Study on digitalisation of the manufacturing sector and the policy implications for Ireland

The objective of this study was to assess the policy implications for Ireland from the impacts, opportunities and challenges arising from the digitalisation of the manufacturing sector. For the purposes of this study, digitalisation of manufacturing is defined as the use of digital technologies, data and applications to deliver advances in manufacturing processes, products and related services, in both established and emerging sectors.

A number of research tasks were defined to complete this objective, including: i) defining the concept of the ‘digitalisation of manufacturing’ and a framework for analysis; ii) understanding the context of Irish manufacturing; iii) gathering lessons from international experience; iv) understanding the opportunities and challenges for Ireland; and v) defining policy options for Ireland. Concepts and frameworks from the academic literature have helped to inform the methodological approach, and an extensive review of international policy discussions and implementation efforts has provided a valuable context to the emerging priorities identified for Ireland. In addition, the study has drawn heavily from targeted consultations with industry, academia and government stakeholders in Ireland. Although this approach has succeeded in providing a large amount of primary data from local stakeholders, limitations exist based on the number and types of stakeholders consulted. However, the authors believe that the selection of stakeholders for consultation has been highly inclusive, in accordance with the project design, and hence has provided representative views of the Irish context.

This study has attempted to go beyond the high-level analysis of basic technologies by more carefully considering the industrial structures and technological systems underpinning the digitalisation of manufacturing. In other words, the study goes beyond considerations on R&D and knowledge generation around specific technologies, to cover issues relevant to the diffusion and deployment of those technologies in manufacturing sectors. In this respect, a framework to identify challenges and opportunities related to the digitalisation of manufacturing was developed, which outlines the interaction between three core elements: manufacturing user industries (and the possibilities for digital applications); industrial digitalisation applications and solutions; and policy and contextual factors. The interface of these elements has important implications for the creation and capture of value across manufacturing sectors. It was identified that digitalisation can drive value capture through: the development of new and more functional products and services (including new business models); more efficient and flexible production processes; more integrated and optimised supply chains; and more customer-lead products and delivery. Barriers to value capture were identified across the innovation process, by which new digital technologies are developed, diffused and deployed in the real world.

Ireland’s unique position in the digitalisation journey was discussed, and the main challenges and opportunities for Ireland based manufacturing firms were elicited drawing from a wide stakeholder consultation, which included targeted interviews, roundtable discussions, and a stakeholder workshop. Although there was broad agreement that Ireland based firms will need to exploit the potential of digital technologies to remain competitive internationally, it was clear from the consultation that distinct sectors and firms find themselves in different stages of the digitalisation journey. Furthermore, a key message arising from the consultation was that there are challenges to understand the true value of industrial digitalisation and the opportunities it could provide to businesses. As such, there is a need to ‘demystify’ the use of digital technologies. Overall, results suggest that Irish manufacturers are just starting to realise and exploit the benefits of digital technologies. Also, Ireland is well positioned to exploit these opportunities given the makeup of its manufacturing sector and the existence of ICT expertise and enabling contextual factors. However, a number of challenges still lie ahead.

The study suggests priority policy themes for Ireland, and identifies cross-cutting implementation enablers to address emerging challenges and opportunities. Thematic priorities included: i) awareness raising and identification of user application needs; ii) demonstration of application value; iii) consortia building and application development; iv) technical advisory services for application deployment; v) skills for the deployment of digital applications (including factory technicians; production and ICT engineers; operation managers; and company directors). In addition to these thematic priorities, a number of cross-cutting requirements, relevant to ensure effective policy implementation in Ireland, were discussed, including: i) industry needs-oriented funding mechanisms; ii) policy coordination; and iii) appropriate institutional infrastructure.

Examples from the international experience were included to stimulate discussion. They respond to particular national contexts and priorities and reflect the existing institutional infrastructure. As such, no suggestion is made that they should or could be readily transferred to Ireland. They do, however, provide valuable reference information on what competitors are doing and, to some extent, insights into what is perceived to be effective to drive the digitalisation of manufacturing forward.

Overall, the information contained in this report can help inform the design of a practical policy action plan for Ireland. The thematic priority areas that emerged from this analysis are intended to indicate areas where policy intervention could support Ireland’s digitalisation efforts. It is outside the scope of this study, however, to suggest a detail implementation plan with specific responsibilities for Government departments and agencies, or to assess whether a policy agenda to drive digitalisation in Ireland forward can be implemented with existing institutions. It is recognised, however, that the success (or failure) of a particular policy programme or initiative might be determined by the quality of institutions involved in delivering them, as much as the qualities of the adopted approach.

The analysis contained in this report shows, however, that by exploiting the distinctive opportunities and national capabilities identified here, Ireland is well placed to take a leading international position in the digitalisation journey.