Feasibility Study: Growing Industry 4.0 Capability in SMEs

Prepared by: Dr Marilyn Comrie OBE

December 2018

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Contents

EXECUTIVE SUMMARY 3 INTRODUCTION 5 Consultancy team 6 Methodology 6 MANUFACTURING LANDSCAPE OF GREATER MANCHESTER & THE NORTH WEST 7 Greater Manchester context 7 GM Opportunity from industry 4.0 8 Skills Demographic 8 Productivity 9 GREATER MANCHESTER INNOVATION ASSETS 9 Planned new developments 10 High Value Manufacturing Catapult 11 BARRIERS TO ADOPTION 11

Made Smarter for Under £1000 12 NEW MANUFACTURING INSIGHTS 12 What companies told us 12 Other key challenges 13

Speeding up the adoption process 13 Characteristics of early adopters 14 Coaxing late adopters 14

BRIDGING THE DIVIDE 15 Gaps in innovation ecosystem 15

Models for advanced manufacturing hubs 16 Scaled demonstrator framework model 19

COST MODEL 21 GREATER MANCHESTER APPLICATION 22

Manufacturing City 22 Location 23 Impact assessment 24 Inclusive growth 25

CONCLUSIONS 26 IMPLEMENTATION STEPS 27 APPENDIX 28 List of stakeholders consulted 28

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Executive summary

The main purpose of this study was to assess the feasibility of establishing an Advanced Manufacturing demonstrator co-located with a skills facility in the Manchester City Region to speed up the adoption and deployment of Industry 4.0 technologies (i.e. digital manufacturing or Made Smarter) by small and medium sized enterprises (SMEs) across a range of sectors, and to grow smarter supply chains.

Industry 4.0, otherwise known as the fourth industrial revolution, is a collective term for technologies which draws together Automation, Artificial Intelligence, Augmented Reality, Robotics, Additive Manufacturing, Sensors, Data and the Internet of Things.

A key objective was to obtain up to date evidence of actual business needs and priorities based on extensive consultation with manufacturers and other organisations in the area, in order to help decide the right scope and scale of the demonstrator. A further objective was to devise a generic model for the demonstrator, designed to meet the needs of manufacturing SMEs in the Greater Manchester area, but which could also be considered by other city and local regions elsewhere in the UK, where the need for adopting such technologies is recognised but where the approach and investment required for raising awareness and capability amongst SME manufacturers has not yet been established.

The recommendations in this report have been aligned to the Made Smarter Review (MSR) published in October 2017. It found that UK manufacturing SMEs have been too slow in embracing industrial digitalisation technologies (IDTs) in comparison to other industrialised nations. A North West pilot was launched in November 2018 as a first step to improve take up.

The study which took place between January and May 2018, consulted with around 140 businesses, trade associations and public agencies to gain their perspectives on what could be done to encourage non adopters to embrace Industry 4.0 technologies. The main findings from the survey showed that 84% of SMEs felt cost was the biggest barrier to adoption, 80% cited skills shortages and 90% said workforce upskilling/reskilling was a priority.

The need to develop solutions which aim to provide beneficial, low cost entry points for Industry 4.0 capability in SMEs starting at equipment costs of around £4k will be necessary to challenge the ‘unaffordability’ perception. Affordable solutions are vital for demonstrating that Industry 4.0 technologies are not just the preserve of larger manufacturers but can deliver productivity improvements for any size of business. Catchy slogans such as ‘Industry 4 for £4k’ could be employed to communicate this message.

As part of our work, we also looked at the important characteristics of early adopters. Psychological studies show innovation to be a function of one’s connectedness to others who are also innovative. Diffusion and adoption of digital manufacturing technologies by SMEs follows the familiar bell-shaped curve led by early adopters. However, it is possible to speed up the adoption and deployment process. A framework model was subsequently developed for a new type of demonstrator scaled to suit the needs of a city or local region and in this case for Manchester involving £15 m to set up. The operational costs for the first three years are estimated to be £5 million per annum. The facility will become sustainable and generate diverse income streams including delivery of degree apprenticeships aligned to new trailblazer standards, workforce upskilling/reskilling programmes, rental of business incubation spaces, prototyping services, collaborative R&D projects, membership fees and the staging of events/conferences.

These ‘entry level’ digital manufacturing demonstrator hubs would serve three core function to strengthen the manufacturing ecosystem within a locality:

1) Technology – a scaleable demonstrator for testing and demonstration of new applied industrial technologies that SMEs can access, learn on and use. The emphasis should be on provision of a generic range of digital manufacturing technologies that cut across a number of engineering

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and manufacturing sectors, but with a ‘local twist’ based on strengths within localities. Selection criteria will be employed for deciding which technologies to adopt and deploy leveraging the manufacturing strengths of an individual locality to drive economic growth. For each area it would focus on: -

o What we are good at and where there are market growth opportunities. o How to draw knowledge across from different sectors to strengthen the manufacturing

ecosystem and the resilience of SMEs. o Source the best fit cross sectorial industrial digitalisation technologies.

2) Workforce development and skills training in the latest digital manufacturing technologies.

Co-location with a skills development facility offering Level 5-7 degree apprenticeships and workforce upskilling and reskillling training to grow the pool of ‘high spec, high tech’ engineers and technicians that are needed.

3) Innovation – facilitating an ecosystem of Primes, SMEs, technology suppliers engaged in collborative R&D projects with universities to drive manufacturing innovations, shared technology transfer, quality systems and smarter supply chains.

Given the emphasis on higher level skills training to grow the skilled engineers and technicians which will be needed, there may be scope for repurposing the £1.3bn of unspent apprenticeship levy funds into this new type of multi –purpose advanced manufacturing demonstrator. Furthermore, large manufacturers and primes are able to allocate 25% of their apprenticeship levy to capacity build their supply chains. This funding pipeline is largely untapped.

The study concluded that to be effective for attracting and mobilising SME companies towards Industry 4.0 adoption and innovation, the demonstrator needs to incorporate and co-locate the 3 key elements of technology, skills and supply chain development and to be funded by a mix of public and private investment. The proposed solution was derived from an established demonstrator facility in Huddersfield scaled at £700k annual operating cost, but it was further shaped and refined in response to the up-to-date evidence we obtained earlier this year through extensive consultation in the Manchester and NW Region.

The food, drink and packaging industries emerged as the priority sectors that it should aim to support. Beyond this, we believe this demonstrator model could be equally applicable to many other sectors in the region and indeed to any comparable cities and regions elsewhere the UK with SME companies looking to develop and adopt digital manufacturing capabilities.

The following actions are recommended:

1. Develop the business case for implementing this proposed demonstrator solution in the Manchester area, at one or more locations depending on needs and the levels of industry co-investment obtained.

2. Evaluate the evidence obtained in this study for its relevance in helping optimise the implementation of the NW Pilot of the Made Smarter Review. The relevance of the proposed demonstrator model to the implementation plans for the £121m Made Smarter Industrial Strategy Challenge Fund Programme announced in the October 2018 budget should also be considered.

3. Consideration to be given for adoption of the proposed demonstrator model by relevant authorities elsewhere in the UK, including City and Local Regions, High Value Manufacturing Catapult and other local, regional and national organisations pursuing the Industry 4.0 Made Smarter agenda.

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Introduction

In the UK, manufacturing makes up 11% of GVA, 44% of total UK exports, 70% of business R&D, and directly employs 2.6 million people1. Britain is the 8th largest manufacturing nation by output. Whilst almost all developed or developing countries have seen a decline in manufacturing as a proportion of their GDP, the decline is most stark in the UK, where manufacturing has fallen from nearly 20% of the economy to just 10% in 2015. (Made Smarter Review)

The review estimates that Industrial digitalisation could be worth as much as £455bn to Britain’s manufacturers over the next decade, increasing sector growth up to 3% per year, and creating a net gain of 175,000 jobs whilst reducing CO2 emissions by 4.5%. Smart factory technologies present a massive opportunity to reverse the past decade of decline of many industrial towns and heartlands. Legacy sectors such as precision engineering and textiles could be reinvigorated through digital transformation and integration of technologies that can predict production line failures. The Made Smarter Review recommended three priority areas for action:

1. Create a much more visible and effective digital ecosystem to accelerate the innovation and diffusion of Industrial Digital Technologies (IDTs)

2. Upskill a million industrial workers to enable digital technologies to be successfully exploited 3. Inspire the UK’s next industrial revolution with stronger leadership and branding of the

country’s ambition to be a global pioneer in IDTs.

The MSR report found that small and medium sized businesses were slow to adopt new technologies citing concerns about affordability, cyber security and what’s available. As SMEs make up 95% of the UK manufacturing sector, growing their Industry 4.0 capability is now an economic imperative which is reflected in the UK government’s Industrial Strategy. A North West pilot was launched in November 2018 targeting SMEs who can become early adopters and evangelists. With a budget of £20 million, companies will be offered a portfolio of intensive support from the Growth Hub including consultancy, grants for purchasing equipment and leadership training for innovation. The pilot will also connect trailblazing SMEs with technology suppliers and innovation assets across the North West region. The North West pilot however contains no provision for the creation of a ‘go to’ advanced manufacturing showcase facility where companies can come to tinker with IDTs, learn how to use them and gain a better understanding of the most appropriate ones for their business. Psychological studies on adoption and diffusion of new technologies show that shared spaces with supportive groups are essential for making this process easier.

Industry 4.0, otherwise known as the fourth industrial revolution, is a collective term for technologies which draws together Automation, Artificial Intelligence, Augmented Reality, Robotics, Additive Manufacturing, Sensors, Data and the Internet of Things. The shift towards smart factories is vital to boosting productivity, economic growth and export potential of UK manufacturing. The Made Smarter Review sets out how the UK’s manufacturing sector can be transformed through the adoption of industrial digital technologies (IDTs) also referred to as Industry 4.0.

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Consultancy team

The research has been led by Dr Marilyn Comrie OBE, business development director at The Blair Project, and vice president of Greater Manchester Chamber of Commerce. Additional research and data analysis input was provided by the Policy Research Team at the Chamber. The Blair Project is a specialist provider of technical and vocational education in digital manufacturing and design for schools and is actively involved in developing the workforce of the future. Its founder and CEO is 23-year-old Nile Henry. Additive manufacturing is particularly appealing to young people of all ages and abilities, turning anyone and everyone into a maker.

Marilyn met a group of kindred spirits at the Additive Manufacturing Special Interest Group launch in London back in Spring 2017, with shared passion and interests around young people. Together they set about to trailblaze new additive manufacturing apprenticeships with key partners such as the Manufacturing Technology Centre, Manchester Metropolitan and Birmingham City Universities, and National Physical Laboratories to name a few.

In September of that year, Greater Manchester Combined Authority announced a call for proposals for its Capital Skills Fund. Working together, the group submitted a proposal for an Advanced Manufacturing Centre of Excellence for the delivery of Level 3-5 apprenticeships. However, there was a realization that it would be impossible to do skills development without access to the latest cutting-edge equipment and technologies.

The Blair Project drafted a proposal and approached Siemens to fund a feasibility study to explore co-locating a large scale demonstrator with a skills training centre of excellence. As Siemens had no funding available, The Blair Project re-drafted the proposal and approached Innovate UK (IUK) via the KTN, having identified areas of mutual interest with IUK around advanced manufacturing demonstrators. This also coincided with the publication of the Made Smarter Review. The recommendation for a North West pilot added a new dimension and reason to do this study.

Methodology

This report assesses the degree of support for a large-scale digital manufacturing centre among key stakeholders and entrepreneurs in Manchester’s manufacturing community, exploring the need and potential role within the City region’s manufacturing ecosystem, and the innovation gaps it could fill. The core element of this work involved: -

• mapping the manufacturing and R&D landscape in the Manchester City region and the wider North West and regional and national industrial strategies

• engaging with key stakeholders such as manufacturing SMEs, Primes and their supply chains, technology partners, training and business support providers, public bodies, academia and the national catapult centres.

• designing a best fit configuration for a new breed of advanced manufacturing demonstrator which meet the identified needs of manufacturing SMEs and act as a generic blueprint for national roll out.

We set out to adopt a place based approach, that leveraged the strengths of the Greater Manchester area and co-design a best fit solution based on what SMEs told us they wanted. We approached the study with a completely open mind, listened attentively to what industry was telling us, co-designed a best fit folution with them. The conclusions and recommendations in this report are based on the findings from:

• 33 in-person interviews and three phone interviews with stakeholders • Workshop surveys with 116 respondents (75% were involved in manufacturing or mechanical

engineering) from the food & drink, automotive, engineering and packaging sectors • Case study analysis of SME innovation incubators in West Yorkshire, Greater Manchester and

the North West Region • Primary and secondary data research on the manufacturing landscape in Greater Manchester

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Manufacturing landscape of the North West region Manufacturing is a major generator of wealth for the North West region with just over 323,000 employees. The region has the largest manufacturing base in the whole of the UK, producing 9 percent of the UK’s total exports, with activity in a wide range of industrial sectors such as aerospace, automotive, nuclear, chemicals, food & drink and agriculture. These sectors are dominated by a larger concentration of Primes, OEMs (original equipment manufacturers) and medium sized enterprises. According to new research by the Policy Research Team at Greater Manchester Chamber of Commerce, the North West region’s manufacturing base has experienced a 10% growth since 2009 equivalent to £2.2bn. Of this, Lancashire which has high strengths in aerospace and automotive accounted for £1.5bn. Cheshire with strengths in advanced manufacturing and automotive provided £1.2bn and Cumbria a nuclear research centre of excellence generated £243m growth. However Greater Manchester and Merseyside both contracted in the same period.

The growth of manufacturing output in the North West is now dominated by Cheshire which has seen its share of output increase from 20% to 27%, making it now the single largest contributor to the region’s manufacturing economy. Greater Manchester’s share on the other hand has fallen from 31% to 24% during that time, moving it from the largest to the second largest share of North West output1.

Greater Manchester context

There are 8,340 companies in the Manufacturing sector in Greater Manchester2 (GM) employing 114,000 people. The City Region has relative strengths in food, drink, packaging and textiles as well as chemicals and materials. While medium and large companies are significant in food and drink, the other subsectors are dominated by small and micro-size companies who make up 94% of the sector, employing on average 18 people3. Businesses employing more than 50 people in 2013 accounted for less than 6% of all firms in the GM manufacturing sector. The sector has however failed to seize the competitive advantage opportunities of gender and ethnic diversity in the workforce4.

The manufacturing sector in Greater Manchester is dominated by Advance Manufacturing identified as a Northern Powerhouse ‘prime’ employing just under 50,000 people mainly in small companies, with food and drink employing 20,000 people and advanced materials & textiles and other manufacturing (packaging, furniture, jewelry and plastics accounting for 33,000 jobs.

Greater Manchester (GM) is home to the largest concentration of food and drink manufacturing employment in the region. Over three-quarters of the world’s top-25 food companies have a base which includes major primes such as McVities, Heineken, Kellogg’s and Heinz. Greater Manchester is also home to one of the UK’s largest technical textiles clusters for both manufacturing and research. Specialisms include medical and healthcare material applications, sport and performance materials, and carbon fibre production5. Technical textiles is a recognised manufacturing corridor stretching from Bolton, through Huddersfield to Sheffield.

Within the North West, Greater Manchester’s manufacturing sector took the second largest hit during the recession, losing 14% of its output between 2007 and 2009. The City Region stands out amongst the five North West sub-regions as the only one to be smaller in 2016 than it was in 1998. This means that, within the North West, it is the only sub-region to have seen its manufacturing output contract

1 GM Chamber of Commerce Research Apr 2018 2 New Economy Deep Dive Manufacturing Report 3 Deep Dive: 02 Manufacturing Report 2016 New Economy. 4 Greater Manchester Manufacturing Strategy 2015 5 MIDAS Sector Fact Sheet Advanced Manufacturing

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since 1998, being 16% smaller in 20166. This compares to 9% growth for the North West as a whole, with other sub-regions varying from flat over that period (Merseyside) to 51% growth in Cheshire.

The Greater Manchester opportunity from Industry 4.0

Mapping the City Region’s competencies and strengths, the food, drink and packaging sectors emerged as the ones with the biggest gap in R&D and innovation support. Undervalued and overlooked by policy makers in favour of automotive and aerospace, yet these sectors have significant growth potential through exports7. This finding is backed up by the Made Smarter Review which estimates that the food and drink industry could add an additional £55bn to the economy over the next decade through improved digitalization alone.

Leveraging and building on this strength would help the Manchester City Region and England’s North West to establish itself as a global lead for innovations in food, drink and packaging manufacturing. The North West currently accounts for 11% of food and drink GVA. Digital transformation of food and drink manufacturing would deliver an additional £6bn for the North West regional economy.

Industrial digitalization across the manufacturing supply chain, coupled with cross sectorial knowledge transfer will:

• Drive manufacturing innovations and improve products and/or services; • Reduce costs and improve competitiveness of UK manufacturing • Support SMEs to become more resilient, agile and better able to adapt to changing market

conditions so they can seize emerging opportunities. • Create smarter supply chains which are better run and managed through the sharing of real time

market data, information and production performance monitoring.

Skills demographic

Skills are core to the success of IDT adoption and deployment. There’s already an identified shortage of digital skills in the UK economy, and these shortages will become more acute post-Brexit. The food and drink supply chain which contributes 8£100bn and employs approx. 4 million people is very reliant on EU workers – 34% of the permanent workforce are EU nationals. 56% of companies plan to adapt by automating production, while another 50% plan to recruit locally, but worryingly 36% think their

6 Policy Research Team GM Chamber of Commerce 7 FDF Economic Contribution 2017 Report by Grant Thornton 8 Breaking The Chain – Key Workforce Considerations for the UK’s food and drink supply chain as we leave the EU.

New data gathered by Greater Manchester Chamber of Commerce reveals that the past dominance of Greater Manchester is now being usurped by neighboring areas such as Cheshire, Lancashire and Cumbria.

Industrial digitalization technologies present a massive opportunity to reverse the past decade of decline of Greater Manchester’s manufacturing base and achieve the levels of double-digit growth being enjoyed by neighbouring areas like Cheshire and Lancashire. Supporting micro and small manufacturers to become strategic players in larger supply chains is a priority need if this is to be achieved.

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business will become unviable. Investment in higher level skills provision such as Level 5 -7 Degree Apprenticeships is needed.

A key area of focus must be developing the skills base of the engineering and manufacturing ecosystem in a locality and delivering higher level skills through degree apprenticeships. Workforce upskilling and reskilling training programmes are also a vital part of the mix to ensure workers continue to have the rights skills and capabilities to adopt and deploy digital manufacturing technologies.

The Labour market recovery in Greater Manchester is skewed towards flexible forms of work i.e. zero-hours contracts. Only 33.7% of the population have a level 4 qualifications compared to the UK average of 36.9% and 10.1% have no qualifications. It is forecast that to the years to 2022, almost 250,000 jobs will be created in GM, of which a quarter will require skills to Level 3+.

Productivity

While Greater Manchester (GM) benefits from a large working age population and high levels of in-commuting compared to other areas, low employment rates and high levels of economic inactivity act as a significant drag on its economic potential. Just over 10% of residents have no qualifications at all.

Overall productivity in GM is low due to a mix of both demographic and “in work” productivity factors. Demographic factors account for around 20% of the productivity gap between the Manchester City Region and the UK. “In work” productivity accounts for 80% of the productivity gap. Upskilling and reskilling residents needs to be a major priority to fill skills gaps, boost earning power and lift more people out of poverty.

Greater Manchester innovation assets Greater Manchester has a globally significant concentration of science, research and innovation assets, which is a key factor that differentiates the city region from other UK and international city competitors. However, the trickle-down effect of high tech innovation assets within the Manchester City Region have so far failed to deliver improved prosperity for all its residents.

The Corridor Manchester in the south of the City Region is the strongest single location with its concentration of university, NHS and private sector assets, and is where the majority of new jobs are being created. Although leading research is undertaken in the universities in Salford and Bolton and

It has been predicted that, within 20 years, 90 percent of all jobs will require digital skills. This means that approximately 16.5 million people in the UK are going to need to be skilled to become ‘digital workers’ and ‘digital makers’.

To achieve inclusive growth, it is vital that more local residents are equipped with the higher level and technical skills needed by industry so that the City Region can exploit the economic growth benefits of industrial digitalization technologies. This will boost residents earning potential and lift more of them out of the poverty trap.

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public/private facilities across Greater Manchester, the greatest commuter flows are into the City Centre and Corridor Manchester. The list of Greater Manchester’s Innovation assets includes but is not limited to:

National Graphene Institute (NGI): The £61m National Graphene Institute which opened in March 2015 enabling academics and their industrial partners to work on live R&D projects, accelerating translation and commercialisation of research. University of Salford -Centre for Advanced Robotics and Autonomous Systems: The Centre works very closely with food, packaging, aerospace and nuclear supply chains, especially SMEs to deliver proof of concept and innovative low-cost robotics solutions. It is a key partner in the EPSRC National Hub (part of £68m awarded Dept. for Business, Energy & Industrial Strategy) for ground-breaking research/innovation in Future AI & Robotics for extreme environments.

Manchester Metropolitan University Print City – recently opened education and innovation centre specializing in 3d printing and additive manufacturing in addition to providing rapid prototyping, research and development services, and small-scale production. Manchester Food Research Centre, part of Manchester Metropolitan University exists to provide industry-leading assistance to hundreds of micros, small and medium sized food companies in food science and innovation to support scale up. This includes factory design, industry 4.0 adoption, food safety, management systems, and targeted business support to enable local businesses to benefit from grants and funding.

National Composites Certification & Evaluation Facility (NCCEF): The National Composites Certification and Evaluation Facility supports the supply chain across all sectors in the transition from metallic to advanced composite manufacturing. Textile Manufacturing Cluster: University of Manchester, Manchester Metropolitan University, Manchester School of Art, University of Bolton, University of Salford: these institutions represent one of the largest concentration of textiles and materials, fashion and design, teaching and research in the world. Textile innovation in the UK is ranked at world No.3 and No.1 in Europe in terms of patents generation between 2000 and 2015. University of Salford - Morson Maker Space, is a new facility developed in partnership with Morson International, providing state-of-the-art smart manufacturing technologies, including additive manufacturing labs. Future new additions include a smart factory to address the EDU 4.0 skill gaps that young people will require to be Industry 4.0 ready.

Sci-Tech Daresbury: Sits outside GM’s administrative boundary but is home to the Hartree Centre which houses an innovation incubator and the Virtual Engineering Centre (VEC) which supports companies through the demonstration, application and adoption of virtual engineering tools to support new product innovation.

Planned new developments

Several other innovation assets are in the development or planning stages. Information on these potential new developments was mostly gathered from stakeholder interviews; relatively little information is available publicly at the time of this report.

Royce National Research and Innovation Centre in Advanced Materials: Opening in 2019, The Sir Henry Royce Institute for Materials Research and Innovation is a £235m research centre to provide world-leading research base in advanced materials science. University of Manchester -Manchester Engineering Campus Development: £350 capital investment from the University of Manchester which is due to open in 2020. It will bring tighter research, teaching, expertise and facilities of four schools and two research institutes into a single engineering campus, along with space to host industrial partners (78,000m2 floor space, 1,300 staff members, 6,750 students).

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Manchester Metropolitan University – Cheshire 3D Print Hub Planned new £6m facility to enable the implementation of advanced digital technologies in design, manufacture (3D printing/additive and advanced manufacturing) and service support. It will be located between Altrincham and Knutsford and close to Manchester Airport and the Science Corridor.

Greater Manchester Institute of Technology (IOT) – The Greater Manchester Combined Authority (GMCA) has applied for IOT status to create a new Institute of Technology (IoTs) to achieve a step-change in provision of technical education in STEM subjects at levels 3, 4 and 5. IoTs are tasked with meeting local economic needs for higher technical STEM skills by strengthening and growing provision to fill gaps in the market.

Nationally, a Food and Drink Sector Deal is currently being developed by the Food and Drink Federation (FDF) with BEIS9 and DEFRA10. A key focus is enabling SME access to key demonstrator sites for automation and process innovation. The FDF is currently working with the Manufacturing Technology Centre (Catapult) in Coventry, Sheffield Hallam University and the University of Lincoln which houses a demonstrator for use by manufacturing SMEs.

High Value Manufacturing Catapult (HVM)

The scaled Industry 4.0 demonstrator hubs are designed to be the first rung of an innovation conveyor belt that seeks to convert the vast majority of small manufacturers who are more hesitant about employing new technologies, and turn them into ‘born again’ adepts. Once converted, they can be supported to progress to heavier automation and robotics. This integrated approach is designed to complement and support the objectives of the Made Smarter National Adoption Programme being piloted in the North West and provide an increased pipeline of SMEs working with the High Value Manufacturing (HVM) Catapult Network.

The HVM Catapult combines seven world class centres of industrial innovation into one cohesive force to scale up the best manufacturing innovations and commercialise them to create world beaters. The network includes the Manufacturing Technology Centre (Coventry), the Advanced Manufacturing Research Centre (Sheffield), Advanced Forming Research Centre (Strathclyde), Centre for Process Innovation (Redcar) National Composites Centre (Bristol) Nuclear AMRC (Rotherham) WMG Catapult (Coventry).

Barriers to adoption To achieve higher levels of adoption by SMEs, digitalisation through Industry 4.0 needs to adopt a bottom-up approach instead of top-down. Too many SMEs have little or no understanding of what these new technologies are, and how they can benefit from them. Research by the Engineering Employers Federation found that 56% of UK manufacturing respondents had little or no understanding of Industry 4.0 and 67% have no strategy in place. Turning the situation around therefore requires a fresh innovative approach, that puts SMEs at the heart of the design and solutions process. Digital transformation of manufacturing can seem daunting, expensive and possibly irrelevant to SMEs, who see larger manufacturers who have the resources to deploy the latest Industry 4.0 technologies, taking centre stage. Although interesting to SMEs, many do not see digital manufacturing technologies as being a part of their immediate future or within their reach. So, enthusiasm declines, and focus is returned to the task in-hand. Amongst the top deterrents to leveraging industrial digitalisation technologies (IDTs) is a lack of knowledge about available solutions; a perceived high cost of implementation and uncertainty about what the benefits are. Another often cited issue is cybersecurity. 9 Dept for Business, Energy and Industrial Strategy 10 Dept for Environment Food and Rural Affairs

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Made Smarter for Under £1000

The AMRC set about putting together two low cost demonstrators to show that for just a few hundred pounds, SMEs can retrofit or make simple adaptations to their existing legacy machines to embed digital technologies. Put simply, the AMRC team found that SMEs were happy to pay about £3-4k for overall implementation to get started on their industrial digitalisation journey. An ‘Industry 4.0 for £4k’ price point allowed SMEs to see a return on their investment. Solutions costing under £1k generated an immediate yes! In summary, increasing the provision of low-cost demonstrations is therefore critical for speeding up greater adoption and deployment of Industry 4.0 technologies by SMEs.

New manufacturing insights What companies told us We consulted with a wide range of manufacturing companies in Manchester and the wider North West region to get a snap shot of the state of the manufacturing sector as seen through the eyes of business leaders, owners and managers from a variety of sectors and company sizes.

The study which took place between January and May 2018, consulted with around 140 businesses, trade associations and public agencies to gain their perspectives on what could be done to encourage non adopters to embrace Industry 4.0 technologies. Our ambition was to obtain fresh insights on the manufacturing landscape in the North West, understand priority needs and co-design a best fit solution with industry, academia and other partners. The main findings from the survey showed that 84% of SMEs felt cost was the biggest barrier to adoption, 80% cited skills shortages and 90% said workforce upskilling/reskilling was a priority.

As part of our work, we also looked at the important characteristics of early adopters. Psychological studies show innovation to be a function of one’s connectedness to others who are also innovative. Diffusion and adoption of digital manufacturing technologies by SMEs follows the familiar bell-shaped curve led by early adopters. However, it is possible to speed up the adoption and deployment process. Highlights of the respondent profile:

• More than 75% of respondents were owner managers or directors of SMEs • Manufacturing, engineering and technology suppliers are represented in the survey but the

majority of respondents are from manufacturing (54)% • The respondents who participated in the survey came from automotive suppliers, engineering

consultancies, , food & drink primes and SMEs, mechanical engineering, industrial automation, plastics and packaging manufacturers, software, transport and logistics.

• Autmotive supply chains have a greater awareness or exposure to these new technologies.

Low cost industrial digitalisation technologies have now become a big area of focus. In their White Paper, Digitalisation of Legacy Machine Tools, the Advanced Manufacturing Research Centre highlighted the current dearth of demonstrator facilities relevant to the scale of the challenges that SME businesses faced. Existing facilities had a high price point, required highly skilled staff to operate them so therefore favoured large manufacturing primes and OEMs.

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The survey’s key findings are:

• While 60% of respondents reported having a clear understanding of Industry 4.0 technologies were and what it means for their business, cost was identified as a significant barrier by 84%

• 90% of those surveyed agreed or strongly agreed that there should be training for existing staff to embrace Industry 4.0 as they have the existing knowledge of their products and processes

• The shortage of skilled technicians and engineers was cited as another barrier to adoption by 80%

• Data management and cyber security was a concern for 54% of all respondents . • 60% of them felt that business support and advice was too fragmented, and wanted to see

greater connectivity between the various centres of excellence such as the Hartree Centre and LCR4.0 and a central point of connection to make it easier for SMEs to access the right support at point of need.

• Just over half of those surveyed (54%) thought there was a lack of effectice leadership to support diffusion of these new technologies.

Other key challenges

Business support organisations, engineering consultancies and university team that work with SMEs were keen to point out that Industry 4.0 technologies are not always the solution for improving business performance and boosting productivity. Small adaptations to legacy systems can deliver can also deliver significant productivity improvements.

What SMEs want are opportunities to test out and get hands on with these new technologies to de-risk the process of adoption and enable them to decide for themselves which are the most appropriate for their businesses, and if and when appropriate, the most cost-effective way to integrate these new technologies with their legacy systems.

Big technology firms like Siemens who are at the cutting edge of expertise in industrial digitalization technologies typically only work with companies employing more than 500 people. There is therefore a sizeable gap in the market for consultancies who can and want to work with SMEs to adopt and deploy digital industrialisation technologies to improve business performance.

Engineering consultancies working with SMEs also reported that companies often lack the business acumen to spread their risk, and grow diverse revenue streams. Many SMEs are also unaware that they can use R&D tax credits to offset the cost of adoption and deployment of new technologies within their business. This should be a particular focus for awareness raising.

Some SMEs lack leadership, vision and business planning skills to support innovation. Bosses of SMEs therefore need to be equipped with the skills to future-proof their business alongside training in applications of Industry 4.0. Leadership skills for innovation is one of the key areas of focus for the North West pilot

Speeding up the adoption & deployment process

Scaled Demonstrator- Equipment- Skills training- Collaborative Innovation

North West Pilot:- consultancy- leadership training- grant funding

HVM Catapult:- Scale Up-Commercial readiness- IP & Patents

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Characteristics of early adopters

Psychological studies show that human beings tend to be resistant to change until a critical mass is reached – the magic 16%. Adoption of new innovations is led by early adopters and creative visionaries who make up 13.5 % of a population; these individuals share certain important characteristics. According to Everett Rogers’ book, Diffusion of Innovations, innovators and early adopters share important characteristics that differentiate them from later adopter categories. They are:

• younger • better educated • more affluent • better connected — read more, information seekers, share new things • extroverts • willing to take risks

Psychological studies show innovation to be a function of one’s connectedness to others who are also innovative. Diffusion and adoption of IDTs by SMEs follows the familiar bell-shaped curve as adoption sequentially spreads through a marketplace, led by early adopters.

Coaxing late adopters

The good news however is that it is possible to speed adoption and deployment by late adopters through implementing a number of enabling interventions. Adoption is a personal state of mind —but it’s also a function of your connectedness to other people. The more connected businesses are to those who are more innovative, such as incubator spaces, the earlier they’ll adopt an innovation. Being part of a supportive ecosystem where learning and experiences are shared, combined with a feeling of we are ‘in it together’, makes individuals more willing to try out new things. One of the other key motivating factors is competitive advantage gains - how much better will this make the product than those of competitors. Obviously the greater the competitive advantage a product has over existing products, the easier adoption will be. Key considerations include: -

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• compatibility — how well does the technology fit with the manufacturers expertise and production capabilities. Late adopters tend to be more nervous of change so small incremental step changes that can deliver quick wins will make adoption easier. So, if the manufacturing SME can for instance update legacy systems cheaply such as the fitting of sensors and see their productivity improve, they’re more likely to continue on the path to heavier automation and robotics.

• complexity — how difficult is it to learn to use the technology. Making technological learning easy (even intuitive) greatly speeds adoption. E.g. controlling automation processes using Apple iPads will create great user experiences

• trialability — can SMEs reduce their risk by trying out the technology before buying. Giving business owners and their staff the opportunity to tinker and get hands on with the latest equipment and IDTS will speed adoption.

• observability — seeing other businesses using the technology and reaping the productivity benefits.

Other enablers of adoption include:

• Communicating the message – tailored to where businesses are in the adoption and deployment process.

• Enlist innovators and early adopters as brand ambassadors. These ‘evangelists’ are the best bet for spreading the IDT message.

• Relevant Case Studies – Sharing of personal journeys and success stories of SME manufacturers who’ve adopted IDTs and are happy to wax lyrically about the measurable business benefits they’ve achieved which have impacted the bottom line and delivered growth.

• SME Conference/Exhibitions – Regional Industry 4.0 Conference and events especially for SME manufacturers to keep updated on the latest innovations which are relevant for them.

• Customised Solutions – Universities and independent consultants working with SME manufacturers to design customised solutions that are low cost, effective and reliable.

Bridging the divide Gaps in North West innovation ecosystem

Food, drink and packaging manufacturing were the sectors most dissatisfied with the lack of innovation assets in the North West that addressed their specific needs. They cited the sizeable innovation assets which have been established at Daresbury Sci-Tech and at Salmesbury to support the automotive and aerospace sectors which combined are smaller than the food & drink sector.

There are calls to set up a food & drink group for the North West – Manchester and Liverpool have never had a food group – to give them a strong collective voice so the sector can get the attention and investment it deserves.

Current market failures were perceived to be around about:-

• De-risking the innovation process: Giving SMEs access to a range of affordable industrial digitalisation equipment and technologies that they can try out, play with and use themselves.

• Independent advisors: Increasing the number of trusted advisors and engineering consultancies who are sensitive to the needs of SMEs, and can give advice about what IDT solutions are available and which are appropriate for each individual business to adopt based on their specific needs and objectives.

• Legacy Systems Integration: Help with integrating legacy systems with new technologies to boost productivity and drive innovation within the business.

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• Smarter Adaptable Supply Chains: Package of interventions to support SMEs to become more adaptable, flexible and better able to respond to market changes by diversifying into, and servicing other related sectors. Example automotive suppliers manufacturing components/products for the rail or food industries.

• Higher level skills training: Combination of Level 5 – 7 Degree Apprenticeships to grow the pipeline of higher spec engineers and technicians that are needed, in addition to CPD workshops, and e-learning programmes to grow the skills, knowledge and competences of senior managers and business owners which are delivered in a way that they can fit around their busy schedules. • Low Volume Production: There is a lack of provision for small-batch production within the

Greater Manchester area. This is a critical issue to scaling up as manufacturing SMEs typically do not have the capital equipment to produce even small batches of their products for sale to customers. They need access to a network of experts, equipment and other manufacturers and their capabilities to identify and collaborate with them in the early stages to achieve their production goals.

• Collaborative R&D Spaces: Manufacturing SMEs and entrepreneurs desire spaces to connect, innovate, and collaborate with complementary businesses and universities. Current innovation assets in the city region under-prioritize the value of shared spaces for sparking new innovations through the sharing of ideas, knowledge and expertise.

• Limitations of Knowledge Transfer Partnership (KTP): KTPs work very well for more established SMEs who have in excess of £20k to invest in collaborating with universities around R&D Commercialization: Finding this level of investment is extremely difficult for most micro businesses, who make up over 85% of manufacturing businesses in Greater Manchester. Many pointed to a lack of enthusiasm among Manchester’s major research institutions to engage with them to conduct research into new product/service development that the company wants and needs. Another key constraint is that projects will only be undertaken if they are of personal interest to research students. The application process can also take up to 8 months to conclude.

• Business Support/Innovation Support: Businesses wanted to see greater connectivity between the various innovation assets to make it easier for SMEs to navigate the huge plethora of often disjointed or poorly signposted provision.

• Raising Capital: Obtaining capital will be the single biggest obstacles for many manufacturing SMEs wishing to adopt and deploy new Industry 4.0 technologies— the ability to attract investment funding is a major challenge and one of the biggest barriers to transitioning to smart technologies.

Models for advanced manufacturing hubs

The term “ecosystem” is a biological term, but it is used in business to describe the web of interdependent relationships that are necessary for the seeding and growth of new ideas, products and ventures.

There are three distinct but partially overlapping models for advanced manufacturing innovation, which are typically used by digital innovation hubs to support the adoption and deployment of new technologies by manufacturing ecosystems. They are outlined in the table below.

Advanced Manufacturing Incubator Primary Models

R & D Spinoff New Product Development Small Scale Fabrication

Supporting Institutions

University or research institute

Corporate sponsors, university extensions, local government

Corporate sponsorship Non-profit affiliate

Focus Commercialisation of research and/or new technology

Development or new products based on existing technology

Expansion of production and marketing

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Tenant/member profile

Academic researchers, seasoned entrepreneurs, engineers/designers

Engineers/designers, startups with high growth potential

SMEs, prototyping by primes and OEMs

Typical Legal Structure

Not-for profit (independent or university)

Not-for-profit or for-profit Not-for-profit

Local example Salford University Robotics Centre

3M Buckley Centre Manchester Food Research Centre

All companies go through various phases of development, from initial concept through to business planning and market validation to growth. Each of the innovation models above tend to be targeted at university startups, more established SMEs and large corporates:

• R&D Spinoff catapults to provide services to companies from the concept stage to commercialisation. A critical component of such innovation hubs is collaboration with researchers at R&D facilities or universities that are dedicated to commercializing research or new technologies. These can be tailored to meet the needs of SMEs.

• New Product Development Incubators accommodate companies that are developing a concept, refining their product through prototype development and securing financing. Entrepreneurs using these type of incubation spaces typically need access to specialized equipment to develop prototypes and eventually, once the prototype is refined, access to contract manufacturers that would be willing to do small-batch production.

• Small Scale Fabrication Facilities, on the other hand, do not typically provide assistance to businesses at the concept or planning stage, but focus instead on companies that are validating their product and entering the growth stage.

While most incubators and innovation hubs provide a common set of business support services regardless of model, each model provides more specialized services tailored to the needs of its target entrepreneurs. The typical set of services and advantages offered by each model are outlined in the table and briefly described below.

R&D Spinoff New Product Development

Small Scale Fabrication

Collaboration between Entrepreneurs x x o Business/Legal/Marketing Assistance 0 o x Flexible Lease Structure 0 x x Mentorship 0 x 0 Customizable Space 0 x x Shared Equipment 0 x x Engineering/Design Assistance x x 0 Funding/Financing x x 0 Investor Introductions x x No Employee Training Resources No No No Supply Chain/ Export assistance o x o Access to latest technology/Research x x 0

X = Yes; O = Sometimes/relationship with partner organisation

There was skepticism by leaders of innovation assets in the North West region as to whether a large-scale digital manufacturing demonstrator focused on SMEs could become sustainable. To be sustainable, many admitted to having to work with large primes, OEMs and medium sized enterprises who were cash rich.

However, the 3M Buckley Innovation Centre (3M BIC) in Huddersfield has managed to do just that. 3MBIC specializes in supporting SMEs to adopt and deploy new industry 4.0 technologies and in just three years has become self-sustaining. The centre now generates nearly £700k pa through a

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combination of rental, events, network membership (£350 per annum for SMES, £500 pa for professional consultancies) and provision of rapid prototyping & other technology services.

Led by Prof Liz Towns-Andrews, the 3M BIC model developed from her intimate knowledge of what worked and didn’t work for supporting SME innovation during her time at the Science Technology and Facilities Council and Sci-Tech Daresbury.

The 3M BIC model was blended with the pioneering work of Salford University’s Centre for Robotics and Autonomous Systems led by Prof Samia Nefti-Meziani, which works very closely with food, packaging, aerospace and nuclear supply chains, especially SMEs to deliver proof of concept and innovative low-cost robotics solutions.

In 2007 Salford University hosted the North West Centre for Food Robotics and Automation and hosted it for five years. This centre of excellence provided practical and research expertise to assist food and drink companies in the North of England to improve efficiency and reduce costs by adopting low cost and innovative automation solutions. The centre provided independent practical advice through automation audits highlighting where robotics and automation could provide benefit. It also produced individual design solutions to specific automation problems, and organised workshops and seminars focusing on automation issues and challenges. The greatest success of the centre was in raising awareness amongst food manufacturers of what robotics and automation could achieve. It allowed SMEs particularly, who were often unaware of or lacked the confidence to explore robotics and automation, to invest in and benefit from the technology. Case Study 1 – Strawberry pullet lid application

Case Study 2 – Automated Sandwich Assembly

A food manufacturer was struggling to find sufficient seasonal staff to place lids on strawberry punnets. They thought robots were probably the answer. Initial trials by the University of Salford showed that although robots could perform the task, the most cost-effective solution was a low-cost automated system. The University provided a proof of concept demonstrator which outperformed both humans (30 per minute), robot (15-20 per minute) delivering 100 per minute and cost less than £1500. A robot-based solution would have cost tens of thousands of pounds.

Faced with persistent problems in recruiting and retaining staff, a sandwich manufacturer wanted to explore the use of robots to sustain production quotas. An off-the-shelf robotic solution that could have done the job was prohibitively expensive. Whilst robots were initially trialled by Salford University, low cost innovative mechanisms were developed which provided a much more cost-effective solution to continue to make 50 sandwiches per hour but with fewer people. The proof of concept demonstrator was tested within a factory environment and then taken forward by the industrial partners to commercialise the machine.

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Scaled demonstrator framework model

Coaxing and nurturing manufacturing SMEs to adopt and deploy Industry 4.0 technologies requires a supportive ecosystem developed around the core manufacturing assets of a locality, with strong partnerships and linkages between academia, workforce organizations, investment/funding providers, trade associations, and other private and public sector bodies.

A framework and commercial model have been co-designed to create a new breed of multi-use digital manufacturing demonstrators co-located with a skills training facility. The model builds upon the success of SME innovation programmes at Salford and Huddersfield Universities which are proven to work in removing barriers to adoption through the design of low-cost automated solutions capable of delivering quick wins and long-term productivity improvements.

The need to develop solutions which aim to provide beneficial, low cost entry points for Industry 4.0 capability in SMEs starting at equipment costs of around £4k is necessary to challenge the ‘unaffordability’ perception. Affordable solutions are vital for demonstrating that Industry 4.0 technologies are not just the preserve of larger manufacturers but can deliver productivity improvements for any size of business. Catchy slogans such as ‘Industry 4 for £4k’ could be employed to communicate this message.

Access to affordable technologies and solutions costing less than £4k for making things smarter, faster and more profitably will undoubtedly help to attract SMEs who are more cautious, and get them hooked on Industry 4.0 technologies.

The target companies are 11small and 12micro businesses who don’t know where to start and have limited budgets. For instance, you can retrofit sensors to legacy machinery to capture real-time data in order to detect bottle necks to improve efficiency and productivity for less than £1500.

Scaled demonstrator hubs are designed to be the first rung of an innovation conveyor belt that seeks to convert the vast majority of small manufacturers who are more hesitant and uncertain about embracing new technologies, and turn them into ‘born again’ adepts who can then be supported to progress to heavier automation and robotics. This approach is designed to complement and support the objectives of the Made Smarter National Adoption Programme being piloted in the North West, as well as providing an increased pipeline of SMEs working with the High Value Manufacturing Catapult Network which has seven centres around the UK.

These ‘entry level’ digital manufacturing demonstrator hubs would serve three core function to strengthen the manufacturing ecosystem within a locality:

4) Technology – a large-scale demonstrator for testing and demonstration of new applied industrial technologies that SMEs can access, learn on and use. The emphasis should be on provision of a generic range of digital manufacturing technologies that cut across a number of engineering and manufacturing sectors, but with a ‘local twist’ based on strengths within localities. Selection criteria will be employed for deciding which technologies to adopt and deploy leveraging the manufacturing strengths of an individual locality to drive economic growth. For each area it would focus on: -

o What we’re good at and where there are market growth opportunities o How to draw knowledge across from different sectors to strengthen the manufacturing

ecosystem and the resilience of SMEs o Source the best fit cross sectorial industrial digitalisation technologies

5) Workforce development and skills training in the latest digital manufacturing technologies.

Co-location with a skills development facility offering Level 5-7 degree apprenticeships and

11 Less than 50 employees 12 Less than 10 employees

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workforce upskilling and reskillling trainng to grow the pool of ‘high spec, high tech’ engineers and technicians that are needed.

6) Innovation – facilitating an ecosystem of Primes, SMEs, technology suppliers engaged in collborative R&D projects with universities to drive manufacturing innovations, shared technology transfer, quality systems and smarter supply chains.

Businesses told us that a co-located hub which did these three things, would make it simpler and easier for them to access the range of support they wanted and needed. Provision of skills training on its own without the investment in world class equipment would just maintain the current status i.e. an acute shortage of higher skilled technicians and engineers. Conversely, a demonstrator on its own would give companies access to the latest cutting-edge equipment and technologies, but not the skilled workforce they would need to successfully embed and support the deployment of digital manufacturing technologies within their businesses.

The model is a generic blue print which could be rolled out nationally. Industrial digitalization technologies present a massive opportunity to reverse the past decade of decline of many industrial towns and heartlands. Legacy sectors such as precision engineering and textiles could be reinvigorated through digital transformation and integration of production lines. Removing the perceived cost barriers, and creating a space where SMEs can tinker with new technologies and get involved in collaborative innovation with others will:

• Boost their productivity and export potential; • Contribute to creating new, higher-paid, higher-skilled jobs • Build their capacity to create new value streams and join supply chains for big end users; • Repurpose UK manufacturers operating in declining sectors to fill acute supply chain shortages

in other fast growth sectors to safeguard jobs and put them back on the path to profits. The model we’ve developed is designed to achieve: -

• More rapid adoption of IDTs by SMEs, and across the supply chains of big end users, through the creation of a scaleable demonstrator hub which will act as showcase smart factory equipped with a range of different technologies that SMEs can tinker with and get hands on. It will provide a more visible cross sectorial space for collaborative innovation between manufacturers of all sizes, academia and technology suppliers and also catalyse an effective ecosystem.

• Build the next generation of cross-sectorial supply chains who can service big end users • Drive technology transfer from one sector to another and promote cross sectorial translation of

solutions between SMES. • Accelerate the commercialisation of new products and services. • Grow the talent pool of higher skilled engineers and technicians needed through the provision

of Level 5-7 degree apprenticeships.

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Cost model Financial assistance will be needed to cover the capital cost of creating these new entry level demonstrators which are co-located with a skills training facility to provide the most complete solution. Current estimates put the cost in the region of £15 million. The funding model has been designed to support the long-term purpose of these new digital manufacturing hubs which will become the ‘go to’ place and one stop shop for manufacturers of any size, but with a special focus on supporting micro and for small manufacturers to scale up. The proposed balance is 50% public (‘Core Grant’ only), 25% collaborative R&D and 25% commercial funding expectations. The operational costs for the first three years will be £5 million per annum. Part of core public funding could also come from the devolved governments of city regions like Greater Manchester.

Given the emphasis on higher level skills training to grow the skilled engineers and technicians which will be needed, there may be scope for repurposing the £1.3bn of unspent apprenticeship levy funds into this new type of multi –purpose advanced manufacturing demonstrator. Furthermore, large manufacturers and primes are able to allocate 25% of their apprenticeship levy to capacity build their supply chains. This funding pipeline is largely untapped.

A focused strategy and delivery plan will need to be developed to show clearly how the activities of the hub will address the stated market failures and in so doing drive local economic benefits, and maintain alignment with, and execute against core criteria and objectives measure by an agreed number of KPIs.

These digital manufacturing hubs co-located with a skills facility will be able to generate substantial commercial income in a variety of ways including delivery of degree apprenticeships aligned to new trailblazer standards, workforce upskilling/reskilling programmes, rental of business incubation spaces, prototyping services, collaborative R&D projects, membership fees and staging of events/conferences. For example, each hub should seek to train 100 x apprentices per year costed @ £27k pa. This alone will generate £2.7 million of revenue per annum.

The hubs would also generate income through securing R&D funding, capacity building of supply chains for primes to overcome manufacturing challenges and technical skills shortages. The hubs could also be subcontracted by the HVM catapult network to enhance their SME service provision.

To ensure good governance, each hub would be established through the setting up of a holding company managed by a board made up of local/regional organisations, industry, and training and academic orgs. KPI-based performance management systems will be at the heart of the evaluation and monitoring of the organisation to ensure they remain aligned with the proposed funding model.

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Greater Manchester application – Manufacturing City The first industrial revolution started here in Manchester and it has a number of strengths to become a leader of the next one through the creation of Manufacturing City demonstrator based on the model proposed in this feasibility study.

Overlaying the model to the specific context of Greater Manchester’s manufacturing base, and taking a strength in places approach, the food, drink and packaging sectors emerged at the ones who are currently under served by existing innovation assets, but where digital transformation could deliver massive growth and export potential.

Manufacturing City will contribute to the City Region’s local industrial strategy. For the Manchester City region, the focus will be the Food, Drink and Packaging sector but will also build and generate cross sectorial supply chains which are adaptable and more resilient, working with rail, advanced textiles and digital and creative sectors.

The food and drink industry is the UK’s largest manufacturing sector, contributing £28.2billion to the economy annually and employing 400,000 people. It is a key part of the UK’s £110 billion 'farm to fork' food chain. In 2016 the food and drink exports were worth £20bn, and is expected to increase by a further £6bn by 202013.

The North West Region is the largest food and drink manufacturing region and Greater Manchester has a higher concentration of food, drink and packaging companies than the rest of the region, with a high proportion of Primes based within Wigan, Manchester and Bolton. Wigan also has the highest concentration of packaging companies.

The productivity of the UK packaging sector is more than double that of all industries’ average performance. The sector turns over £11bn pa and is a world leader in product innovation and manufacturing technology. Packaging at end of life (so called packaging waste) represents a massive new business opportunity in terms of recycling and recovery that Manchester would be well placed to exploit.

Skills shortages are one of the biggest challenges for the food and drink manufacturing sector – and will become more acute post Brexit. The National Skills Academy for Food and Drink Manufacturing has repeatedly identified the need for greater training and provision of skilled technicians and professionals to counteract the effect of skills loss due to an ageing workforce, Brexit and lack of higher-level skills.

Decades of under investment and an ageing workforce means the opportunities to hire and recruit young people are huge. According to the Food and Drink Federation, the sector will need to employ 140,000 new recruits by 2024 to feed an expected population of 70 million and meet domestic market demands.

One of the biggest challenges for the food, drink and packaging manufacturing sectors in Greater Manchester is the lack of work-based manufacturing training facilities across the City region for apprenticeship training and workforce upskilling/reskilling. The food and drink sector has developed its own trailblazer standards at Level 3, 5 and 6 but local colleges struggle to teach the Level 3 practical skills required.

Large primes such as Heineken, McVities and Heinz currently have to send their apprentices to Liverpool and Birmingham to receive the standard of technical training that the food and drink manufacturing sector requires. This is because Greater Manchester colleges lack investment for the type of high-tech equipment that the industry requires their apprentices to be trained on. The colleges also struggle to recruit skilled lecturers, trainers and end point assessors with the relevant industry background to inspire the confidence of the food and drink manufacturing employers.

13 FDF Economic Contribution Report by Grant Thornton June 2017

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To secure the level of quality engineering training they require, primes in the Manchester City region are having to engage directly with companies like Siemens and Festos. The problem has become so bad, that the primes have started to invest in supporting training organisations like the North West Training Council with equipment and know-how. There is willingness on the part of these primes to capacity build the Greater Manchester Learning Provider Network so that their training needs can be met within the City Region in the future.

Another proposal for tackling the shortage of lecturers who have the relevant industry skills is to attract and upskill experienced industry engineers who are close to retirement, and retrain them to become trainers for apprentices and college lecturers too! These retired engineers would work alongside leading technology partners on a part time or short-term contract basis.

The specific scaled demonstrator model for Greater Manchester would look like this:

One of the biggest gaps in the market for the food & drink sector is small production kitchen facilities for small manufacturers to scale up production and transition into medium sized businesses; the minimum order for supermarkets is 75,000. Bringing the packaging sector into that ecosystem so they would work collaboratively with food & drink companies on new innovations would be an added bonus.

Location

There is strong support for the creation of an M62 corridor linking Manufacturing City which would be based at Salford University, with centres of excellence in Liverpool, Huddersfield, the Leeds City Region and on into Hull. This would facilitate a truly connected Northern Powerhouse of manufacturing innovation to grow and sustain smarter and more resilient supply chains.

Salford University is the ideal location. It is based just off the M62 motorway which connects the northern industrial cities of Liverpool, Manchester and Leeds. The A580 East Lancs Road which runs through Salford connects Wigan, Bolton and Merseyside too. The university which is home to the Centre for Advanced Robotics and Autonomous Systems, is next door to Salford Crescent railway stations which is the major hub for rail services in the North West. Locating the facility at Salford provides good connectivity with industrial towns like Oldham and Rochdale and also into West and South Yorkshire where many supply chains are based. Manufacturing City is a good fit for Salford. The Council and the University have collaborated in the development of the University of Salford and Crescent Masterplan for which they are currently recruiting a developer. A major part of the vision of the £800 million Masterplan is the creation of a new industrial innovation district which will become a major employment area and benefit from its close proximity to the University Campus.

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The Masterplan will pave the way for the creation of new high-quality and much larger, flexible buildings, which respond to the market needs of industry and process driven markets. It will meet the growing demand for high quality incubation and enterprise space to support businesses and industry start-ups and SME’s.

The model of a demonstrator co-located with a skills training facility in Salford has received enthusiastic pledges of support and backing of major primes in the Manchester City region such as Heinz, McVities, Heineken and Kelloggs to name a few.

Impact assessment

The potential economic impact that Manufacturing City would have on the economy of Greater Manchester was assessed by analysing the effects of similar type developments and extrapolating relevant data to form the most accurate picture.

The comparison sites chosen were the Advanced Manufacturing Research Centre (AMRC)in Sheffield and Salford’s Media City. The Kada Research Centre (2016) concluded that the AMRC project led to 1,232 net new jobs, including 812 operational net jobs and 429 net construction jobs. The Gross Value Added (GVA) of the project was £228m, and the AMRC was credited with attracting high profile investment, such as the £20m McLaren manufacturing facility and the £110m Rolls-Royce advanced blade casting facility.

Salford’s Media City has experienced the highest rate of growth in creative employment in the North West, with a 101% increase from 2009 and 2015, and a 75% increase in digital employment over the same time-period. Moreover, in an economic forecast for Greater Manchester, Oxford Economics (2017) are predicting that the GVA of the creative and digital industry will be £2,977m (2.9% growth) with another 3,600 jobs by 2034.

Furthermore, the report found that the creation of a cluster in Media City UK led to a reduction in barriers for collaboration with smaller independent digital agencies, an improvement in the quality of output from smaller firms as a result of collaboration with the BBC, and an increase in the flow of talent to the area.

The ONS multiplier data shows that the food and drink sector scores highly in terms of the potential for economic spill-over effects compared to other parts of the economy. This not only supports the notion that investment in new facilities can help to rebalance the economy of Greater Manchester if located North of the city centre, but also that the sector is one in which the potential for cluster effects are high, sitting as a key driver of output in agriculture, retail, hospitality, logistics and other sectors.

The shift-share analysis conducted by Greater Manchester Chamber of Commerce supports the case for locating new investment in the North of Greater Manchester, as areas like Wigan, Bolton, Oldham and Rochdale have all outperformed the national average in terms of food and drink employment growth. These areas look to be solid foundations for the creation of a food and drink cluster, providing an opportunity to capitalise on the existing rapid-paced development of the sector.

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The Made Smarter Review which estimates that the food and drink industry could add an additional £55bn to the economy over the next decade through improved digitalization alone. Greater Manchester and the North West accounts for 11% of food and drink GVA.

This combined with the known impacts of similar tech hubs, such as Media City in Salford and the AMRC in Sheffield, means we can confidently predict that the establishment of Manufacturing City, with a special focus on food, drink and packaging manufacturing would contribute an additional £6bn for Manchester and the North West region.

Inclusive growth

JRF Research14 shows the trickle-down growth from shiny new high-tech innovation assets is unlikely to deliver the more and better jobs needed to lift more people out of poverty unless diversity and inclusion is embedded into the DNA of economic strategies and models. The manufacturing sector is not seizing the competitive advantage opportunities of gender and ethnic diversity in the workforce15.

The Joseph Rowntree Trust estimates the More and Better Jobs Gap in the UK’s major cities – the number of people in the workforce who don’t have a good quality job – at 5.3 million people. This is equivalent to the combined working age population of the West Midlands, Greater Manchester, Liverpool City Region and Tees Valley.

Manchester ranks 215 out of 324 local authority areas in Grant Thornton’s Vibrant Economy Index. The Index is based on an area’s average ranking across six baskets of indicators, with each basket corresponding to one of the six components of sustainable and inclusive growth. Although Manchester ranks in the top 20% nationally for prosperity and dynamism & opportunity., socially the city faces a number of challenges.

Manchester ranks in the bottom 20% nationally for inclusion & equality (which includes indicators such as employment rates, child poverty and homelessness) and health, happiness and wellbeing. Just under a fifth of the workforce earns less than the living wage – that’s just over 0.5 million. This affects people not only in their pay, but in terms of social mobility, work opportunities and life chances. In headline terms, only two areas in Greater Manchester –Trafford and Stockport – rank above the national average.

The new Greater Manchester Strategy called ‘Our People, Our Place aims to address these social inequalities. The challenge for this ambitious city region, which is undergoing rapid economic growth is to ensure that technological advancements and innovation assets are fused with culture, ethics, communities and places to build a modern and prosperous Greater Manchester where everyone benefits and no-one is left behind.

14 Joseph Rowntree Foundation Cities Growth and Poverty Research Programme 15 Greater Manchester Manufacturing Strategy 2015

-1500-1000

-5000

500100015002000

Bolton

Bury

Manch

ester

Oldham

Rochdale

Salfo

rd

Stockp

ort

Tamesid

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Traffo

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Food & Drink Employment Shift-share 2009-2015

Job Change Expected Change Local Competitive Effect

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Conclusions The creation of a new breed of advanced manufacturing demonstator which is co-located with a skills facility in the Manchester City Region, gives SMEs access to low cost digitalisation technologies and grows the highly skilled workforce that is needed, will be effective in removing the barriers to adoption and deployment of Industry 4.0 technologies.

This multi-purpose demonstrator model was co-designed with a range of partners, including small and medium sized manufacturing companies who stand to benefit the most from making things smarter, faster and more profitably.

The framework model for a digital manufacturing demonstrator focused on affordable Industry 4.0 technologies is a generic blue print which could be rolled out nationally. The model builds and expands upon best practice SME innovation programmes run in the North of England by Huddersfield and Salford Universities who’ve worked successfully with micro and small businesses to design innovative low-cost automation solutions that significantly improve productivity.

The following actions are recommended:

1. Develop the business case for implementing this proposed demonstrator solution in the Manchester area, at one or more locations depending on needs and the levels of industry co-investment obtained.

2. Evaluate the evidence obtained in this study for its relevance in helping optimise the implementation of the NW Pilot of the Made Smarter Review. The relevance of the proposed demonstrator model to the implementation plans for the £121m Made Smarter Industrial Strategy Challenge Fund Programme announced in the October 2018 budget should also be considered.

3. Consideration to be given for adoption of the proposed demonstrator model by relevant authorities elsewhere in the UK, including City and Local Regions, High Value Manufacturing Catapult and other local, regional and national organisations pursuing the Industry 4.0 Made Smarter agenda.

The model includes creating an ecosystem of collaborative innovation backed by high level skills and degree apprenticeships. Given the emphasis on higher level skills training to grow the skilled engineers and technicians which will be needed, there may be scope for repurposing the £1.3bn of unspent apprenticeship levy funds into this new type of multi –purpose advanced manufacturing demonstrator. 25% of their apprenticeship levy paid by large manufacturing companies and primes can be used to capacity build their supply chains. However, this funding pipeline is still largely untapped.

We have shown through this study that: -

• In the specific case of Greater Manchester, a centre that is focused on leveraging Greater Manchester’s manufacturing strengths in food, drink, packaging and textile sectors will play a crucial role in halting the decline of the manufacturing base in the City region.

• Manufacturing City will create a Northern Powerhouse M62 Corridor of smarter more adaptable supply chains with cross sectorial expertise to build sustainability, connecting industrial towns and cities from Liverppool to Leeds and on into Hull.

• Financial assistance will be needed to cover the capital cost of creating a new digital manufacturing hub which we estimate would be in the region of £15 million. The funding model has been designed to support the long term purpose of this mixed use digital manufacturing demonstrator facility. The proposed balance is 50% public (‘Core Grant’ only), 25% collaborative R&D and 25% commercial funding expectations. The operational costs for the first three years will be £5 million per annum.

• The development has the potential to deliver in in excess of 1000 new higher skilled jobs and generate an additional £6bn of GVA for Manchester and the North West Region.

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Implementation steps for Greater Manchester Greater Manchester has an important opportunity to show that it can turn the rhetoric of the Industrial Strategy and the Made Smarter Review into a reality and succeed in its goals of becoming a UK inspiration and world leading exemplar of inclusive economic growth driven through the application of IDTs. City regions must be at the heart of designing and delivering their own industrial strategies if they are to create the right conditions for inclusive growth, driven by disruptive Industry 4.0 technologies where everyone does benefit.

Experience shows however that the trickle-down effect of high tech innovation assets within the Manchester City Region, have so far failed to deliver improved prosperity for all its residents. Greater Manchester’s manufacturing sector is currently not seizing the competitive advantage opportunities of gender and ethnic diversity in the workforce.

Civic leaders can leverage the Public Sector Equality Duty, investment funding and procurement to deliver real equality of opportunity for under-represented groups, drawing people from the widest possible pool, so that they too can flourish, progress and succeed.

There are several key steps that need to be taken to progress the project to the next stage. They include: -

1. Developing the business case for implementing this proposed demonstrator solution in the Manchester area, at one or more locations depending on needs and the levels of industry co-investment obtained. This will involve skills mapping across companies in addition to understanding the gaps in Greater Manchester college provision, and the investment and interventions needed to meet the needs of industry.

2. Agree equipment specifications which will support the demonstration of cross-sectorial engineering and manufacturing technologies. In the case of Manufacturing City this will have a food, drink and packaging twist.

3. Identify one or more champions or advocates to provide compelling leadership: The role of these diverse champions is to successfully lobby for the creation of Manufacturing City, and work with the GMCA in engaging key stakeholders and decision makers.

4. Convene stakeholders and local leaders to obtain buy-in for Manufacturing City and agreement on the potential model and design. Convening should be orchestrated via the Metro Mayor’s office, consulting with the broadest range of stakeholders to publicise and establish the legitimacy of this proposed new innovation asset, as well as laying an initial foundation for a network of anchor institutions and investors critical to the success of the project. The input should help to confirm and concretize the type of business model/niche that is needed to sustain large scale impact.

5. Explore financing options including public and private sources of financing

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Appendix List of Stakeholders Consulted

We would like to thank the many individuals and organisations that have contributed to this report. In particular, we would like to thank the following:

Prof Liz Towns-Andrews Stephen Gregory

3M Buckley Innovation Centre

Malcolm Harold 4 Manufacturing Rab Scott Advanced Manufacturing Research Centre Mike Westlake Autodesk Geoff Mackey BASF Mick Hadfield Business Growth Hub Stephen Mitchell EEF GM Chamber of Commerce Engineering & Manufacturing Forum Raam Shankar Equitus Ltd Paul Foster Phil McCabe Robert Downes

Federation of Small Businesses

Neil Purdom Food and Drink Federation c/o Princes Group (Bradford) Food Manufacturers Group Sean Anstee GMCA Mo Isap GM LEP William Goulbourn Heinz Chris Dilworth Heinz Prof Sam Turner High Value Manufacturing Catapult Susan Reiblein Independent consultant Robin Wilson Innovate UK Patrick Chetham JEM Pumps Paul Wheeler Kelloggs Louise Jones KTN Katie Gallagher Manchester Digital Colin Rodgers Manchester Food Research Centre Prof Craig Banks Manchester Metropolitan University Chris Pinder McVities David Hilton MIDAS Carol Holden Martina Rodrigues

Northern Automotive Alliance

Rob Woollin National Physical Laboratories Justine Fosh National Skills Academy John Steward New Economy Donna Edwards Alain Dilworth

North West Pilot

Paul Musa North West Training Council Lucy Smith Northern Powerhouse Ian Trow Quad Plus Justin Bentham Bernie Vaudrey

Salford Council

Prof Samia Nefti-Meziani Steve Davis Vera Barren Dr Maria Stukoff

Salford University

Mike Curtis-Rouse Satellite Applications Catapult Dave Bogg Science Technology Facilities Council Andy Hodgson Siemens Lisa Tse Sweet Mandarin David Deakin Wilde Analysis

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Acknowledgements Innovate UK for funding this study

Knowledge Transfer Network for publishing this report

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