Michigan spends $8.5M to push small manufacturers to become ‘digital ready’

A $25 sensor may be all it takes to persuade some Michigan manufacturers to take a leap into a new level of technology investment that state officials hope will boost the sector’s competitiveness.

That sensor on a stamping press could measure vibration, sending alerts when it gets out of whack and needs adjustment. The fix could come more quickly than waiting for a person to notice a problem, possibly ensuring better production and less down time. 

Simple ways to incorporate technology and data into manufacturing – like the sensor – help Tom Kelly, CEO of Automation Alley, an advanced manufacturing development center  in Oakland County,  illustrate why the sector should consider so-called Industry 4.0,  or i4.0, technology upgrades, like automation, machine learning and interconnectivity.

“It’s costly to make a mistake in manufacturing,” Kelly told Bridge Michigan. 

This week, the Michigan Economic Development Council prioritized exposing the state’s manufacturing sector to i4.0.  

The goal: Get 6,200 small and midsize Michigan companies, representing half of the state’s manufacturers, to invest in “digital ready” upgrades by 2025.

The MEDC will spend $8.55 million on the effort, following votes on Tuesday by the Michigan Strategic Fund Board, which is authorized to direct state appropriations toward business development.

“We know through our extensive research … that Michigan companies continue to be vulnerable to disruption from automation across the manufacturing sector,” said Mark Burton, president and CEO of the MEDC. 

Adoption of the emerging technologies will “protect this vital industry,” he  said. 

Manufacturing generates about 20 percent of the state’s gross domestic product, and it remains a top employer in Michigan, with factories across the state turning out autos and automotive parts, medical devices, food products and packaging, and other goods. 

The sector employed 564,700 people in October. It started the year with 628,700 workers, a number that represents a rebound from the Great Recession, but remains below its 2000-era peak of about 898,000.

Retaining manufacturing employment means holding onto better paying jobs, even as the sector changes. The jobs pay well, with the average weekly wage in 2020 at $1,365, higher than the state’s overall average of $1,037.

University of Michigan economists forecast the state’s manufacturing to recoup some of those lost jobs — 31,500 in 2021 and 17,500 in 2022.

The rebound, though, could further slow if the state doesn’t embrace connected technology, even though there’s a movement to “re-shore” production of goods now made outside the United States, said Bob Lyscas, COO of the Michigan Manufacturing Technology Center, or MMTC. 

Michigan’s manufacturers “compete against sophisticated countries that are very good at manufacturing and don’t want to lose all they’ve gained,” Kelly said, mentioning China, Germany, South Korea and Mexico.

“They’re strong manufacturing hubs and they ‘get’ Industry 4.0,” Kelly said. “They’re all looking to chip away [market share] from the U.S.”

The MEDC pointed to its five-year strategic plan from late 2019 as a reason why the attention to the small- and midsize manufacturers makes sense for the state’s investment. 

Manufacturing is represented in five of the six focus industries identified in the strategic plan as priorities for business growth and retention: mobility and automotive manufacturing, advanced manufacturing, medical devices, technology and engineering. 

The sectors are “where Michigan has a distinct competitive advantage,” according to the MEDC.

The plan approved this week includes: 

• A $2.5 million agreement with Automation Alley to provide statewide outreach and Industry 4.0 readiness assessments to manufacturers, and a $3.05 million agreement with MMTC for similar services. 
• Up  to $2 million in grant funding for a nonprofit or regional governmental organization to increase manufacturers’ readiness to adopt Industry 4.0 technologies. 
• $1 million to advertising agency McCann Detroit for an in-state advertising campaign about Industry 4.0 awareness and services.

Turning toward the latest technology and effectively using data collection isn’t natural to many manufacturers, Kelly said, especially the small- to midsize ones across the state that may have limited product lines and little incentive to invest in a change.

So far, only 12 percent of small- to mid-size manufacturing companies  have adopted I4.0, said Josh Hundt, chief business development officer at the MEDC. Among the risks of not pursuing the technology is that Michigan could be less resilient from future downturns, he said. 

Kelly agreed.  “We have to make manufacturers aware of this disruption that’s building all around them,” he said. 

That also was the conclusion of Automation Alley’s most recent annual technology report. 

“Manufacturing companies need a long-term strategic plan for their digital transformation. But our lean practices, which focus on cost reduction and short-term [return on investment] can become a major impediment to digital transformation,” according to the report. “We must understand that our state is doubly at risk if we stay the course,and companies that don’t adopt a digital mindset will get left behind.”

While a midsize manufacturer may do $50 million in business, many of the smallest shops in Michigan have 10 employees or fewer, particularly in rural areas. 

The  manufacturing technologies center plans to increase staffing to perform 300 Industry 4.0 assessments next year, up from 40 per year, Lyscas said. Those will happen in the MMTC’s Industry 4.0 lab in Plymouth Township, and in its satellite centers across the state.

West Michigan has prioritized the digital transformation among its 2,615 manufacturers, said Birgit Klohs, president and CEO of The Right Place economic development group in Grand Rapids. Most of that region’s manufacturers have 250 employees or fewer, and Klohs said many already accept that it’s time to pursue technology changes. 

While the $25 sensor example from Automation Alley’s Kelly can make a digital upgrade sound inexpensive and easy, costs could go much higher, depending on recommendations. A 3D printer, for example, could cost a manufacturer $30,000, Kelly said.

However, that investment will usually mean lower production costs, Kelly said, while allowing a more competitive business model. Increasing digitization by data sharing will allow a small shop’s systems to communicate with its customers’ networks, further adding value. 

“It's not the investment that’s necessarily expensive,” Kelly said. “What’s expensive is if you make it and don’t understand how you’re going to recoup your costs or what you’re going to learn. That’s what prevents [manufacturers] from acting.”

The new statewide awareness push and personalized assessments should help bridge that gap, Lyscas said.

It also can hope to close the labor gap, Lyscas said. With many companies struggling to find enough workers, technology can handle repetitive tasks as workers perform more specialized functions.

The technology “can make them bigger, better and more competitive in the market,” Lyscas said. “[Manufacturers] don’t realize the potential they have.”