5 trends that can be shaped into new future opportunities

Changing times for machine Electric , , and changing customer demands are all having an impact on manufacturers and dealers of machine tools. This spans everything from small mounted tools to large , , grinders, lasers, multi-tasking machines and automated robotic tools. As a global financial solutions provider and 100% daughter of Rabobank Group, we have collected the top 5 trends to keep in mind for future opportunities. “Investment spending is increasingly being driven by initiatives to lower costs, and/or take advantage of automation and data/ information. Machinery and metal products which lend themselves to areas of advanced processes such as automation and electric vehicles are set to benefit in the medium to long-term as they become more widespread across economies.”1

“At DLL, we closely monitor trends in machine tools and other industries, because we actively support new business practices and that help our customers remain relevant and competitive in their sector,” says Steve Hope, DLL Program Manager CT&I, Canada.

“In this report, our DLL experts in machine tools share their perspective on the latest trends and the challenges they pose. We suggest ways for OEMs and dealers to prepare for these challenges and even leverage them to create new sales growth and operational efficiencies.”

1Source: Oxford Economics

2 Electrification offers new opportunities according to a report from the German Machine Tool Industry. Noise emission reductions still need to be achieved in transmission manufacturing. There is an increasing need for protection against component wear due to switching between electric drive and combustion mode at high speeds. New brake system designs are needed because of the high weight of batteries. Turbocharger upgrades will be needed across the board. Also critical is the potential of upcoming production systems for manufacturing electrical components such as batteries, traction motors and power electronics.2

Trend 1 Electric vehicles DLL’s view on this trend Transitioning from ICE to electric supply chain Electric come in all types, from compact to Leverage broad coverage and experience luxury. As advances, the price tags of financing sustainable technologies electric cars are getting more and more interesting “This transition period represents a huge and sales are running up. Given the simplicity of how change and new risks for the automotive an electric is manufactured as compared to market. It will require different knowledge and a vehicle with an internal combustion engine (ICE) business approaches from OEM’s and dealers – 20 moving parts on an electric vehicle versus some in machine tools to address these factors. DLL 2000 parts for an ICE – this will have a knock-on brings broad experience across industries to effect all the way down the supply chain, especially help players in machine tools address their for Tier 2 and 3 suppliers and small players. Either challenges. Our financing solutions can help they adapt or they are going to have a difficult time if you leverage the opportunities in transitioning they rely on the traditional automotive supply chain. from ICE to electric, without running into risk issues with lenders immersed in the How do you deliver what the fast-changing automotive market. DLL and Rabobank are also market is looking for? at the forefront of sustainable business As a result, there are potentially less customers initiatives, and our knowledge of Lithium Ion for both OEM’s and dealers. However, it is expected Batteries, will help us provide a trusted source that there will be a long transition period when hybrid for both OEM’s and dealers as their typical end vehicles (which combine a combustion engine with user customer evolves”. an electric motor) are dominant. These will add to Adrian McGready, DLL CT&I Business even greater manufacturing complexity and will Development Manager, Australia. increase metal cutting volume. At the same time, there will also be new entrants into the market such 2VDW Market Report. (2018). The German Machine Tool Industry and its as battery producers and technology companies. Position in the World Market. German ’s Association. OEM’s in particular must adapt to the changing market and to new entrants, to ensure that their products continue to deliver what this fast-changing market is looking for.

3 Trend 2 Automation – Industry 4.0 DLL’s view on this trend The race to produce automated/ Leveraging more flexible financing options and robotized machines robotics partnerships Increased automation (certainly in North America) Traditionally, the machine tool market is very has been a trend in the manufacturing space for ownership driven. However with advances in 10+ years as businesses try to compete against technology like automation, there is likely to be offshore companies, particularly in India and China, more of a requirement for financing options that by reducing their wage and benefit overheads. In help customers take advantage of new terms of technologies, Technavio and Allied Market technologies as quickly as possible, while giving Research report that the CNC solutions market them the flexibility to return the equipment at (which is about 25% of the total market) will advance the end of a contract. by close to 6% CAGR in the coming years alone.4 So OEM’s have had to make sure they are “DLL has experience in financing the actual manufacturing machines that are becoming more machine tools, and can also cover the digital and and more autonomous to satisfy customer demand. software part of the equation. To address the Industry 4.0 will take this to another level with digital complete needs of your customers, we can pull solutions such as cloud computing, cognitive together an integrated product offering, computing and artificial intelligence helping to work including all hard and soft costs.” towards fully integrated smart manufacturing. Gianluca Menni, DLL CT&I Country Sales Manager, Italy. How do you integrate your machines with other partners? DLL’s track record in leasing automation OEM’s have been able to work on automation of equipment is fueled in part by our global vendor their equipment, however, this has primarily been on partnerships with some of the leading robotics a stand-alone basis. They now need to integrate companies in the world, including including AVG their machines with other partners, such as robotic (Automated Guided Vehicle) manufacterers, manufacturers (or include this as part of their robotic equipment suppliers and integrators manufacturing offering), to allow their customers to who provide complete automation solutions for create a true smart manufacturing facility. From an supply chains. Through these partnerships we OEM’s perspective this is likely a costly exercise in have been able to develop financing solutions terms of R&D to keep ahead of their competition, for a wide variety of automation equipment, and drive what their customers are looking for. from autonomous mobile robots (AMRs) and AGVs to palletizing robots and collaborative robots (cobots) for virtually any production, Machine tools: the instruments that make the manufacturing and logistics task. machines. This area is set to benefit the most from industry 4.0 and continued gains in advanced 3Market Report. (2019). and metal goods. Q2 2019. Oxford manufacturing as well as the integration of robots Economics. into the production line.3 4Market Report. (2016). Global Solutions Market 2017-2021. Technavio Research.

4 Trend 3 Integration of 3D printing An urgent need to embrace 3D printing How do you cost-effectively invest in 3D printing? Additive manufacturing (3D printing) has been All major OEM’s need to have a 3D product offering described as the most disruptive technology in as this technology continues to evolve. This will the manufacturing sector in the 21st century. Some result in expenditures on R&D, engineering and OEM’s who specialize in 3D printing machines (such product launch. They also have to be mindful that as as EOS, 3D Systems & Stratasys) continue to 3D printing becomes more and more common upgrade their machines as their customer base in the production process, it could mean less of a moves more towards full production after years of market for traditional machine tools. Additive prototyping. Other OEM’s of more traditional machines and traditional machine tools will certainly machine tools, have realized the potential of 3D co-exist in the future, however, OEM’s and dealers printing moving forward and have pushed to get must be proactive in ensuring that they can satisfy their own machines to market, with varying levels of the demand for both. Interestingly one Japanese success. Eventually all leading OEM’s would like to manufacturer Yamazaki Mazak utilizes 3D printing in have a 3D machine as part of their product offering, the production of its standard CNC machines. however, as the technology continues to evolve entrance to the market is difficult to determine. DLL’s view on this trend

Leveraging experience in 3D printing and “The number of manufacturers using 3D printing machine tool assets for full-scale production has doubled compared to “DLL already has experience in the Additive last year (40% in 2019; 21% in 2018). Two-thirds of Manufacturing space and recently closed one companies reported they have more than doubled of its first 3D machine deals in Canada. Where their use of industrial-scale additive machines in their manufacturing, and 47% are now using the we think DLL can be successful is working with technology for runs of thousands of printed parts, OEM’s, dealers and direct customers who utilize a jump of 17% compared to 2018.”5 both traditional CNC and additive manufacturing.” Steve Hope, DLL Program Manager CT&I, Canada

5Langnau, L. (2019, November 19). Essentium research reveals key trends in additive manufacturing. Retrieved from https://www.makepartsfast.com/ essentium-research-reveals-key-trends-in-additive-manufacturing.

5 Trend 4 Higher precision machine tools

From Macro to Micro to Nano technology As customer requirements and expectations continue to demand greater precision and tighter tolerances, the move has continued from Macro to Micro to Nano technology. Machine tool OEM’s must keep on top of these trends and ensure that the machines they are producing keep up with the demand. Additive manufacturing also plays a major part in the higher precision machines and we have covered that above.

This is explained in more detail in the book Micromanufacturing Engineering and Technology. DLL’s view on this trend “Ultraprecision machine tools play an important role in the implementation of micro-/nano-cutting, Leveraging the efficiency of digital while they directly determine machining accuracy, financing tools , producibility, and repeatability. There “Again, DLL will partner with OEM’s and dealers have been great market demands for ultraprecision to get an understanding of the high precision machine tools, which are capable of machining machine space, and our knowledge of their increasingly more complex-structured components customer base will allow quick turnaround for and products (e.g., axially asymmetric surfaces and processing credit applications. This is a very free-form surfaces) with greater accuracy and finer profitable and specialized part of the machine surface finish, and with any newly emerging tool business, and usually attracts strong credit materials for high-throughput and cost-effective profiles. One strength that DLL brings to this manufacturing. These demands and requirements area is its advanced digital tools that help have led to the significant development of a new simplify and speed up each step of the sales 6 generation of machine tools.” process. DLL offers mobile applications, online pricing tools and an electronic signature app. How do you manage costs? That means before a customer comes through As with most of the other trends the cost of keeping the door, a dealer already knows if they can do on top and ahead of the competition is something the financing deal. This reduces time- that the OEM’s must manage. The positive part is consuming paperwork and delays, while that as their machines become more and more allowing customers to immediately sign the precise it opens more markets for their customers. contract on the spot” Medical and dental are a good example of a market Marijke Verspeek, CT&I Strategic Marketing that requires micro manufacturing and very high Manager Europe & Asia: precision. As customers offer more to these markets, the demand for their products and for more machines will increase. As with most other 6Sun, X and Cheng, K. (2015). Micro-/Nano-machining through Mechanical machine tool trends the initial cost of the Cutting in Qin, Y (Ed). Micromanufacturing Engineering and Technology, Second Edition (pp 35-59). Elsevier. technological advancements will eventually result in increased revenue and profitability, however, the challenge as with any business is to cash flow the growth trajectory.

6 Trend 5 Streamlining the supply chain DLL’s view on this trend Global supply chains Traditionally OEM’s will base their supply chain on Leveraging the resources of a global certain geographical regions, like Western Europe or financing partner the Americas. But today, businesses are taking a Taking leasing programs across borders. At more holistic view of their processes as a way of present leasing programs offered by OEM’s and improving efficiency and flexibility in serving the their dealer network appear to be very changing demands of their customers. Trying to fragmented. The dealer often has to create balance profitability with service level commitments, local relationships with leasing companies in they consider leveraging economies of scale for their area. This takes away the advantage of everything from credit approval processes, contract scale that the OEM can offer, as well as a preparation and marketing activities to inventory consistent approach on global leasing and and channel cost strategies across the board. finance programs. DLL has proved to be the number one global finance partner for OEM’s in How do you realize economies of scale with your sectors such as Material Handling and financing programs? Construction Equipment and we can use this This can require a change of mindset for many expertise in the machine tool industry. By companies who take a compartmentalized approach partnering with a global provider like DLL, gives to their sales processes, for example. It also requires an OEM the confidence to authorize shipping companies to build relationships with globally of a machine prior to full payment since there is oriented partners who have the experience and full transparency of the leasing or finance infrastructure to deliver global efficiencies that company they are working with. meet local requirements. Taking leasing programs from one continent to another. From an OEM’s perspective the If you are an OEM or Tier 1 manufacturer, your fact that they can offer a global standardized supply chain is almost certainly becoming leaner finance solution would make a lot of sense, and must adapt to a much faster pace. At the same rather than relying on dealers’ local time, your products are growing more complex and relationships. They would also be able to work business considerations force you to focus with DLL to discuss options such as subsidy, increasingly on core competences and outsource rebates, loss pool’s, etc to offer a solution that non-core activities. Typically you have hundreds of their competitors typically do not. From a suppliers, manage thousands of parts and operate dealer perspective they will likely receive several global factories. In order to deliver high- quality products, your supply chain requires to be preferential finance options (backed by the size well-engineered and professionally constructed. and scale of the OEM) and they also do not Regardless of whether you are an OEM or Tier 1 have to take the time to source finance options manufacturer, you understand that your operations on each deal. need to be demand-driven and that you must increasingly take supply chain collaboration into 7Verchére, F. (2020, March 31). Discrete Manufacturing. Retrieved from account in your end-to-end collaboration strategy.7 https://www.quyntess.com/industries/discrete-manufacturing

7 www.dllgroup.com

Carving out success In summary, the landscape of machine tools is rapidly changing, requiring new strategies from manufacturers and dealers if they are to continue to thrive and grow.

Are you one of these challenges? – Transitioning from ICE to electric supply chain – The race to produce automated/robotized machines – An urgent need to embrace 3D printing – New requirements moving from Macro to Micro to Nano technology – Leveraging economies of scale with global supply chains

Whatever challenges your business faces in the rapidly changing machine tool industry, we want to help you succeed. If you are interested in how DLL can help you create new opportunities for your business, you should get in contact with your local DLL Finance representative. By combining our strengths, we can come up with creative ways to keep your enterprise moving forward towards the future.

For more information please contact us

Region Americas: Region APAC: Steve Hope Adrian McGready E [email protected] E [email protected] T +1 9059016300 T +61.291135047

Region Europe: Gianluca Menni E [email protected] T +39 0263694224

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