that it might take more time for them to capitalise on investments made, depending on their specific sector.

Further, 35% of participants expected to realise a 20% to 30% increase in efficiency gain owing to Industry 4.0 investments.

"This finding relates to and concurs with a cost reduction expected by 82% of participants [arising from Industry 4.0 investments made] over the next five years, with 26% of respondents expecting cost reductions of more than 30%," says PwC South Africa smart manufacturing leader Vinesh Maharaj.

"As visible in the report, there are definite benefits to implementing Industry 4.0 technologies and organisations are quite bullish on what the returns will be. However, despite many foreseeing significant benefits, 23% of respondents remain uncertain about the return on investment.

"Further, 15% said they experienced resistance to transformation from workers and unions and 37% said they foresaw a challenge in terms of skills to operate transformed operations. However, if we can overcome the challenge of upskilling people, we will get the benefits from the transformation," Maharaj says.

SKILLED EMPLOYEES
The report indicated that 73% of participants expect the number of skilled employees will increase as the industry transforms, with 77% expecting new skilled positions to increase because of the implementation of Industry 4.0.

In terms of the impact on the workforce within industrial manufacturing, a significant increase in skilled labour is expected and 40% of participants expected the level of productivity of employees to increase. Similarly, 30% of participants expected the number of new skilled positions to increase.

Additionally, 20% of participants expect workforce costs to increase and 30% of participants expect production costs to decrease. This shows an overall improvement in efficiencies and safety, with higher paid skilled staff, the report shows.

"Given the fact that Industry 4.0 is changing how we work, live and socialise, it is expected that a number of skills are mandatory to thrive in this new technological era, deliver on high expectations and use technology to serve employees and their companies," the report notes.

"We found that the number of unskilled employees was not necessarily linked to a reduction in employment rates, as manufacturers were eager to upskill employees to complete more fulfilling tasks, while being open to the idea of automation and digitisation, paving the way in terms of repetitive and laborious tasks. It is, therefore, important to consider how upskilling will happen within each sector."

The majority of participating manufacturers, 67%, agreed that the number of unskilled employees would decrease. This is in line with literature suggesting that South Africa has a significant skills shortage owing to failings in its education system, limiting the supply of workers needed for Industry 4.0.

Meanwhile, overall investment made into Industry 4.0 in South African manufacturing is substantially low. Investment risk owing to South Africa’s unstable political and economic climate, as well as poor infrastructure and logistics, was noted, the report states.

Significantly, from a historical context, Asian economies developed through the use of low labour costs and the adoption of technology. If South Africa does not take advantage of benefits offered by industrial technologies, it will be left behind, says Maharaj.

To overcome resistance to transformation encountered from workers and unions requires that companies help personnel understand the benefits of the technologies, how they will be empowered to do more work, and that higher skills mean higher-paying jobs, in addition to helping to support the company's competitiveness and sustainability and hence their job security, he says.

"If our competitors are investing heavily in new systems to improve their competitiveness and we do not, we will continue to become less competitive and eventually lose the industry if we do not keep pace with international trends," he says.

Similarly, South African industries will not secure large returns without large investments, and even modest increases in investments deliver increasingly large benefits, Maharaj emphasises.

Additionally, separate PwC research indicates that each manufacturing job creates four other jobs in the rest of the economy, owing to links to primary sectors, such as mining and agriculture, and downstream linkages to wholesale, retail and financial services.

"If we can get our manufacturing to be globally competitive and reindustrialise South Africa, we can solve the job problem and uplift our entire society," he says.