EMEA | White Paper
SEPTEMBER 2014
Getting Closer
to the Customer
How consumers and technology are
revolutionising manufacturing
Introduction
Consumer demand, focused on the speed of delivery of customised products, and
technological innovations, are driving the next industrial revolution: the era of mass
customisation. The emergence and adoption of technologies, such as 3D printing,
Collaborative Robots and Big-Data, among others, are impacting on the supply chain
and enabling manufacturers to service their consumers better and faster, and add the
required level of flexibility and efficiency to their manufacturing processes.
Influenced by consumer requirements, these new technologies are no longer nascent;
with costs reducing significantly, the speed of adoption by manufacturers is picking up
pace and as these technologies diffuse, the effects are becoming clearly visible in the
supply chain.
Key Take-Aways
Colliers International has undertaken primary research and surveyed a number of
companies representing a variety of industries, to better understand the challenges
posed by mass customisation, the technologies that are being utilised and the impact
they will have on supply chains and real estate. The key findings from the study are
outlined below:
• Technology - 3D printing, along with cheaper and more versatile robots, such as
Collaborative Robots, will reduce the labour cost per product unit. This will lead to
increased locational flexibility, particularly at the consumer end of the supply chains
where there is less reliance on managing the delivery, production and assembly of
many moving parts.
82%
consider proximity to
customers important
in manufacturing
77%
believe flexibility of the
supply chain is their
main challenge posed by
mass customisation
• Decentralised production - As a result of technological
advances, we expect to see the emergence of a more
decentralised production model which will create more
flexible supply chains and diverse business location decision
making. However, as supply chains become more flexible,
they may become more complex.
• Less warehousing - From a real estate perspective, more
efficient and increasingly digitalised supply chains, together
with technologies like 3D printing, have the potential to
reduce the need for storage space, especially the service parts
segment.
• Reduced production space - Growing automation and
more flexible, less invasive robot machines will impact the
design and configuration of production and warehousing
spaces as less space is required for the same level of output.
Additional cost reducing implications include lower energy
requirements, in terms of heating and lighting, compared to
production chains with higher human labour intensity.
We believe that these trends will also have two broader effects:
• Factories of the world ending - In the longer term, gains in
terms of increased locational flexibility and a focus on speed
of delivery have the potential to alter the global balance
of power in manufacturing. As consequence, emerging
economies might lose their status as the ‘factory of the world’,
and start producing more for themselves – and their growing
domestic markets – and less for the rest of the world.
• Infrastructure hubs important - Globally, increasing
operational flexibility and diminishing labour cost
differentials will also place greater importance on
infrastructure in all its forms, be it physical, digital or
institutional, as a competitive advantage in manufacturing.
Europe has some challenges ahead but also opportunities,
particularly in terms of developing and upgrading port
and railway infrastructure, with the EU recently tripling the
budget for transport infrastructure during the period 2014–
2020, to €26 billion.
HOW IMPORTANT IS PROXIMITY TO
CUSTOMERS IN YOUR MANUFACTURING
PROCESS?
5%
12%
29%
Customised Products Fast!
We are now in what could be defined as the era of product
customisation, where personalised goods are becoming
commonplace. 62% of companies interviewed for this study
offer some degree of product customisation, with 46% offering
customers the opportunity to add personal elements to the
product.
Looking forward, it is clear that supply chains will be
increasingly shaped by consumers, rather than producers.
This has forced manufacturers to rethink their production
systems to enable profitable manufacturing of smaller batches
of customised products at scale. Three words are changing the
rules of the game: Customised Products Fast.
Power To Consumers
Once more, technology is set to be the enabler of change. One
way in which producers and retailers are getting closer to their
customers is by allowing direct input into final product design,
through a variety of platforms such as 3D instant product
configurators and social media. Customisation is also helping
manufacturers differentiate themselves from the competition,
at a time when consumer loyalty is being tested by the ease
with which products can be readily compared and priced by
consumers on the web.
To remain relevant in the customisation race, some companies
are experimenting with new technologies, or leveraging existing
ones, such as 3D and sensor technologies.
Without doubt, technology has a further role to play in product
customisation and re-approaching consumers and retailers/
producers, delivering positive experience for the former and
efficiencies for the latter. 3D will be a key driver of change in this
field.
Launched earlier this year by Artec Group, Shapify
allows consumer to take a 3D scan of themselves
using Kinect sensors. The 3D scan is then used to
manufacture micro-figurine of the person which is
then delivered to the customer’s home in less than
five days.
Very important
Quite important
Not so important
Irrelevant
53%
2
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
Flexible Technologies In The Smart
Factories Of The Future
Keeping pace with growing demand for a greater variety
of personalised products will require more flexibility and
interoperability along the production line. The need to utilise
new hardware and software to minimise efficiency losses and
scale production at profit, will become an increasingly critical
component of this process. Robots will play a growing role
in achieving this. 62% of respondents to our survey consider
robots important in their manufacturing process, with a similar
share (64%) looking to increase automation in the next three
years.
Are You Looking To Increase
Automation In The Next Three Years?
29%
Yes
No
Don’t know - n/a
7%
64%
An aging population, resulting in fewer people of working age,
will require an increase in productivity per worker to sustain
output/production flows. This seemingly unstoppable trend,
coupled with the falling price of robots - it is estimated1 that
the price of automated labour compared to human labour has
fallen by up to 50% since 1990 – will accelerate the adoption of
robots in factories. According to the International Federation
for Robotics, robot installations are expected to increase by 6%
on average per year between 2014 and 2016, about 4% in the
Americas and in Europe, and about 8% in Asia and Australia.
More importantly, new robots are more flexible and
interoperable compared to previous models, which were
designed for mass production assembly lines. These
enhancements will minimise efficiency losses and lead
times, associated with retooling and/or reprogramming
when switching from different variants during the production
process. For example, some products with short life cycles
(e.g. smartphone) which will have the potential for elements
of the product to be highly customised, in most cases are still
assembled by hand because automation is unable to keep pace.
1
Mc Kinsey, 2012
3
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
Co-Robots
“One of the main advantages is the robots’
integrated safety mode. Depending on the
application and compliance with certain
requirements, this means that they can be operated
directly alongside humans without a safety fence.
In contrast to large robots, these smaller UR
models are ideal for applications in small and
medium production plants with limited space”
Traditionally, the automotive and pharmaceutical verticals have
been two of the most robot-intensive industries, at the forefront
of manufacturing technology experimentation. However, in the
future, technical improvements and falling technology costs
will lead to the increased use of robots in general industry.
Collaborative Robots (Co-Robots), cheaper, more flexible and
able to work alongside humans, will gain ground, particularly in
small and medium sized companies (SMEs).
Impact On SMEs
Source: Universal Robots Case Study
SMEs are still a relatively untapped area for robotics, partly
for cost reasons – new robotic arms cost on average $100,000$150,000 (eur 75,000-110,000) once application-specific
peripherals have been added2 - and the fact that existing
industrial robots are not versatile enough for less structured
production processes requiring more flexibility, typical of
many small and medium sized businesses. At the same time, in
Western economies, it’s these companies that are most in need
of automation to remain competitive in the global economy,
especially in the face of comparatively higher labour costs.
Potentially, there are big gains for SMEs embracing new forms
of automation, such as Co-Robots, in terms of efficiencies and
productivity.
Although it’s not clear just how versatile these Collaborative
Robots are in terms of handling a range of complex tasks –
many of their current applications consist of relatively simple
tasks such as picking up pieces, packaging, loading/unloading
- continuing advances made in robotics suggest there is more
to come. In the era of incremental innovation, further layers
of sophistication will undoubtedly be added, increasing the
flexibility of the robots functionality.
What’s The Future For Factory Workers?
The impact of the use of industrial robots on employment
remains an ever contentious debate. A recent report3,
commissioned by the International Federation for Robotics,
highlights a generally positive correlation between automation
and job creation. Our view is that the advent of more automated
and digitalised production processes is only likely to place
greater emphasis on the quality of the workforce. More complex
and high-tech manufacturing processes, where robot-assisted
production is already the norm, will probably see relatively few
changes, or, if anything, increased specialisation.
For other manufacturers traditionally utilising a higher
proportion of human labour input, the adoption of Co-Robots
has the potential to reduce the need for manual labour on a
unit production basis, a thought shared by nearly a third of
respondents (chart below). More importantly, the skills set
required of the labour market will evolve, creating the need for
multi-tasking personnel to supervise and “train” Co-Robots and
hardware, whilst continuing to execute tasks that don’t lend
themselves to robotics. Knowledge based work will become
more prominent in the future, no matter the size and specialism
of the business.
4
2
3
www.robots.com
Metra Martech, 2013
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
IMPACT OF ROBOTICS ON PEOPLE
EMPLOYED/ROBOTS RATIO
31%
38%
Neutral
Decrease
Don’t know
ARE YOU CONSIDERING ADOPTION OF 3D
PRINTING IN THE FUTURE?
Taken to the extreme, 3D printing has the potential
to completely revolutionise manufacturing, whereby
consumers would be able to print a range of increasingly
complex products at home, effectively bypassing traditional
manufacturers for the provision of certain goods. However,
factoring in issues relating to safety, product quality and
Intellectual Property, a more likely scenario is whereby
manufacturers/suppliers continue to retain control of the
entire productive process, or at least parts of it.
31%
9%
36%
3D Printing: Reshaping The Supply
Chain
In the previous sections we looked at how sensor technologies
and 3D printing are redefining the consumer-producer
relationship and online retailing in general. In this chapter, we
examine in more detail changes the latter is bringing about at
the producer end of the supply chain.
Maybe
55%
3D printing technology is already extensively used for
prototyping, however, combined with new innovative materials
(foams, coatings and metals), it’s easy to see how 3D printing
will be instrumental in helping manufacturers satisfy growing
demand for customised products. In the future, this technology
could also be used to manufacture standard components/
modules more efficiently with reduced environmental impact.
Some multinationals like GE, Boeing, Ford and Nike are
pioneering the use of 3D printing. Many won’t know that
the Boeing’s latest aircraft, the 787 Dreamliner, is made up
of 30 3D printed parts, including air ducts and hinges. For
many manufactures, 3D printing is a cost-effective solution:
reportedly, 3D printing is helping GE to cut production costs of
certain parts by up to 30%4.
Our survey highlights openness towards this technology, with
more than 55% considering it as a possibility, and 36% actively
interested.
4
http://mashable.com/2013/06/09/ford-3d-printing/
5
Yes
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
Don’t know,
must find out more
Impact Of 3D Printing On The Supply
Chain
While the current high cost of more sophisticated industrial
3D printers and longer production cycles will continue to slow
mass adoption, the potential impact on the production process
and supply chain is nonetheless significant.
1) Inventories for printable components, particularly spare
parts, could be significantly reduced and simplified by
reducing and/or optimising storage and warehousing
requirements.
2) 3D printing could help reduce industrial waste, delivering
savings in terms of storage and disposal costs.
3) For the reasons above, in the short-medium term, the
impact will be felt most by low volume production, high
value/specialist production with high customisation
potential (accessories, etc.) or some industrial
components.
4) The supply chain of raw materials (sourcing, refining,
shipping, storage) needed to “feed” 3D printers is likely
to become even more important, potentially partly offsetting simpler supply chains for spare parts.
5) SMEs using 3D printing could accelerate the adoption
of robots; 3D printing has the potential to be used to
manufacture robots with interchangeable parts, such as
grippers and other components.
6) For the consumer, 3D printing could present significant
opportunities for replacement parts, whereby customers
looking to purchase new parts (e.g. car and appliances’
parts) would be able to walk in dedicated centres to get
parts printed, based on a databank of licensed blue-prints.
Once 3D printing becomes a scalable, faster and 100 per cent
secure technology, we expect widespread adoption across
an ample number of industries and products, such as highvolume/high-complexity goods and FMCGs.
For some productions, the rationale for locating manufacturing
away from home could be also called into question, helping
to bring some parts of the production processes closer to final
consumers. This will mean more environmentally friendly
supply chains, a trend already supported by a need to manage
costs and emphasis on corporate sustainability targets.
5
6
Beyond Hardware
The hardware component represents only one side of the
equation, in the smart factory of the future, software promises
to deliver even greater flexibility and increased efficiencies.
Technologies such as Big-Data, predictive analytics, cloud
computing and new cutting-edge enterprise software are
already making the difference for early adopters, in terms of
cost-savings across a host of industries. They will enable a
better coordination and optimisation of production across the
board and a faster response to quantitative and qualitative
fluctuations in demand.
Cloud enabled systems will allow real time control of multiple
processes along the whole supply chain. There is therefore
the potential for substantial gains in terms of productivity,
supply chain management, resource and material planning,
and greater room for flexibility overall. Big-Data, coupled
with predictive analytics, is helping reduce error rates along
production lines while detecting and fixing vulnerabilities, even
before new models are launched.
In the UK, supermarket chain Tesco found
that many of its refrigerators were operating at
lowers temperatures than necessary, resulting
in increased costs and environmental impacts.
In order to better manage its refrigeration
system Tesco used Big-Data to monitor the
temperatures of the individual units every three
seconds. The company reportedly aims to save
up to €20 million per year across the UK and
Ireland in cooling costs by maintaining consistent
temperatures throughout the system5. In another
example, McKinsey estimated that Big-Data
could reduce research and development costs
for pharmaceutical makers by $40 billion to $70
billion6.
As these technologies become more widely adopted, for
increasingly digitalised manufacturing systems to work
smoothly the attention will increasingly be placed on data
security, a well-functioning and integrated digital infrastructure
– two direct consequences of cloud-enabled technologies and, last but not least, the right skills able to “orchestrate” the
production process and the whole supply chain. However, a
new generation of logistics providers will play a crucial role in
developing and enabling this space.
http://www.computerweekly.com/news/2240184482/Tesco-uses-big-data-to-cut-cooling-costs-by-up-to-20m
McKinsey
6
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
The “PLs” Of The Future: Beyond
Warehousing
As supply chains are evolving and adapting to fluid market
conditions, so is the way they’re managed. Manufacturers
have long understood the benefits of outsourcing all or parts
of their supply chain operations to specialized companies (the
so called PLs), so they are able to re-focus on their core value
propositions. Initially, activities outsourced concerned shipping
and transportation (1PLs and 2PLs), but eventually they went
to encompass a broader range of logistics activities such as
warehousing, inventory management, and freight forwarding
(3PLs).
Over time, the need for manufacturers to more effectively
manage a growing network of outsourcing partnerships and
fragmented supply chains has seen the rise of a new category
of PLs, known as 4PLs, effectively designed to manage and
supervise 3PLs activities, but also to help integrate and optimise
clients supply chain operations across the globe.
In the future, changing supply chain dynamics and the impact
of new technologies mean that the role of logistics providers is
likely to evolve even further.
Under the impulse of 3D printing, logistics gravitating around
spare parts inventories is likely to become less relevant, as these
could be made to order. Intuitively, areas where technology will
have the effect of cutting out parts of the supply chain will offer
less room for logistics providers to operate the way they have
traditionally.
Logistics providers of the future will have to adapt and take-on
new functions. Some last generation logistics services providers
are already playing an active role in product customisation.
Syncreon adds value to the products that it stores by configuring
and assembling them on a per-order basis, to meet the specific
needs of customers or end-users.
The strategic advice component that already distinguishes
4PLs from previous generation providers is only likely to grow
in importance in response to mass customisation, technologic
change and fluid supply chains. In some ways, this has the
potential of turning some organisations into product life-cycle
management operators, entailing more advanced analytics and
software development tasks. What is certain is that outsourcing
will continue, as indicated by half of companies surveyed.
WHAT ROLE WILL LOGISTICS SERVICES
PROVIDERS HAVE IN YOUR BUSINESS IN
THE FUTURE?
Growing role: we’ll
probably outsource other
parts of the supply chain,
possibly more strategic,
in addition to those
already outsourced
17%
50%
33%
No change/little
change expected in
current structure/
arrangements
Don’t know,
Conclusions: A New Manufacturing
Landscape
The trends and technologies discussed in this report have
the power to redefine the supply-chain model, based on
large, vertically-integrated productions, designed to exploit
economies of scale, into more decentralised and flexible
production processes gravitating around end consumers.
New digital production systems will enable a greater integration
of all stages of the production process and the rest of the supply
chain, resulting in increased efficiencies and faster response
times. Once fine-tuned, new hardware technology, such as
Co-Robots and 3D printers, will provide greater flexibility across
the board and make it viable to produce a variety of customised
products/components closer to where they are needed, thus
meeting consumer demand for quick delivery timescales.
Infrastructure Key To Success
The global balance of power in manufacturing will also change
as a result of the increased locational flexibility. Emerging
lower cost economies may eventually lose their competitive
advantage for certain parts of the production process as labour
cost arbitrage weakens and transportation costs rise. Equally,
control over the higher value parts of the production process
will become increasingly important – both the physical, digital
and intellectual aspects of production and being in the right
regulatory environment which affords the required level of
security and control.
Western Europe and the developed world are poised to benefit
from a new industrial paradigm in response to consumer and
technologic change. Within these markets, we should start
to see the emergence of ‘decentralised and democratised’
production which creates more flexible supply chains and more
diverse business location decision making.
7
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
Direct Implications For Real Estate:
Rethinking Production Space
From a real estate perspective, the advent of “best-shoring”
has seen a number of manufacturers moving away from the
traditional mass production style associated with markets like
China. With labour costs in the country increasing dramatically
over recent years, businesses have had to look elsewhere to
reduce costs and meet consumer requirements for speedy
customisation and delivery. With companies looking to bring
production closer to home, demand for industrial stock is set to
increase in capital markets across Western Europe and the US.
This increase in demand is likely to be offset, however, by the
retail end of the supply chain; business with digitalised supply
chains that utilise Big-Data - to understand consumer demand
and seasonality trends, in order to improve the efficiencies of
warehouses by ensuring the correct amounts of the right stock
are maintained - are able to make cost savings from the space
efficiencies gained as their space requirements are reduced.
The adoption of robotics also has implications for the design
and configuration of production and warehousing facilities,
as companies using these technologies are likely to be able to
reduce their square footage requirements by decreasing the
amount of human facilities required. In addition, less invasive,
more flexible and safer machines will occupy less space, and
potentially could operate in an environment with reduced
heating and lighting, reducing energy consumption costs.
CATCHING UP: ANNUAL AVERAGE REAL WAGE
GROWTH
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
-1.00%
2006
2007
2008
2010
Asia
Developed economies
SOURCE: ILO
The ability to redesign how space is used in the production
process is already visible in robotic intensive industries such
as car manufacturing. Together with 3D printing, which also
has the potential to reduce storage space requirements by
reducing the amount of physical stock a company needs to
hold, especially in the spare parts industry, new technologies
will improve efficiencies throughout the supply chain.
8
2009
Getting Closer to the Customer | September 2014 | White Paper | Colliers International
2011
485 offices in
63 countries on
6 continents
United States: 146
Canada: 44
Latin America: 25
Asia Pacific: 186
EMEA: 84
$2.1
Primary Authors:
Guy Douetil
Managing Director | EMEA Corporate Solutions
DIRECT +44 20 7487 1888
MOBILE +44 7824 355 888
guy.douetil@colliers.com
Karel Stransky
Director | EMEA Corporate Solutions
DIRECT +420 226 537 633
MOBILE +420 603 457 242
karel.stransky@colliers.com
Bruno Berretta
Senior Research Analyst |
Research & Forecasting
DIRECT +44 20 7344 6938
MOBILE +44 7796 995 112
bruno.berretta@colliers.com
billion in
annual revenue
Colliers International
1.46
billion square feet
under management
50 George Street
London W1U 7GA
United Kingdom
emea.research@colliers.com
15,800
professionals
and staff
About Colliers International
Colliers International is a global leader in commercial real estate services, with over 15,800
professionals operating out of more than 485 offices in 63 countries. A subsidiary of FirstService
Corporation, Colliers International delivers a full range of services to real estate users, owners
and investors worldwide, including global corporate solutions, brokerage, property and asset
management, hotel investment sales and consulting, valuation, consulting and appraisal services,
mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked
Colliers International as the second-most recognized commercial real estate firm in the world.
colliers.com
Copyright © 2014 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult
their professional advisors prior to acting on any of the material contained in this report.