How small manufacturers can address 50% of their product cost through smarter indoor logistics

Large companies have the means and resources to digitalise and adopt cutting-edge technologies that boost their productivity. Small and medium-sized enterprises make up the remaining 98% of businesses in Europe, but how could they overcome the risk and cost of productivity-enhancing digitalisation?

A 2009 study published in the International journal of advanced manufacturing technology found that on average, the mere moving of items around the factory is responsible for up to 50% of the total manufacturing cost of an item.

Add to that 25% of employees, 55% of all factory space, and 87% of the production time.

All this adds up to a huge cost burden, yet an issue most small-to-medium-size enterprises – SMEs – are unable to tackle for lack of funds for improvement investments, risks inherent in implementation, and the difficulty in finding partners who can deliver.

Overkill or nothing?

For many SMEs, traditional indoor logistics solutions are too capital-intensive and unsuited for their production volumes. This is probably why less than 2% of European SMEs use more agile, advanced technologies such as robotics and Artificial Intelligence, even though factory-floor logistics accounts for half of their manufacturing cost.

With SMEs representing 98% of the manufacturers, a large part of the European manufacturing industry is in danger of falling behind in productivity and competitiveness on the global market.

Growth gets stuck in cost of expertise 

Many European manufacturing SMEs are extremely agile in their daily business and manufacturing process. Agility is crucial to their survival. However, when they don’t have access to advanced logistics solutions, this agility comes at a high cost, which brings productivity down.

Multinational companies have both the in-house expertise and the capital to optimise their production, while SMEs have to rely on small systems integrators to do the job. This requires that both parties understand what the challenges are, how to optimise the solution and which advanced technologies are best suited for the purpose. Developing expertise for every unique solution becomes too uneconomical for the integrators, and in-house competencies prohibitively expensive for the manufacturers.

To exacerbate the situation, small systems integrators in Europe, though highly skilled in traditional robotics solutions, are inexperienced in the installation of advanced solutions to varying SME production lines. No wonder, then, that 98% of SMEs are not using advanced technologies. For them,  it is too expensive, time-consuming and risky.

Ecosystems to the rescue

What SMEs need is easy access to multidisciplinary ecosystems that can enable rapid deployment of advanced robotics solutions. The adoption of robots and building the IT infrastructure for logistics automation also requires access to finance, training and discovering new business models. To tackle these challenges, a holistic view is needed. The L4MS programme – a marketplace for low-cost smart logistics solutions – is a consolidated effort to bring together all the key actors for enabling new technologies and boosting the competitive edge of European manufacturing SMEs.

If you’re interested in better competitiveness through smarter factory-floor logistics solutions, apply now by following the links below.

L4MS (Logistics for Manufacturing SMEs) is a VTT-led acceleration programme within the EU’s Horizon 2020 framework, designed to help manufacturing SME’s to update and improve their factory-floor logistics. If you are a manufacturing SME or mid-cap looking for equity-free funding up to 250 000€ to develop new, efficient and modern automated logistics solutions, apply to L4MS Open Call by 31st November at at l4ms.eu.

blog_AliMuhammad
Ali Muhammad

Principal Scientist, Coordinator of L4MS
ali.muhammad(at)vtt.fi


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