Out-Law News | 22 Oct 2014 | 3:21 pm | 4 min. read
In a lecture that is part of the Horizon series run by Pinsent Masons, the law firm behind Out-Law.com, Marsh explained that the "new industrial revolution" has seen digital technology added to the mix of elements traditionally associated with manufacturing – material, skills, energy and capital.
Marsh said that digital technology provides manufacturers with opportunities to connect devices, become more creative and deliver "greater customisation".
"The new industrial revolution will give opportunities to customise things, to make things tailored to the requirements of the user rather than the same basic products coming out of the factory and fitting in with what you hope are the requirements of the customer," Marsh said.
There are already examples of manufacturers using technology to tailor products to the demands of individual customers, Marsh said. He cited a children's suitcase manufacturer as being able to make their products in up to one billion possible variations to suit customers' colour preferences. He also said that 3D printing had been used to make bespoke 16th century musical instruments.
A new report by the Office of National Statistics (ONS) on manufacturing productivity trends in Britain (20-page / 435KB PDF) identified the role that technology can play in growing manufacturers' output, particularly in light of a reduction in manufacturing jobs.
Manufacturers that gave more than 40% of their staff access to broadband services between 2001 and 2007 increased their "annual labour productivity" by approximately 11% each year in that period, according to the ONS figures. Manufacturers that gave fewer than 40% of their staff access to broadband in that time experienced a slight annual reduction in productivity, on average, it said.
"Productivity growth tends to be higher in firms with higher levels of ICT maturity, but the relationship is far stronger in manufacturing than services," the ONS report said. "Manufacturing firms that have a low ICT maturity have seen productivity fall by around 1% per annum, while manufacturing firms that have high ICT maturity have seen productivity growth of just over 11% per annum."
In his speech, Marsh said that digital technology can help improve manufacturers' relationships with suppliers all the way down their supply chain. Supplier interactions can be made "more efficient" by technology. It is up to the companies to develop an "information network" suitable for them, he said.
Manufacturers are embracing the so-called 'internet of things' (IoT), Marsh said. He said increased connectivity is enabling manufacturers to use "data networks to connect up objects" and develop commercial opportunities in telecoms, data processing and hardware as well as in pure manufacturing.
Marsh said digital technology can help manufacturers innovate. It can enable "a surge in new thinking" and help "ameliorate some of the problems with the environment", for example. He said some manufacturers have already used technology for this purpose, including a Japanese business that has been able to reduce the energy consumption of electric motors and a Preston-based manufacturer that has built a "smart thermostat".
The new industrial revolution presents opportunities for British manufacturers, despite stiff competition from the global leader in manufacturing, China, as well as from businesses based in other major manufacturing hubs such as the US, Japan and Germany, Marsh said.
British manufacturing has many strengths, including its industrial design base, many innovative SMEs, a number of manufacturing 'clusters' and "lateral thinking" engineers, Marsh said. However, "undercapitalisation" of some manufacturers and a shortage of large manufacturers that act as role-models for the industry are weaknesses, he said.
British manufacturers need to "practice technology blending" and get better at "transferring skills globally". "Hidden success stories" need to be championed, students inspired and "mavericks" given freedom to innovate, Marsh said. Manufacturers need to be product-focused and become more service-thinking, he said.
Marsh said that opportunities for British manufacturers are not confined to the luxury market.
"If you are doing something clever and creative but nothing to do with luxury you can still do well because you are doing something that no one else has managed to do," Marsh said. "The luxury sector is a good one but it would be silly to say it is pushing on manufacturing in the UK because it is not."
UK policy makers have a role to play in developing existing manufacturing clusters in Britain, such as the metal works industry in Sheffield, Marsh said.
"You want the leadership to come from companies and trade associations and you want government to be like every good chorus in an opera - coming in at the right points without necessarily playing a leading role," Marsh said. "Where clusters do exist you want to make more of them. If I was a government policymaker I would look at areas where there are clusters and focus resources on them."
Specialist in manufacturing supply chain contracting Jayne Hussey of Pinsent Masons, the law firm behind Out-Law.com, said that the rise of digital technology raises a number of legal and commercial issues that manufacturers need to think about.
"If we take the concept of the connected car you can see that there are lots of issues around data ownership: the collection of data and who owns it, who's entitled to use it, and of course the OEMs, the vehicle manufacturers, understanding the legal framework that they need to operate in," Hussey said. "There are interesting pieces around third party usage of that data, so for example an insurance company using data to assess the premiums that somebody may pay for the car insurance."
"Equally there are issues to be got to the bottom of in terms of product liability, so if part of a car breaks down is the fault in the part, is the fault in the system that's passing the data back and forth?" she said.
Further issues can emerge in commercial contracts with suppliers, Hussey said, including questions over liability for inaccurate data. Increasingly connected supply chains may also see the emergence of new supply chain contracting models, she said.
Hussey also said that manufacturers may also encounter difficulties in moving to new suppliers if "sub-tier suppliers" become embedded in their supply chain and "get possession of business-sensitive data".