"Metals and mining organizations recognize that – when the upcycle does return – they will need to be much more agile and efficient in order to drive profitable growth. Cognitive computing, AI, automation and self-driving vehicles will be critical in helping organizations take advantage of new growth opportunities as they arise." – Eric Damotte, Global Head of Metals, KPMG International
Metals organizations expect to pour significant investment into R&D over the coming years in an effort to drive new growth and open new markets. But with just 19 percent saying they will change their range of products and services, it seems that few organizations will find sufficient opportunities to put their R&D investment capital to work.
According to respondents, 43 percent of metals manufacturers will spend more than 6 percent of their revenues on R&D over the next 2 years. Amazingly, one-in-six say they will spend upwards of 10 percent of revenues on R&D in the same period. And whereas 16 percent say they spent less than 1 percent of revenues on R&D in the past 2 years, all of our respondents say they will spend at least 2 percent of revenues on R&D going forward.
"Given the current market environment, it is unlikely that metals organizations will ultimately invest as much capital into R&D as they currently anticipate, particularly given the focus on cost cutting, but the ambition is certainly a welcome sign," notes Eric Damotte, Global Head of Metals at KPMG International. "In many cases, metals organizations are investing into ‘incremental’ R&D that responds to a specific customer requirement rather than pouring capital into developing new ‘breakthrough’ products or services."
What is clear, however, is that metals organizations plan to channel significant investment towards developing and implementing new manufacturing technologies aimed at driving efficiency and improving performance. Just over a quarter of metals respondents say they have already invested into additive manufacturing and 3D printing, and 27 percent say they will definitely invest more in the future. One-in-six say they have already invested into AI and cognitive computing solutions; a third (32 percent) say they will certainly invest more.
"While technology may not be a top agenda item for miners, there has been a lot of capital invested into applying technology to improve operational efficiency – self driving vehicles, real-time information about production and automation, for example," notes Richard Sharman, Global Head of Commodities Trading at KPMG International. "However, given the current capital constraints, some technology initiatives seem to have been shelved for the time being."
Maybe the greatest focus for R&D investment, however, seems to be towards robotics with 42 percent of respondents saying they will definitely invest in this area over the next 2 years. Around on-in-six have already invested in this area. "There are only two ways to grow the bottom line – increase your market share with new and innovative products or improve your efficiency and productivity," notes Eric Logan with KPMG in the US. "With fixed labor prices on the mining side and diminishing returns from labor arbitrage on the metals side, organizations are looking for opportunities to lower their costs and improve their uptime through automation and robotics."
How are leading metals organizations responding?
How are leading mining organizations responding?
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.