Whitepaper #2

Low cost digital solutions for Manufacturing SMEs: A Catalogue of Digital Solution Areas

The aim of this paper is to present a set of digital solution areas associated with operational challenges that are relevant to a majority of manufacturing SMEs. The catalogue has been developed in consultation with over 100 manufacturing SMEs. The catalogue describes 59 solution areas. Out of all participants in the study, 86% ranked one of the top 5 items as a key priority for their business. This contribution can help increase accessibility to digitalisation for manufacturing SMEs.

Authors: Benjamin Schönfuß, Duncan McFarlane, Gregory Hawkridge, Liz Salter, Nicky Athanassopoulou, Lavindra de Silva

ISSN: 2633-6839, REF ENG-TR.008

Date: August 2021

Keywords: Industry 4.0, Manufacturing, SMEs, Digitalisation, Digital Manufacturing on a Shoestring

This work was supported by the Engineering and Physical Sciences Research Council [grant number EPSRC: EP/R032777/1].


  1. Introduction
  2. A Catalogue of Digital Solution Areas for SME Manufacturers
    2.1. Overview
    2.2. Developing the Catalogue
    2.3. The “final” Catalogue of Digital Solution areas for manufacturing SMEs
  3. Interpreting the Catalogue
    3.1. Catalogue Composition
    3.2. The Catalogue and the SME Business
        3.2.1. The Catalogue and Business Areas
        3.2.2. The Catalogue and Manufacturing Operations
  4. Conclusion
  5. References

1. Introduction

The work reported here is part of the Digital Manufacturing on a Shoestring programme which focusses on low cost digital solutions for manufacturing SMEs.

The digitalisation of manufacturing processes has a profound impact on the manufacturing industry. It can lead to increased efficiency, improved product quality, higher capacity, and many other benefits [1,2]. We define digital manufacturing as the application of digital information from multiple sources, formats, and owners for the enhancement of manufacturing processes, value chains, products, and services.

Small and medium sized enterprises (SMEs) face bigger digitalisation challenges than larger companies [3]. However, SMEs represent a large part of the economy. In the UK manufacturing sector, they accounted for 45% of the economic contribution and employed 53% of the workers in 2019 [4,5]. Two challenges, which are specifically pronounced for SMEs, are the perceived high cost and complexity of digital solutions [6,7]. Despite the high relevance, little research into addressing SME-specific barriers has been conducted to date [8,9]. We use the term SME in accordance with the guidelines of the European Commission, referring to companies with a headcount of < 250 and an annual turnover of ≤ 50MN € [10].

The aim of this study is to identify common digital manufacturing needs of SMEs. The rationale is to provide direction for research into SME digitalisation and to facilitate standardised development of digital solutions to lower the cost barrier of digitalisation.

2. A Catalogue of Digital Solution Areas for SME Manufacturers

A key element to supporting digital adoption in SMEs is to identify the operational areas most in need of solutions. This section outlines the approach to developing a catalogue of such digital solution areas. After an overview of the idea and underlying premises, the method used for developing the catalogue is described, and then the “final” catalogue is presented, and its composition discussed.

2.1. Overview

The catalogue identifies Digital Solution Areas. A solution in this context is a system that facilitates a (current or new) activity in a company. A digital solution is then a system that provides this solution by using digital technologies. A solution area describes the purpose of a solution, without referring to a concrete technological implementation. New technologies are developing at a fast pace and the catalogue is intended to be of longterm relevance. The same solution area could be implemented from entirely different technologies in the future. This technology-agnostic definition of the solution areas makes it easy for SMEs to use the catalogue, as no deep understanding of technology is required.

2.2. Developing the Catalogue

For the development of the catalogue, we assumed that all types of digital solutions that are currently relevant to SMEs have been deployed before. We used direct feedback from SMEs, case studies, and consultancy reports where the cases were conducted in manufacturing SMEs to identify relevant solution areas.

To combine the different input sources, we followed an iterative process research approach as first proposed in [11]. The approach consists of multiple research cycles (see Figure 1), after which new solution areas are added to the catalogue, and then used as input for the next cycle. After sufficient research activity, if no new solution areas can be identified, this is counted as evidence towards the comprehensiveness of the catalogue.

Figure 1: The proposed multi-stage research approach to establishing a catalogue of SME digital solution areas

Referring to Figure 1, the initial working catalogue was generated from academic (1a) and non-academic (1b) case studies. The input from SMEs then built on this initial catalogue. This order allows to refine the working catalogue through company feedback in each cycle. When a new solution area was identified during a workshop, we tested it against functional definitions of the existing solution areas to differentiate genuinely new additions from mere changes in wording. We added any new solution area from a relevant source to the set to further comprehensiveness.

Any SME manufacturer that produces discrete products (excluding outsourcing and continuous manufacturing) was eligible for the study to maximize engagement. Multiple participants from the same company, and nonmanufacturing companies were excluded from the data set, resulting in the input from a total of 128 manufacturing SMEs. To identify new solution areas, we asked the companies to share any recent digitalisation activities and any concrete plans for the upcoming year before exposing them to the working catalogue. At the end of the workshop, companies were asked again whether they were satisfied with the current options. The “final” catalogue (stage 4), from the perspective of this study, consisted of 59 solution areas.

Table 1: Catalogue of Digital Solution Areas for Manufacturing SMEs

2.3. The “final” Catalogue of Digital Solution areas for manufacturing SMEs

The catalogue of digital solution areas, finalised after interacting with 128 SMEs, is presented in Table 1. The solution areas are grouped into the four categories 1) Data Capture and Visualisation, 2) Data Analysis, 3) Actuation, and 4) Support systems. This classification is similar in style to the production information loop, a common approach to classify cyber-physical systems [12,13]. The first category comprises both data capture and visualisation solution areas, because capturing data does not in itself solve a specific problem a SME might have. Category 2 contains solution areas that employ analytical methods. These can be based on data derived from solution areas from category 1, or on existing data within the company. The output can feed into an automated decision algorithm or be used for human decision support. Category 3 consists of actuation-based solution areas. Another recurring theme that was mentioned in many workshops was support systems (category 4), which replace manual data handling processes, but still require full human interaction to be effective.

3. Interpreting the Catalogue

In this section we highlight trends observed in the “final” catalogue and discuss company activities supported by the solution areas.

3.1. Catalogue Composition

Most solution areas are in the categories of Data Capture and Visualisation (37%), and Data Analysis and Decision (42%). This could be a reflection of the fact that many SME manufacturers are still in the early stages of digitalisation [14]. Gathering and visualising data can be an important first step towards more digitalisation. It is however noticeable that only two solution areas are in the category of actuation. A potential reason is that companies could perceive actuation as a core function for some manufacturing processes rather than as a digitalisation activity. Different from the categories 1-3, the solution areas in support systems mostly represent software solutions for management functions that can act independently from other solution areas in the catalogue. Notable exceptions are digitised work instructions (no. 57), which is targeted at shop floor workers, and ERP/MES systems (no. 50). We emphasise that none of the solution areas identified are new. The reader is reminded that the aim of the catalogue is simply to capture digital solution areas that SME manufacturers consider important.

3.2. The Catalogue and the SME Business
    3.2.1. The Catalogue and Business Areas

To better understand how the catalogue items apply to different areas of the manufacturing business, Figure 2 maps each solution area to a company activity, derived from Porter’s generic value chain [15]. Each solution area is represented only once, in the most relevant activity. However, many of the solution areas can provide benefits to other company activities through network effects as well.

Figure 2: Allocation of the catalogue items to the activities of manufacturing SMEs, based on the generic value chain of a firm [15]

Most solution areas fall under operations (53%) or firm infrastructure (14%). The heavy focus on operations is not surprising for manufacturing SMEs, as the category includes all activities that contribute to the main value the company provides (such as producing a product). Due to the heavy representation, we have further decomposed this area as shown in Figure 3.

Firm infrastructure includes activities such as management, planning, and accounting [15]. Many of the participants were management level representatives of the SMEs, so that specific challenges in this area might be more salient to them. Another possible explanation is that infrastructure functions in SMEs might be staffed with fewer workers than operational functions so that the potential upside of digital solutions is very high. The focus on Data Capture and Visualisation solution areas is expected then, as better data availability can help to provide a better overview of the company.

Notably, no solution areas to address the technology development were proposed. This is most likely due to the scope of this study, focussing on operations in manufacturing companies. While a portion of the participants develop products, they likely saw their priority needs in other areas. However, some of the solution areas also provide benefits for technology development (for example solution areas 12, 16, 29, or 57). Similarly, the fact that the participants (being SMEs) have small workforces can explain the low representation of solution areas for human resource management.

Interestingly, the solution areas relating to procurement focus on operational aspects of supply chain management, but not on lowering the cost of procurement (e.g., materials, or costs of the purchasing process). Only few solutions in the areas of inbound and outbound logistics were identified. A possible reason could be that these categories are closely connected to operations and can benefit from several of the solution areas there. For example, tracking of complaints (5) and library of recurring faults (9) could also be of value for outbound logistics, while automated job scheduling (27) could help with fluctuations in the inbound logistics.

    3.2.2. The Catalogue and Manufacturing Operations

Figure 3: Allocation of the catalogue items in the area of Operations [15]

Figure 3 shows a more granular overview of the category operations. The subcategories are derived from examples in Porter’s original work [15]. Production is named in a generic way to include any relevant transformative step other than assembly (e.g., machining, moulding). Some solution areas provide overarching benefits to multiple of the six subcategories. Examples are 7) Digital Job Cards, which travel with a product and can be beneficial in both production and assembly (and potentially other steps) and 57) Digitised work instructions, photos and assembly procedures, which can provide value in any process where human work is involved.

A further observation is that all solution areas that can facilitate assembly can also facilitate the production. Many of the additional solution areas in production are of the data analysis type and address process optimisation. A potential reason could be that SMEs often use more advanced equipment in their core production processes (such as CNC machines), while assembly procedures are mostly manual, thus profit less from advanced analytics.

Scheduling can be facilitated by a variety of solution areas as well, demonstrating the potential modularity and incrementality of solutions. While the solution area 27) Automated job scheduling to human and machine resources is part of the catalogue, such an automated system is not the only way the activity area Scheduling can be enhanced. Accurate monitoring of resources (solution area 2), real time tracking of internal jobs (solution area 18), or a digital worker shift management system (solution area 55) could all be valuable additions to the company while keeping the actual scheduling process manual.

4. Conclusion

This study has identified a limited catalogue of digital solution areas relevant to manufacturing SMEs and provided an initial prioritisation from the SME perspective. The findings are of high practical relevance to manufacturing SMEs, researchers, and businesses in the space of digitalisation. Individual SMEs can profit from the catalogue by saving time on researching potential digitalisation projects for their business, and gaining a research-based overview of the available options. The catalogue can also help focus research endeavours on high-impact issues in digitalisation for SMEs. For solution providers, the catalogue provides a prioritisation of future developments that can be expected to be of high relevance for potential customers.

The aim of this paper was to make digitalisation more accessible to manufacturing SMEs by addressing the barriers of financial resource limitation, knowledge resource limitation, and technology awareness limitation. Formulating the solution areas in the catalogue in a technology-agnostic way, focussed on operational challenges, lowers the need for deep technical understanding. The concentration on solution areas that are relevant to a majority of SMEs can help focus research and standardisation. We identified such a catalogue from the data we gathered from over 128 SME owners and decision makers. Over 99% of SMEs in the study rated at least one of the digital solution areas as being highly beneficial to their business, confirming the comprehensiveness of the set.

5. References

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[2] A. Kusiak, Smart manufacturing, Int. J. Prod. Res. 56 (2018) 508–517. https://doi.org/10.1080/00207543.2017.1351644.

[3] S. Brunswicker, W. Vanhaverbeke, Open Innovation in Small and Medium-Sized Enterprises (SMEs): External Knowledge Sourcing Strategies and Internal Organizational Facilitators, J. Small Bus. Manag. 53 (2015) 1241–1263. https://doi.org/10.1111/jsbm.12120.

[4] C. Rhodes, Manufacturing : statistics and policy, 2020. https://commonslibrary.parliament.uk/researchbriefings/sn01942/.

[5] European Commission, List of country SME key figures 2019, SME Perform. Rev. (2019). https://ec.europa.eu/growth/smes/business-friendly-environment/performance-review_en#annualreport (accessed June 3, 2020).

[6] A. Sevinç, S. Gür, T. Eren, Analysis of the difficulties of SMEs in industry 4.0 applications by analytical hierarchy process and analytical network process, Processes. 6 (2018). https://doi.org/10.3390/pr6120264.

[7] D. Horváth, R.Z. Szabó, Driving forces and barriers of Industry 4.0: Do multinational and small and medium-sized companies have equal opportunities?, Technol. Forecast. Soc. Change. 146 (2019) 119–132. https://doi.org/10.1016/j.techfore.2019.05.021.

[8] S. Mittal, M.A. Khan, D. Romero, T. Wuest, A critical review of smart manufacturing & Industry 4.0 maturity models: Implications for small and medium-sized enterprises (SMEs), J. Manuf. Syst. 49 (2018) 194–214. https://doi.org/10.1016/j.jmsy.2018.10.005.

[9] T. Masood, P. Sonntag, Industry 4.0: Adoption challenges and benefits for SMEs, Comput. Ind. 121 (2020) 103261. https://doi.org/10.1016/j.compind.2020.10326.

[10] European Commision, User guide to the SME Definition, 2015. https://doi.org/10.2873/782201.

[11] K.W. Platts, A Process Approach to Researching Manufacturing Strategy, Int. J. Oper. Prod. Manag. 13 (1993) 4–17. https://doi.org/10.1108/01443579310039533.

[12] D. Inkermann, D. Schneider, N.L. Martin, H. Lembeck, J. Zhang, S. Thiede, A framework to classify Industry 4.0 technologies across production and product development, Procedia CIRP. 84 (2019) 973–978. https://doi.org/10.1016/j.procir.2019.04.218.

[13] S. Thiede, Environmental Sustainability of Cyber Physical Production Systems, Procedia CIRP. 69 (2018) 644–649. https://doi.org/10.1016/j.procir.2017.11.124.

[14] M. Pech, J. Vrochta, Classification of Small- and Medium-Sized Enterprises Based on the Level of Industry 4.0 Implementation, Appl. Sci. 10 (2020) 1–22. https://doi.org/10.3390/app10155150.

[15] M.E. Porter, Competitive advantage : creating and sustaining superior performance., New York : Free Press, 1985., New York, 1985.

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