Brought to you by Mitsubishi HC Capital Canada
Next-Gen Automation: Financing to Fund the Future of Work
March 8, 2024 in Industry
By Paul Green, Sales Director, Diversified Industries and Aviation
For manufacturers in Canada – and around the world – automation is here to stay. The question is no longer if automation will impact the manufacturing industry, but how.
Automation is here to stay largely because workforces aren’t. At one time in the not-too-distant past, businesses were afraid that automation would put people out of jobs. It turns out that workers have been already transitioning out of lower-paying positions involving routine, repetitive tasks, and moving on to more advanced positions. As companies find it harder and harder to find, hire, train and retain employees, automation is stepping in to offer a solution.
From manufacturing plants of large, complex goods to small job shops, automation is changing the way businesses operate. Staying abreast of developments, particularly in how to finance automation, is key to nearly every manufacturer’s ability to survive and thrive. To help, we’ve identified four important finance-related factors Canadian manufacturers should keep on their radar.
Next-tier applications
In many cases, manufacturers have already embraced and implemented automation at large scale, particularly in sectors where routine, repetitive tasks are abundant. Now, the industry is looking at new ways to automate in ways that might be less obvious, but will fill worker voids and increase productivity. It could be in moving, folding and packing boxes. Or it could be in picking and sorting produce or even cooking high-demand, quick-turn items at fast-food restaurants. We also expect to see more autonomous warehouses and logistics operations throughout the country.
Extension to lower-volume shops
We will continue to see automation extend to the full manufacturing ecosystem, as companies continue to struggle with hiring and maintaining a workforce. Today, automation technology is available to, and works well in, operations of almost any size, including job shop environments with batch sizes as small as 20-100, and shop floors of 20,000 square feet or less. Companies that specialize in automation implementation provide comprehensive assistance, and tailored financing programs make the move to automation a smart ROI decision.
Matching financing to ROI
Automation may bring plenty of benefits, but manufacturers face the challenge of financing it. While every company and application is different, many manufacturers will see a return on investment (ROI) in two to three years, and sometimes as quickly as 6-12 months. Finance companies that have historically been comfortable with five-year terms understand that they need to adapt to the shorter-term needs of manufacturers implementing automation technology.
The good news is that financing providers with a history of developing customized solutions and working with customer business models are able to match financing to ROI. Some also have partnerships with providers that design, build and integrate custom automation solutions. Together, they can provide comprehensive ROI models and develop tailored financing that gets automation working as productively as possible.
As-a-service models
In an as-a-service transaction, a supplier provides a service (or product with associated service) on a non-ownership basis, typically as a subscription. The as-a-service model is particularly attractive for products or services requiring expensive, time-consuming, complex implementation.
Today, as-a-service models extend to industries far beyond traditional hardware and software. There are energy-as-a-service, containers-as-a-service, disaster recovery-as-a-service and even car-as-a-service models. Manufacturing environments, where 100% on-time working equipment is imperative, will emerge as a “next frontier” of as-a-service. As manufacturers sell not only equipment, but also software and service to meet uptime goals and metrics, finance partners will create customized programs that accelerate the sales cycle, improve cash-flow predictability, simplify purchase agreements and increase competitive advantage.
Conclusion
The automation path for manufacturers is very clear. It will continue to evolve, improve and increase productivity for companies that thoughtfully incorporate it into their operations.
New and customized financing models will pave the way for faster adoption. Manufacturers will need to find financing partners that work to understand their – and their customers’ – business models. No matter how quickly technology advances, financing is still a relationship business. Developing a solid working relationship with a financing partner there for the long term can mean the difference between keeping up with automation or being left behind.
Paul Green
Paul Green is Sales Director, Diversified Industries and Aviation, at Mitsubishi HC Capital Canada. Previously, he served as director of Aviation Finance and director of Strategic Programs for the company.
Paul’s nearly three decades of experience in lending and banking include heading new-business development for construction, transportation, and food and agriculture industries at DLL in Toronto. He has also held the position of vice president at LiftCapital Corporation in Toronto, and chief risk officer at AerCap in Amsterdam.
Paul holds a Bachelor of Commerce degree from Memorial University of Newfoundland, and a Master of Business Administration degree from Dalhousie University.
