A new research paper from Siemens Financial Services examines the potential value digitalization offers manufacturers. According to the paper, the potential financial value of digitalization is estimated to be between 6.3% and 9.8% of total annual revenue by 2025.

New-generation digitalized technology (also known as Industry 4.0) is enabling manufacturers to improve performance through increased manufacturing productivity, improved planning and forecasting, enhanced competitive capabilities and greater financial sustainability.

The various dimensions of productivity differ between industries and countries. Nevertheless, increased manufacturing productivity has a clear and calculable positive effect on costs and margins. This effect is called the digitalization productivity bonus.

“Intelligent financing arrangements tend to be offered by specialist providers that have a deep understanding of not only the digitalized technology, but also of how that technology can be practically implemented,” said Gary Amos, CEO of Commercial Finance North America from Siemens Financial Services. “They play a vital role in enabling organizations to access cutting-edge technology and start benefitting from the digitalization productivity bonus.”

Capturing testimony from more 60 international industrial companies, expert management consultancies and academic specialists based in 11 countries, the paper has built a model that estimates the digitalization productivity bonus for different industries. The potential global digitalization productivity bonus (all manufacturing sectors) is estimated to be between 4.5% and 6.3% of total annual revenue by 2025.

The paper analyzes the pharmaceutical and food and beverage sectors to demonstrate how digitalization can be practically applied to contribute to improved manufacturing productivity. In the food and beverage sector, digital information flowing up and down the distribution and supply chains helps to better match supply and demand to guard against over-ordering and over-production. In the pharmaceutical sector, digitalization and data analytics can reduce the high levels of downtime typically experienced by pharmaceutical plants.

The digitalization productivity bonus can only be realized when a manufacturer has upgraded production technology to new generation digitalized systems and equipment. Specialist financing techniques have been developed to enable the technological platforms and new mindset of Industry 4.0, for manufacturers to achieve digital transformation in a sustainable fashion. These techniques allow companies to harness the future benefit of digitalized equipment in order to fund the acquisition of that technology.

The paper examines these specialist financing methods, including pay-to-access/use, technology upgrade finance, pay for outcomes, transition finance and working capital solutions. They cover a range of requirements from the acquisition of a single digitalized piece of equipment, right through to financing a whole new factory.