Utilising AI in your manufacturing business
Expansion & Improvement
Artificial intelligence has gone from sci-fi concept to a part of everyday life with remarkable speed. Smart robots now advise us on everything from film recommendations to how to drive safely. However, in the realm of manufacturing, AI is still considered the preserve of major global manufacturers and transformative technology businesses.
Kapil Davda explains why that is a huge missed opportunity, as well as the scope for small and medium manufacturing businesses to implement AI tools in their work to maximise growth, efficiency and success.
Attitudes to AI
Automation in manufacturing is nothing new, though the application of artificial intelligence has been slower to catch on in smaller manufacturing businesses. Discussions with clients on this matter tended to be mostly theoretical, but are becoming more practical and pragmatic, for several key reasons:
- Labour: Brexit and changing skill sets have shrunk the available market for experienced plant workers. Those that remain are not always as keen to be working in a highly manual, repetitive role.
- Efficiency: the increasingly globalised manufacturing landscape is putting more pressure on prices, speed of production and service. Working with manual, people-focused processes not only increases labour costs but reduces capacity in the factory.
- Incentives: in an effort to increase the UK’s competitiveness on the global stage, the government is offering businesses attractive tax breaks to invest in new technology and update analogue manufacturing tools, including Research and Development (R&D) tax credits as well as Super Deduction capital allowances tax relief.
The argument for automation
The implementation of artificial intelligence in manufacturing is a logical continuation of processes that have been in place since the first industrial revolution. The difference with the so-called fourth industrial revolution is the ability for it to build on its own success exponentially.
The advent of ever smarter machines, in communication with one another, learning from their performance, creates the opportunity for the utility of these tools to expand beyond their original conception.
This has wide-ranging and significant impacts for all businesses, particularly manufacturing. These include:
- Cost reduction: using AI-powered systems alongside human input enables you to build products more cheaply by reducing labour costs and increasing speed of production. Not only can automated machines build products faster, but they can be run 24/7 to increase output and efficiency.
- Progressive improvements: modern manufacturing tools constantly gather data on their own processes and performance. By leveraging this information, you can design and produce new products at a faster pace by aligning your processes with your production cycle.
- Predictable revenue and performance: automated processes can be benchmarked for efficiency and performance, giving you more control and insight over what will be produced, when and for what cost, letting you forecast further into the future.
- Repurposing human resources: while AI-enabled machines can take on many of the roles currently performed by people, they work best when implemented in tandem with a human workforce. This gives manufacturers the chance to retain and upskill valuable staff with more engaging roles and use their experience to push long term process improvements.
One recent case from my own work is with a manufacturing client. As an established business, they had set ways of working that had performed well up until the moment they didn’t.
Their main challenge was people. The machine they relied on for most of their production required two to three people to operate, but they were having trouble filling schedules to enable continual production. By swapping out their manual-reliant machine for an AI-powered one, which required the input of just one person, they were able to dramatically increase production efficiency and deploy their team more strategically.
How to approach AI implementation
There are certain issues that may point to it being the right time to upgrade your machinery to a more intelligent model, such as:
- Existing machinery reaching the end of its life
- Trouble sourcing parts for legacy machinery
- Difficulty recruiting people to man your equipment
- Falling behind on orders or production schedules
- Margins falling short of predictions
If these things are happening in your business, implementing new manufacturing equipment could have a dramatic effect on business performance.
Integrating your planning approach
One of the key advantages of modern digital production tools is their ability to integrate with other parts of your business, sharing data and insights to save you time and improve output.
When choosing a manufacturing product, consider how it can integrate with other parts of your business to improve performance holistically, including:
- Business intelligence and reporting systems
- Quality assurance
- Logistics/ inventory tools
- Production planning/ ERP tools
- Warehouse management solutions
Maximising AI return on investment
While investing in new equipment involves initial capital outlay, these costs can be mitigated. Firstly, it’s important to move beyond the ‘price-tag’ shock of the initial spend. While keeping the same equipment may seem cheaper, there is an opportunity cost that you pay in the long term.
For example, if you have a piece of equipment coming up for renewal you have a choice - you could keep on repairing it indefinitely, but the longer you use machinery the less efficient it gets and the more maintenance costs. Meanwhile, if you instead choose a new piece of equipment you can benefit from:
- Reduced maintenance costs
- More efficiency
- Lower labour costs
- Increase production
Financial Incentives to AI Investment
The UK government has implemented several incentives intended to accelerate business growth and productivity in the UK with a generous tax break for companies.
- Super deduction tax scheme: from April 2021, investments in plant and machinery will qualify for a 130% capital allowance super-deduction, creating a tax saving in the first year of up to 25p for every £1 spent on new fixed assets.
- R&D tax credits: this tax relief is for taxpayers that design, develop, or improve products, processes, techniques or formulas, including manufacturing businesses. It's calculated on the basis of increases in research activities and expenditures to reward companies that pursue innovation with increasing investment. Any resulting tax refunds or savings can be used to reinvest in AI enabled kit.
Working with an advisor can help you structure your investment and applications to maximise benefit, greatly reducing the net outflow of capital required to investment in cutting edge equipment.
How Haines Watts can help invest in your future
AI-powered machinery is the future of manufacturing. The businesses that can effectively recognise the opportunity and grasp it will be the ones best placed to succeed in the digital future.
From process analysis to tax optimisation, we partner with you every step of the way to make sure you’re making the right decisions for your future.
Get in touch with us to talk through how you can stay ahead of the latest trends while optimising your businesses for efficiency and growth.