How Smart Finance Can Help Manufacturers Through the Pandemic


The aerospace industry has been one of the hardest hit by the pandemic and experts expect its recovery to be “long and rocky”. Machine tool manufacturers serving the industry are currently facing a number of challenges, including: the large aircraft order book; historically low levels of production and new orders; as well as the pressure resulting from ambitious net zero goals, to name a few.

To meet these challenges, manufacturers would benefit from access to agile technologies and machines that can react to changing market demands. These technologies tend to be digitized and automated, providing greater oversight and flexibility during production processes, even when disrupted.

Industry 4.0 and its applications

The practical applications of digitization and Industry 4.0 processes are truly endless. For example, aerospace manufacturers would have the ability to model components and test assembled systems without having to create physical prototypes, shortening discovery time while accelerating the product development process.

Of course, the sector has always been among the first to adopt new technologies to reduce both the weight and the cost of aircraft. Additive manufacturing – the 3D printing process of creating an object by building it one layer at a time, is just one example. The advancement of 3D printing in aerospace is improving value chain efficiency and solving manufacturing problems, making it popular with OEMs and suppliers.

Using additive manufacturing, aerospace engineers can easily design and create complex parts that would not be possible with traditional machining methods. Using traditional methods, assembling complex parts would require welding or brazing multiple parts. However, with additive manufacturing, the same part can be built in one piece, which improves strength and durability.

This allows for the production of lightweight, lightweight parts through geometric designs that would be too difficult to produce with old-school methods. The digital process means that design changes can be made quickly and efficiently and with little waste, resulting in significant cost savings for high value parts. The end product is a lighter aircraft with reduced carbon emissions and cheaper to operate due to the subsequent reduction in fuel burn.

This decentralization of the production process enables significant optimization of the supply chain. With additive manufacturing, parts are built when and where they are needed, instead of producing individual parts centrally and paying the cost to ship them to the build site. Additional supply chain benefits include improved tracking and sourcing through the use of a shared database with suppliers and partners, improved performance and reputation validation suppliers and timestamping of records to reduce fraud and improve supply chain security.

Likewise, subtractive manufacturing techniques such as computer numerical control (CNC) milling machines allow for more efficient production processes. Not only do these machines offer high cycle times, but they can also be operated with minimal or no supervision. One skilled operator is enough to operate several machines at once, and the precision of these machines ensures consistent quality of the end product, reduces errors and eliminates unnecessary waste.

Smart finance and post-COVID recovery

Due to the impact of the pandemic on customer demand, the recovery is sure to present opportunities for smart manufacturers to exploit. OEM production rates are expected to increase following the global distribution of vaccines, leading to increased international travel as restrictions are eased. Higher demand for new aircraft is inevitable and expected to return to 85% to 90% of 2019 levels in 2022, and innovative digital technologies could be an important success factor.

While the benefits of digitization for machine tool manufacturers are widely known, the start-up costs of investments – especially at a time when companies in the sector are struggling – can be off-putting to some. However, historical studies have shown that companies that continued to invest smartly in technology during previous tough economic times survived, thrived, and ultimately achieved long-term competitive advantages.

This is particularly relevant for the aerospace industry, where despite nearly universal recognition of the benefits of digitalization, only a quarter of manufacturers are taking steps to implement digital technologies, according to a global survey conducted by Deloitte. The report cites the pace of technological change and the lack of know-how as the main strategic obstacles behind the decision not to pursue a digitalization process. Fortunately, both of these problems are easily solved with smart finance.

A specialist financier is able to use their expert knowledge of the industry to offer financing packages that can meet a manufacturer‘s specific requirements. If the pace of technological change is a concern, a specialist financier can offer upgrade options during the financing period, whether to replace with a newer model or to improve the main technology platform. .

Maintain momentum

Increasingly, manufacturers are turning to smart financing techniques to maintain momentum. These solutions are designed by specialist vendors specifically to enable investment in technology, equipment, renovations and digital transformation. This provides a financially sustainable journey through weak economic times, as well as the agility and resilience to weather medium-term challenges, so manufacturers can ultimately emerge ready for growth as markets recover.

The important role played by smart financing can be highlighted by the growing number of technology and machinery solution providers now offering integrated financing options as part of their overall customer value proposition. This gives their manufacturing customers access to a wider range of possible technology options, as they can also use financing methods that make the investment affordable and financially sustainable. Indeed, the manufacturer’s investment in technological solutions is made possible by financing that takes into account the commercial benefits expected from the investment.

Business take-off with smart finance – a case study

In order to fulfill a new customer order, a British aerospace manufacturing company urgently needed a new computer numerical control (CNC) machine. However, the aerospace sector has been among the most disrupted by the pandemic, which has had a negative impact on the company’s credit rating and therefore on its access to financing.

The manufacturer approached Siemens Financial Services (SFS) via its supplier Kingsbury. Given their long-standing relationship with SFS as well as our unique industry expertise, the Kingsbury team was confident that SFS would design an ideal solution. SFS recognized the urgency of the manufacturer’s need and worked with the company and Kingsbury to provide a bespoke operating lease with a residual value (RV) element. The solution allowed the manufacturer to acquire the machines quickly and the RV facilitated lower monthly payments as well as future flexibility to extend the lease or invest in new machines as needed.

Access to equipment and financing has bolstered the manufacturer’s resilience at a time when many aerospace companies are shutting down due to the impact of COVID-19. With SFS, the manufacturer can now meet the new customer order, while opening the business up to a range of future projects and opportunities.

Conclusion

The aerospace sector has been particularly vulnerable to the challenges of COVID-19 and is currently on the road to recovery. Investing in new automation and digitization technologies can help ease the pressure by making production more efficient and adaptable for machine tool manufacturers in the industry – now and in the future. With access to traditional lines of financing being limited for many companies, smart private sector financing enables investment even during economic downturns and keeps manufacturers on track.


About the Author

Kirsty Talmage-Rostron 1Kirsty Talmage-Rostron – Business Development Manager, Siemens Industrial Markets

Kirsty has worked as a Business Development Manager for Siemens Industrial Markets for the past 5 years. She has over 20 years of professional experience in the finance and marketing sectors. Her long-standing experience in sales stems from the University of South Africa (UNISA) where she graduated with a Bachelor of Commerce.

In her current role, she is responsible for promoting financial services directly to Siemens partners and OEMs, as well as working with various stakeholders within Siemens to deliver financial solutions to all customers.

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