Advanced technologies like AI, predictive analytics, internet of things and automation are reshaping industrial manufacturing. The race is on for companies to make substantial and impactful investments in these areas — and those that don’t will be left behind.
Supply chain finance is helping industrial manufacturers and suppliers accelerate cash flow, so they can fund transformative investments and embrace the manufacturing landscape of the future.
The future of industrial manufacturing is built on automation, AI and digitization as evidenced by current R&D spend levels across the industry. According to research published by Deloitte, an overwhelming majority of companies investing in R&D spend — 86 of the top 100 — belong to the manufacturing sector.
Despite this spending power, disparity remains between the current state and the desired future of manufacturing. Currently, most manufacturers’ adoption of advanced technologies and capabilities is lagging. PwC reports that just 10 percent of global manufacturing companies are “Digital Champions,” while the majority have either not yet started or have just begun their journey to digitization.
Fortunately, manufacturers are responding with more determination and innovative thinking than ever before. Nonetheless, finding the cash to fund initiatives for smarter, more advanced capabilities will continue to be a challenge, which is why companies are increasingly turning to supply chain finance.
Here’s how supply chain finance will help companies meet their advanced manufacturing goals in the coming years:
Accelerate cash flow to fund new investments in AI and automation. Supply chain finance allows companies to unlock working capital previously trapped in their supply chains. Rather than incur debt or sell assets, supply chain finance provides access to material liquidity often ranging anywhere from $100m to more than $1bn. This cash can be used to increase investments in R&D, particularly AI and automation, which will help streamline manufacturing processes, boost efficiency and productivity, and improve quality — all while reducing costs.
Invest in the recruitment of skilled workers. Automation, combined with a skilled labor shortage that shows no signs of abating, is forcing manufacturers to rethink workforce recruitment. Quality outshines quantity as companies dedicate more resources to recruiting fewer, higher skilled workers that demonstrate a more in-depth understanding of advanced technology and the ability to fluidly adapt to new industry advancements. Some manufacturers are meeting this challenge through the development of advanced training centers and accelerated skills training programs.
Increase integration. Comprehensive integration across global supply chains remains a top priority for industrial manufacturers. One area of particular focus is integration of key financial and procurement systems. With a growing number of geographically (and technologically) diverse suppliers and customers, integration has become almost an expectation from clients as the global economy becomes more and more interconnected. To meet this demand, manufacturers will invest in sophisticated technology that will enable integration and interactivity across all facets of the supply chain, regardless of currency or jurisdiction.
In 2019, there will be a rapid acceleration in the adoption of advanced manufacturing technologies and capabilities. This will drive record interest in supply chain finance as interest rates rise and commercial bank lending becomes a less attractive funding option. Through supply chain finance, manufacturers will have access to funding that doesn’t negatively impact their balance sheets (or their suppliers), allowing them to more quickly and fully achieve their digitization goals.
Nathan Feather is CFO of PrimeRevenue.
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