Impact of a High Speed Broadband Network on Manufacturing ONED HERE

Technology Bulletin 2013/14-01

Introduction The rollout of a national high speed broadband network, previously known as the National Broadband Network (NBN) offers significant promise to the business community, including manufacturing companies. CEOs believe faster broadband speeds will lead to greater levels of innovation, productivity and business growth. Forty percent of CEOs (who responded to the survey) anticipate large increases in the external exchange of information and data, across manufacturing, supply chains, transactions and customer relationship management.1 To Australia in general, the advantages of a high speed broadband network are:   

Increased internet speeds Increased network reliability Reduced costs

“Manufacturing industries face significant threats from regional competitors and from the elevated exchange rate, but may have opportunities to win greater market share by greater use of digital innovations. Even traditional industries like manufacturing will be reshaped by digital innovations.” 2 For the majority of manufactured goods, there is still a physical product to be made and transferred to a customer and this cannot be circumvented by high speed communications, limiting the full impact possible. Future projections suggest however, that as distributed and additive manufacturing developed further, components will be manufactured at the site that they are needed, and the ability to instantly transfer design and manufacturing instructions will facilitate this. In the NBN Business Readiness Survey Deloitte considered that manufacturing (and mining) will experience a “long fuse, small bang” in terms of the future level of effect due to digital disruption (including the NBN). This is due to manufacturing having lower levels of total digital potential, combined with the fact that it has already experienced significant disruption in recent years. 3

A recent AI Group Report surveyed Australian businesses to determine their perception and preparedness for a high speed broadband network and found that manufacturing

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Other studies have estimated that manufacturing will benefit from a long term productivity growth of 5%, in comparison to the service sector (10%) and the rest of the business community (1%). 4 This is in line with data from the European Union.

companies (68%) are the least likely to have made any preparations, followed by mining (60%) and construction (45%). For the companies that have taken steps (40%), the following are the most common actions:     

Investment in new technologies and equipment (17%) Commencement of research (12%) Digital business strategy (6%) Allocation of staff (2%) Allocation of budget (2%)

When asked about the importance of a high speed broadband network to their business over the next two to three years, industry sectors responded as follows: 5 Sector Service Mining Construction Manufacturing

Some importance 87% 83% 75% 72%

Essential 33% 33% 42% 18%

This technology bulletin looks at the implications of the NBN rollout for manufacturing industry. It does not comment on policy aspects, the rollout timetable or the different infrastructure solutions proposed (fibre to the premise, FTTP / fibre to the node, FTTN).

Enabling digital technologies Digital manufacturing is the seamless use of digital data throughout the design and manufacturing process and has seen a continual adoption in the manufacturing industry over the last 15 years. The availability of higher speed, more reliable and cost-effective internet access will permit higher levels of data transfer between companies, their collaborators, customers and suppliers.

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For smaller companies, a full scale adoption of digital manufacturing technologies may have been hindered by slow upload and download speeds and thus, we can expect that a transition to a high speed broadband service will remove these barriers.

Case Study - Noja Power In South America, electrical contracts are decided and awarded through online auctions, with sales agents bidding in real time. Noja currently cannot directly participate in these online auctions from Australia because limited bandwidth creates a lag in bidding times. Noja has to employ a sales agent in South America, which adds costs. With greater bandwidth and real-time interactivity provided by the NBN, however, Noja will be able to manage the South American online auctions from Brisbane and gain more business in this highly lucrative market. 6

E-business In a recent survey, 36% of CEO participants believe that faster broadband will create new e-commerce related efficiencies and business opportunities. An Optus survey of the manufacturing industry asked how companies planned to make the digital transformation. The most popular strategies were:   

Online purchasing and ordering (from 33% now to 65% intended) Online self-service applications (from 6% now to 43% intended) Online service delivery (from 9% now to 35% intended)

For companies in the B2C (business-to-consumer) environment, e-business solutions are a reasonable extension of current offerings, but in the B2B (business-to-business) environment, there are additional challenges to overcome as all transacting companies require an e-business platform. New B2B software for online transactions is available from a number of vendors, and there are many existing companies who already offer B2B e-commerce platforms including Office Works.

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This is illustrated well by the conveyor system configurator from Flexlink.

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In more industrial applications, e-commerce solutions can assist companies to design and visualize their project and these can include the use of online configurators which translate customer designs directly into orders, generate invoices and define the bill-ofmaterials (BOM) required to manufacture the product.

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Figure 1 - Configura® from Flexlink

Remote Working The implementation of the NBN will enable a business model for a ‘manufacturing plant in the bush’7 The CSIRO Theme Lightweight Assistive Manufacturing seeks to exploit new automation technology to supplement and improve the capabilities of Australian manufacturers. One strategy to enable this is the delivery of augmented information to a remote operator, perhaps advising on the optimum set up of a machine tool, or by providing expert opinion during a dismantle and refurbish operation. Both of these scenarios rely on the real-time delivery of information over a capable network. Infrastructure improvements through a high speed broadband network will permit more remote diagnostic, control and monitoring applications to be run, reducing the need for staff to visit remote sites and facilities. One of the most commonly cited advantages of a high seed broadband network is in enabling a greater level of teleworking. 13% of FTTH subscribers work from home more often, an average of 7.3 more workdays at home per month8. While this may not be appropriate for all levels of manufacturing staff, it could still have a significant effect for some businesses and allow them to offer flexibility in working arrangements, assisting in staff retention. For regional areas such as those in North Queensland, the availability of high speed broadband may offer a comparative advantage and allow them to offer an alternative lifestyle to companies and company owners, against similar businesses in suburban and highly populated areas, dealing with traffic congestion, land shortages and high business costs.

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The ability to reskill and upskill workers utilizing high speed broadband delivered services will allow the manufacturing industry to respond more quickly to redeployment and technology-driven needs. Services delivered will be much more interactive, collaborative and cheaper. A high speed broadband network offers faster access to new learning materials, particularly those involving highly interactive content such as video conferencing, telepresence, virtual training environments and collaborative learning.

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Information Provision & Training

The availability of large quantities of training materials allows companies the option to allow their staff to participate in training sessions but also to host them, for their staff or their customers. Potential customers can register for webinars explaining product features and existing customers can be trained in the use of products or informed about latest developments and product updates. At the most basic level, a high speed broadband network offers greater potential for the provision of richer website content.

Collaboration “The roll out of the Australian Government’s National Broadband Network (NBN) provides the infrastructure required to support globally connected businesses. This will provide new opportunities for Australian companies in manufacturing services and the export of products.” 9 “Improved global collaboration to compete in a digital economy: The NBN will provide businesses, especially our small and medium sized businesses, the ability to better collaborate with local and overseas partners for a fraction of the cost.” 10

Case Study A Cairns-based engineering firm with an office in Townsville regularly transfers drawings between offices so that both groups can apply different skills to the same project. At the moment, because of the limits to broadband availability, the collaboration is limited to file transfers rather than a cloud solution that would allow both groups to work on one set of documentation. 11

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It has long been suggested that Australian manufacturing companies cannot compete on price alone, and that a move up the value chain would ensure that the industry continues to create economic benefits whilst retaining intellectual property and capability onshore.

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"We're really excited about the NBN roll-out because depending on the package we sign up to we could operate in real time with our partners overseas and exchange large files rapidly. We're talking 24 minute long episodes of high definition video sent across the world in real time, which on our current ADSL2+ connection could take more than 30 hours to download or 11 days per episode to upload!” 12

The roll-out of a high speed broadband network brings the concept of an “Australian Design Centre” or a Competency Centre in Crashworthiness closer to reality, as the ability to transmit large quantities of complex data in short times does not hinder support service offering to the rest of the world.

GKN Aerospace Engineering Services Pty Ltd GKNAES was established in Australia in August 2001 to service the global demand for engineering services. Headquartered in the aerospace precinct of Port Melbourne and with offices in Sydney, GKNAES has undergone strong and consistent growth since inception and now has over 100 staff. The aerospace engineering capability draws on an experienced and highly qualified team with a strong background in design approval, systems integration and certification. Collectively the engineering staff at GKNAES has experience with over 160 different aircraft types including military aircraft, commercial aircraft, helicopters, missiles, rockets and satellites. GKNAES is an export-orientated company, with over 90% of all work being exported to aerospace primes and OEMs in the USA and Europe.

Supply Chain Implications The availability of a high speed broadband network has implications at all stages of the supply chain, from enhanced customer relationships, greater access to new geographic and market sectors, and streamlining business processes with suppliers.

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Reduced hardware requirements, and cost Reduced levels of IT support needed

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Increased capacity and capability of internet services means that more manufacturing businesses can take advantage of cloud-based services. These have become more prevalent in the last few years and offer a number of potential advantages:

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Leveraging the Cloud

       

Reduced maintenance and upgrade costs with automatic upgrades and updates Security of off-site backup Fundamentally change the way the business operates and allows optimisation of resources Elasticity, scalability and the opportunity to grow as required Enormous capacity of the back end available for large computational requirements when needed “Big Data” is available to help manage the business future and support decisions Better supply chain management Availability of advanced software packages on a pay-as-you-go basis (Software as a Service, SaaS)

It is this final item that manufacturing companies may find the greatest potential. The ability to access advanced software packages such as finite element analysis (FEA), 3D CADCAM and computational fluid dynamics (CFD), means that optimal solutions to engineering problems are not now restricted by the capability of the in-house computing system. An example of this approach is the work undertaken by Zipp, a manufacturer of carbon fibre bicycle wheels, who traditionally relied on wind tunnel testing to evaluate aerodynamics, a complex and multi-dimensional analysis problem. By utilising cloudbased CFD services and intelligent workflow software, much more detailed analysis could be undertaken which offers significant insights into the behaviour of rotating wheels in varying wind directions and speeds. This deeper level of analysis and understanding led to a breakthrough redesign and increased sales for Zipp with their Firecrest brand.13 Whilst the availability of advanced software via the cloud offers potential, the advantages of moving more mainstream manufacturing software such as ERP systems to support more sophisticated Business Intelligence activities. 14 A cloud-based ERP system ensures that data is accessible, even through mobile devices, customizable, flexible and is more cost effective.

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A significant benefit of a high speed broadband network that enables close collaboration is the ability for multiple employees, team members or supply chain participants to collaborate on new designs for products, services and business models. This collaboration can also include other partners, such as customers and suppliers. Of course this type of collaboration has always been possible, but a high speed network brings a

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Innovation & Product Development

new depth to the level of communication possible, perhaps even enabling a level of crowd-sourcing to be employed by more traditional manufacturing businesses. In combination with the ability to access high end modeling, design, analysis and visualization tools through cloud-based services (see above), there is scope for companies to develop more innovative products more quickly. Multiple iterations are possible, and advanced software such as parametric optimization allows the optimum solution to be found rather than the designer or engineer to have to model multiple potential solutions to determine the best one. New business models for manufacturers will emerge that are enabled by a high speed broadband network: “Business innovation such as new business models to support the expansion into manufacturing services, and distributed manufacturing. This will be supported by the NBN.”15 These could include the bundling of web-based services with the traditional product sale. It has already been mentioned that manufacturing companies could access remotely their machines and facilities, but this can also be extended to the monitoring of their products in use either by the consumer or by the manufacturer themselves. This would require the integration of appropriate sensing and communication system in the product but may add richness to the product for which a consumer is prepared to pay a premium.

Other Aspects The NBN is not all about technology; a component of the NBN’s success will come from the policy that goes with it. 16

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Manufacturing opportunities should leverage Australia’s comparative advantage such as the NBN, mining boom and remoteness.17

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It is highly likely that new opportunities for the manufacturing industry that cannot currently be predicted will be enabled by a high speed broadband network. CSIRO state that the pursuit of these opportunities should be part of Australia’s strategy for a sustainable manufacturing industry:

Conclusion Whatever the solution selected by the government for final implementation, there is no doubt that for some companies, a high speed broadband network offers unprecedented opportunities for new products, new collaborations, new opportunities and new ways of doing business. The physicality of the manufacturing industry – the need for products to be made, machines to make them and staff to operate them – limits to some degree the level of transformation possible but the potential is still there. Manufacturing organisations need to consider the possible impact of the network on their specific business and to inform themselves of the opportunities that exist and to begin preparing to full capitalize on them.

References 1 Deloitte, National Broadband Network: A Users Perspective 2 Future of Business Report – Manufacturing, Optus 3 Deloitte, NBN Business Readiness Survey April 2013 4 NBN – Impact Assessment , SWDA 5 The Business End of Broadband, AI Group, 2013 6 http://www.business.qld.gov.au/__data/assets/pdf_file/0011/9011/broadband-casestudies-manufacturing.pdf 7 CSIRO, Sustainable Manufacturing Workshop Report, 2012 8 http://www.ftthcouncil.org 9 CSIRO, Sustainable Manufacturing Workshop Report, 2012 10 Addressing the disruption of our new digital world, CSC, A Point of View Paper 11 Townsville City Digital Economy Strategy 12 http://www.nbnco.com.au/nbn-for-business/case-studies/increasing-internationalcompetitiveness.html 13 http://www.digitalmanufacturingreport.com/dmr/2013-01-10/cfd_for_the_rest_of_us.html

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14 http://www.acumatica.com/blog/the-new-erp-workstyle 15 CSIRO, Sustainable Manufacturing Workshop Report, 2012 16 Addressing the disruption of our new digital world, CSC, A Point of View Paper 17 CSIRO, Sustainable Manufacturing Workshop Report, 2012