Strategic investments in European manufacturing to win global challenges

Periodic Reporting for period 1 - M-Future2015 (Strategic investments in European manufacturing to win global challenges)

Reporting period: 2014-12-01 to 2016-03-31

Manufacturing Industry is the foundation of national and international economies. Manufacturing is critically important to both developing and developed countries. Current globalization – enabled by manufacturing and affecting it – has brought many advantages to new developing countries, but also created many large-scale problems in developed countries. By 2025 the majority of production and consumption will take place in developing economies. A new global approach to Competitive Sustainable Globalization could be based on one hand on competitive sustainable global manufacturing, constituted of global manufacturing industries with factories located in countries with competitive advantage, and on other hand on competitive sustainable local manufacturing, focusing on establishing local competitive and sustainable manufacturing industries.

As a coordination and support measure the M-Future Project was aimed to increase the efforts of the EC and the Member States in pursuing the strategic objective of Europe’s reindustrialization and growth during Luxembourg’s Presidency of the Council of the EU (June-December 2015) through the organization of the MANUFUTURE 2015 conference focused on options for strategic investments in European manufacturing.
In order to increase the coordination efforts of the European Commission and the Member States in pursuing this strategic objective during Luxembourg’s Presidency of the Council of the EU (June-December 2015) the organisation of the MANUFUTURE 2015 conference has been proposed with a focus on the strategic investments in European manufacturing that could meet and win global challenges. The event was planned and took place in the second half of Luxembourg’s Presidency of the Council of the EU (in autumn 2015) and was timed so that its outputs could also contribute to the update of bi-annual work programmes of Horizon 2020, COSME and other EU innovation-related funding programmes at the end of their first bi-annual period (2014-2015). In particular the conference aimed to support Luxembourg’s Presidency which has identified EU’s leadership in industrial technologies and the increased investment efforts in R&D and innovation as one of the top priority areas for policy intervention in the field of industrial policy in continuation of the efforts made in that direction already during the previous Luxembourg’s Presidency in 2005.
The main objective of the proposed conference was to identify and endorse new policy instruments, business models, support mechanisms and technologies that could help to strengthen and improve the manufacturing base in Europe given the existing regulatory framework and the constrains that manufacturers face at this critical time for further accessing finance, human resources, skills and knowledge needed to compete and win-in a highly competitive and global market. More specifically, the conference aims to involve in the consultation process over 750 stakeholders (policy makers, business leaders, innovators and academics) representing all manufacturing sectors in the EU27 and to initiate the creation of a multi-stakeholder network “Manufactured in Europe” that could act as an open, informal forum for disseminating the conference outputs and promoting the agenda of the re-industrialised Europe across the social networks of innovation actors in Europe. The conference was structured along three major themes, including the issues related to widening access to finance for reindustrialisation and growth, moving European industry to the higher end of value chains, and creating synergy of support initiatives at EU level and in Member States with increased participation of financial markets. For each theme a list of sub-issues to be addressed by speakers have been identified through a consultation process with the High Level Group of MANUFUTURE 2015 and the Ministries of Economy and Higher Education and Research which have endorsed the initiative of LXI to host this event.

The MANUFUTURE 2015 conference has taken place in Luxembourg on 23-24 November 2015 and served as a forum for stakeholders from industry, universities, research institutions and government which addressed the needs of manufacturers in the field of research and development in industrial technologies and explored the synergy between different initiatives at the EU level and in the Member States for widening access to finance for reindustrialization and the take-up of Advanced Manufacturing and other KETs.
According to the conference participants MANUFUTURE 2015 was an excellently organised conference which gave important information about the different initiatives at the EU level, past, ongoing and planned, which tackle the current and future challenges of the European manufacturing sector. There were valuable presentations and discussions on widening access to finance for re-industrialisation and growth.
The MANUFUTURE 2015 conference clarified and highlighted the challenges and needs related to manufacturing and manufacturing-related research and development in Europe, and provided input for possible future actions, highlighting the importance of research and development in the area of manufacturing and enabling technologies. One important outcome of this event was discussion on moving European industry to the higher end of value chains and how to support initiatives at EU level and in Member States. The conference was also a good forum for networking and for starting concrete exchange of ideas for new joint research projects with potential partners. An additional outcome was that the event supported each delegate to reach a synthesis where strategic thinking and implementation initiatives can be met with legal instruments, operational plans and technological results.
The project website is available at http://manufuture.europarama.lt/. It can also be accessed from the main MANUFUTURE 2015 Conference website at http://www.manufuture2015.eu/.

The report covers the work performed from the beginning of the project (1st December 2014) to its end (31st March 2016). The project is based on three major work pillars:

• Preparation of a conference implementation plan, including a conference programme and a plan for the follow-up actions and outreach activities, by organizing the work of the Conference Organizing Committee: identifying and selecting stakeholders to be involved as speakers, keynote speakers, panel and round-table moderators, preparing a well-timed and structured conference programme, a plan for dissemination and the list of outreach activities;
• Implementation of the conference plan achieving above average (70%) turnout of the confirmed attendees from the key stakeholder institutions (such as national agencies and the EU institutions, European industry associations and technology platforms, high-level expert groups, major technology clusters) and preparing a Conference Position Paper, reflecting the consensus reached at the conference;
• Running outreach and dissemination activities and follow-up events: a) organizing visits for media and conference participants to the technologically advanced manufacturing sites in Luxembourg, b) holding a high-impact promotional events for students and general audience involving science and industry, and c) initiating a multi-stakeholder action (communication) network “Manufacturing in Europe” for cross-linking the innovation actors from different industry sectors in order to maximize the publicity of the proposed event.
The conference has achieved its targets and main objectives by:
• Assessing the level of research and development advancement in the manufacturing industry in Europe in comparison with global competitors by analysing the latest results from the EU R&D and innovation-related funding programmes (such as the Factories of the Future) and the PPP initiatives related to the Key Enabling Technologies (KETs), by taking into consideration regional smart specialization;
• Comparing the performance and complimentary of industrial investments in the manufacturing industry with the focus on the complementarity of different EU funds and financial markets on the reindustrialization of Europe through the investment in human resources, skills and knowledge, analysing different types of investments, new business models, technology venture entrepreneurship models, public funding and state aid policies;
• Reaching consensus with stakeholders on the conditions needed for reindustrialization of Europe within the existing policy framework, including policies on climate change and competitiveness, regional smart specialization, industrial policies related to internal market and the aimed increased contribution of the manufacturing sector to the GDP (up to 20%).
Apart from that, the conference also intended to actively support Luxembourg’s Presidency of the EU and its activities in coordinating EU policies in the field of research and innovation in industrial technologies and to increase the visibility of this Presidency by:
• Involving national policy makers and high-level representatives from the National Authorities responsible for R&D and innovation policy planning and implementation together with high-level experts and representatives from the EU governance bodies in discussing the existing and planned actions aimed to stimulate targeted strategic investments in the European manufacturing industry from multiple sources of public and private funding;
• Involvement of major European technology platforms and industry associations such as the European Technology Platform MANUFUTURE, the European Factories of the Future Research Association (EFFRA), European Engineering Industries Association (ORGALIME) and the Council of European Employers for the Metal, Engineering and Technology-based Industries (CEEMET) in assessing together with other stakeholders complementarities of strategic investments in the manufacturing across the EU and formulating high-level recommendations for governance during Luxembourg’s Presidency.
The work on the project progressed well and according to plan. To achieve this, the project coordinator maintained communication and performed necessary management and coordination actions. The main objectives of all work packages have been completed successfully without any deviations and corrective actions.

During the conference the number of discussions, exchanges and presentations made by the participants took place and could serve as a basis for preparation of the set of post-conference recommendations. Although, they do not have the pretentions of being fully complete or generally valid, they provide at this moment in time a sample of reflections, thoughts and ideas on how to develop future industrial policy.

Technology, Research an Innovation in Manufacturing

In the last 50 years the industry has evolved radically, which inevitably changed the research landscape. Industry needs to invest continuously in R&D to stay competitive and to adopt the new technologies. The economic crisis in 2008 was a big draw bag in this respect; 2 million jobs in manufacture were gone lost. The decline of industry GDP from 20% to 15% in Europe shows that more consolidated R&D efforts have to be taken.
MANUFUTURE 2015 presented the latest developments of the “Factory of the Future” initiative. Factories of the future are a truly European approach, joining national, regional and European interests. Europe has to exploit further initiatives like the “Factories of the Future” through enhanced clustering, targeting technology transfer, innovation and value creation for Europe’s industry. One of the priorities must be to disseminate the knowledge, which has been already develop and specifically SME’s should be addressed, since tailored tools and mechanism are required to minimize the disparities existing between SME’s and the latest technologies.
IT certainly takes a crucial role in this respect. Either we are talking about knowledge transfer, digitalization of industry (Industry 4.0) or other IT novelties, it is clear that IT is and will be the biggest enabler for business opportunities, skill developments and future growth.
Unfortunately SMEs still stand behind. We see a lot of competitiveness from non-EU online IT tool, process and platforms, which is a threat not only for the European skillset of SMEs, but we risk losing competitive advantages.
The globalization is changing the way of doing things. Multi-cultural influences paired with new business models are key challenge but also a key opportunity to stimulate creativity. Global partnerships seem to be the key to success. Cross-institutional cooperation in product and service innovation is imperative for business success in advanced technological fields. So it is vital to have a global span of expertize to understand better the requirements and to react accordingly.

Business and competiveness

Europe’s human capital should always be central focus for future policy making. Europe is much more advanced in many areas, either we are talking about social, environmental, energy, healthcare and other regulations, than other continents and this has to be seen as an advantage and not a burden.
The ingredients of successful industry policy making can already be found in many initiative, like the Factories of the Future or others. Entrepreneurial spirit and capabilities are required as a driving force in such initiatives to be successful. We have to foster an embedded culture of innovation and open attitude to collaboration.
ICT is undoubtedly seen as a key enabler for successful industry modernisation. The next phase in the digitization of the manufacturing sector is driven by four disruptions: the rise in data volumes, computational power, and connectivity, especially new low-power wide-area networks. The digitalisation of all types of services and products are essential in the next industrial revolution, also commonly known as Industry 4.0. For Europe, Industry 4.0 is the opportunity to bring back factories to Europe through efficient and individualised production, investment and business opportunities and achieve the re-industrialisation targets in a sustainable way.
Digitizing Europe’s Industry has to be the priority number one of the European Commission. The digital transformation in manufacturing is key for the future development of the manufacturing industry. Value creation through digitalization should come in three steps: a) digitization of all types of products, b) digital transformation of processes and radical and disruptive changes in business models. It is clear that Europe has already a solid ICT base and Europe should follow the chosen path, but policymaking, R&D, innovation need to speed up since time is crucial and competition is not waiting.

Policies, Standards and Sustainability

The session Policies, Standards and Sustainability on MANUFUTURE 2015 was dedicated to identify the right framework required for prosperous industry development. What are the policy and standards to make grow an SME and to satisfy global market needs?
Projects like EASME or EXPLORE are tailored tools to address the specific concerns of SMEs and offer dedicated and adapted tools to them. Undoubtedly these initiative know there positive impact, but there is still a lot to do in order boost the product and business innovation of SMEs on the European level. The Junker plan wants to give a new jumpstart and proposes among others the InnovFin guarantee introduced by the EIF (European Investment Fund), which allows financial institute to provide support to innovative companies, as well as traditional companies undertaking innovative (risky) projects.
But it was pointed out clearly at the Manufuture2015, that SMEs need a much more pragmatic approach. Many of these initiatives have good intentions, but finally it comes out, that most of these tools are not practical enough to really give SMEs a help leveraging their (international) business potential. Other solutions are required to scale up SMEs business affairs without “drowning” them in system of complexity and ensuring the competiveness. A more pragmatic approach could be for example to get experts “on board” for a defined period of time in order to gain rapidly the confidence in this global playing field.
Industry regulations and standards are indeed a very complex subject, where no simple answer will be found. Standards and regulations might provide a competitive advantage to Europe’s industry since interoperability, data exchanges, and communications are becoming possible and help industry to develop more rapidly custom made products and services. Conformance to EU and international standards brings important development opportunities to European manufacturing industries. On the other side innovation is all about “thinking outside of the box”, thinking for tomorrow and moving fast. The first to market tends to be the most effective in innovation and the most successful in business. So it is important to find the right balance between regulatory and competitiveness in a global market.
Other influencing factors, like education and skills are as well essential, if we are looking for impacting features on the economic growth of a society, on the innovation as such and on the industry’s competitiveness.
To address future challenges of supply and demand of manufacturing skills, a change of the educational paradigm in manufacturing is required. Collaboration or physical and cognitive competition for work and life-long learning needs to become the new normal. A good example given is the Fieldlab. It is a practice environment in which companies and knowledge institutions targeted further development, testing, deploying and training of Smart Industry Solutions close to operational environments. Models of this type need to be deployed on a large scale throughout Europe to align the education system with the industry requirements.

Finance and investments

Manufacturing industry is still the backbone of the European economy, but we are losing ground in terms of investments. The reality check shows that capital flows very easily around the world and shareholders and investors are typically looking to maximise their returns. The higher the risk, the higher the return expectations of investors are. The down side for Europe is that investments in Europe seem either to be too risky or the returns are not given. Consequently the leak of investments leads to the aging of production equipment which leads to a continuous loss of productivity, especial in SMEs.
We need to create a climate of confidence in the political level. We need to convince strong international partners to join us and most important for Europe future is to overcome this stagnation.
The traditional bank financing and insurance companies invest in safe products like asset backed securities. Other financial products like “Kick- starting” investments are hardly applicable, since the regulation is quite restrictive and is preventing the functioning of capital markets. In the manufacturing sector there is not always predictability since markets do fluctuate. But this predictability is required by banks since cash flow is the key and cash flow management needs predictability. So financial institutes and investors need to adapt themselves to the industry environment. They need to bring out more experts that understand the business models of companies, if not, the financing of industrial projects cannot be successful.
If Europe is losing manufacturing, it is not only about losing jobs in that sector. It is about losing knowledge and competitiveness. So there is no viable alternative than reversing the decline of Europe’s industry landscape. Clustering infrastructure, cooperation on competence building could one option for a successful reindustrialization strategy in Europe, as it was proposed in the Manufacture2015 conference.
The high tech world is changing, as there is worldwide competition, increasing complexity, shorter product life cycles, cost price pressure and shrinking pool of technical talent. More systematic industry clustering could address this issue, since joint forces, joint talents and joint investments can better face these challenges. It is therefore as well necessary to take advantage of joint funding opportunities (international, national and regional) and combine and integrate complementary funding sources to cover the entire innovation cycle (different rules, time windows, etc.). This is one of the main challenges at the European level.

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Periodic Reporting for period 1 - M-Future2015 (Strategic investments in European manufacturing to win global challenges)

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