Robotics Practices in Central and Eastern European Manufacturing
In the previous article about robotics, “The Third Generation of Robots – Automate Whatever, Wherever”, from August 2016, IDC noted that spending on robotics and related services in manufacturing is set to increase globally by a factor of two between 2016 and 2020, according to IDC's Worldwide Commercial Robotics Spending Guide. Now, we are confident that we can get close to a comparable pace of growth within Central and Eastern Europe (CEE), as well. Manufacturers in CEE have vast opportunities to utilize robotics across their value chains, and they have recently evinced more enthuasiasm in exploring them. That said, they also need to be aware of challenges that implementations may bring to their organizations and how to cope with them. A new IDC PeerScape: Robotics Practices in Central and Eastern European Manufacturing identifies some of these challenges and explains how certain Central and Eastern European manufacturing companies addressed them. To learn more about what the research interviews discovered, Ewa Lis-Jezak interviewed both authors, Martin Kuban, IDC’s CEE lead for Manufacturing Research, and Ina Malatinska, IDC’s CEE lead for Robotics Technology Research.
Question: What are the main drivers of the robotics market in Central and Eastern Europe?
Martin Kuban: Manufacturing is going through a transition in Central and Eastern Europe. It is no news that countries in this region trail developed economies in terms of what share of their GPD they spend on R&D support, as well as in the share of total R&D investments that is represnted by private companies. The Central and Eastern Europe manufacturing sector has been strongly rejuvenated by FDI inflows — mostly from EU and other developed countries. Unfortunately, the majority of these investments were motivated by a simple need to lower production costs. This paradigm “manufacture east, ship west”, which is still very evident within Europe as well, has not required much innovation from CEE manufacturing companies, nor investments in advanced technologies. For approximately two decades, the positive aspects of light production and assembly lines (i.e., generating limited added value) have been gradually approaching exhaustion, at least for countries like the Czech Republic, Poland, Slovakia, and Hungary. Some parent companies are considering building new facilities (some, reportedly, even moving old ones) further east, to Romania, Bulgaria, or CIS countries.
On a more positive note, some of the manufacturing leaders that we have recently interviewed (mainly based in Central Europe) seem to have sensed these gradual shifts some years ago and have apparently seeded initiatives to secure the future existence of their local branches. While a large part of the manufacturing spectrum is leveraging increasing automation (advanced robotics) to offset the increase in production costs, another portion will introduce initiatives that will spur innovation (in products, processes, services), aiming at transformation (or diversification) to higher-added-value business models. Of course, some factories will not be successful on this journey and will disappear. In Eastern Europe, decision-makers should learn a lesson here and, for instance, grant incentives only to such entities that will guarantee long-term viability of their production models. IDC beleives that both automation and innovation initiatives may lead to success in transformation, although market leaders in Central and Eastern Europe will need to combine initiatives from both the above-mentioned areas in a sustainable, long-term strategy.
Ina Malatinska: From the technology point of view, I would like to mention two major factors that play in favor of manufacturers. First, the rise of collaborative robotics that are safe to to have in the workplace alongside humans; they are compact, cheap, and easy to program and redeploy. The capabilities of these new robots are coming to a point at which they can seriously be considered for a number of innovative applications. The goal for manufacturers is to further increase productivity by building micro-cells of robotic automation in their operations. Second, despite growth in capabilities, the prices of robots are quickly falling. Collaborative robots priced in the range of $20,000–40,000 are affordable even for medium-sized CEE companies.
Martin Kuban: Robots are not a new phenomenon for Central and Eastern European manufacturers, but it is the new capabilities and greater availability of robots that bring new opportunities for advanced automation. This is as true for small and medium-sized business as it is for large manufacturers. A surprisingly high number of robotics use cases examined during our research produced interestingly rapid returns on investment (ROIs) — starting at as low as 3 months, averaging at below 12 months, and not exceeding 24 months. Also, I would like to add that the Industry 4.0 concept is already having an observable impact across Central and Eastern Europe, driving a new wave of interest in advanced robotics among manufacturers. Connected, mobile, cognitive robots will be an integral part of the emerging Industry 4.0 factories.
Question: Which areas would you advise Central and Eastern European manufacturers to pay special attention to?
Ina Malatinska: Building a good business case for a conventional robot implementation is certainly one of them. It is not a simple function of robot hardware cost, power consumption, and direct labor savings. This kind of calculation would, in fact, result in a very misleading message. Beyond hardware, manufacturers must consider software, connectivity, and services components of the robotic solution. They must take into account the total cost of ownership (TCO) and its impact on ROI calculation, as well as all the benefits of implementing robots — direct and indirect, short and long term.
Among other areas, I would also mention choosing the most suitable integration partner. Manufacturers’ are actually undergoing a twofold decision-making process; selecting the most suitable robot and selecting the best integration partner (which could be, but in most cases is not the vendor itself, especially in smaller projects). Depending on the capabilities of a given integrator, implementation results may vary significantly. Even a presumably easy project could fail when manufacturers underestimate the importance of pre-project homework. It is imperative to know your partner, both as a result of your own research and from references from others who have already learned their lesson. And yet, the best integration partner can not save the day if the customer does not realize the importance of its own role: being an active member of the implementation project. As one interviewed manufacturer pointedly acknowledged, there must be a very good line of communication between both parties: the customer must share as much information as possible with the integrator and support the overall project in all possible ways. On the other hand, the integrator must be transparent about the progress of the work, any additional costs arising, and other possible factors that could negatively affect the project. Mutual transparency and a free flow of communication will be key to a project’s success.
Martin Kuban: I would add the need for skilled people. Sales of industrial robots are growing at a double-digit annual growth rate in Central and Eastern Europe. Such rapid adoption rates are already meeting limits on the side of manufacturers to maintain robot fleets. Successful adoption of robotics will require a resource pool with the right skills set; knowledge of operations technology will be required to deploy, maintain, and expand robotics systems. The interest of the latest generation of students in technical fields remains tepid, and technical educational institutions in many CEE countries have struggled to attract more students. The technical skills and IT talent gap in the labor market has been evident in Central and Eastern European manufacturing, and the situation might get even worse for manufacturers that remain reluctant to address current challenges in recruitment, retention, and development of robotics talents. In addition, some manufacturers are annoyed when they realize that their robots’ potential is not being fully utilized, while others may find constraints in the variability of their current robots. On the journey towards maximum utilization, constraints and bottlenecks in the current operations must be identified. Simply put: The more robots can work, the more money they can make for the companies that utilize them.
Question: Could you also indicate some of the practices you identified?
Ina Malatinska: It is still a work in progress, but perhaps we can mention our working titles for some of the practices. For obvious reasons, we will have to keep the full story for our subscribers.
- Practice 1: Acknowledge all robotic system components and long-term benefits for building a meaningful business case
- Practice 2: Be smart about your partner choice, and remain active in the implementation project
- Practice 3: Attract and secure robotics talent TODAY
- Practice 4: Think of new ways to maximize benefits from your robots
Martin Kuban: The final document will be available on idc.com during December 2016, and subscribers to the service Central and Eastern Europe, Middle East and Africa Manufacturing Digital Transformation Strategies will be able to access the document immediately after publication.