What The Next Industrial Revolution Means For Money Management

“We stand on the brink of a technological revolution that will fundamentally alter the way we live, work and relate to one another,” wrote World Economic Forum Founder and Executive Chairman Klaus Schwab in an article published last January.

That technological revolution, some say, is the Fourth Industrial Revolution, and among its targets for disruption is the way businesses trade with each other across borders.

The revolution will be brought about by cyber-physical systems, ones that, according to the WEF, are “blurring the lines between the physical, digital and biological spheres.”

Considering the rise of digital currency, electronic payments, the Internet of Things and Big Data, that revolution may already be upon us. For suppliers and manufacturers, automation and digitization of processes, IoT-connected equipment and the data sourced from those connected machines are already changing the game.

In a survey of CFOs within the manufacturing sector, Siemens Financial Services found that these professionals commonly cite the capabilities for their equipment to capture and analyze data, to automate order processing and to perform quality control as hallmarks of the Fourth Industrial Revolution.

But there is another segment of operations strategically placed for these businesses to succeed in Industrie 4.0: finance.

A new whitepaper by Siemens Financial Services examined how today’s manufacturing CFOs are tackling the Fourth Industrial Revolution and the financial tools they’re turning to in this interconnected, digital economy.

Smart Finance

Siemens refers to this emerging strategy of the CFO as intelligent financial management. Today, smart finance is one of the pillars of success for suppliers and manufacturers, analysts declared.

In a survey of manufacturing CFOs, Siemens found an array of focuses among these executives. An increase in production capacity and flexibility, an increase in operational efficiency and the acquisition of more innovative technology all top the list.

But 73 percent of CFOs also cited an improvement to working capital and cash flow management as a necessity to stay competitive on the cusp of the Fourth Industrial Revolution. Further, 91 percent of these executives agreed that the acquisition of “fourth-generation technology” is vital to meeting this goal.

In other words, financial management is the backbone for a manufacturer to be able to invest in the technology it will need in a new era of business.

“It is interesting to note how, in the minds of leading manufacturers across the globe, financing has now achieved strategic status, enabling the essential new-generation technology acquisition that underpins competitive success in increasingly demanding, fast-paced and global markets,” Siemens stated in its paper.

In its survey, Siemens identified some of the hallmarks of smart finance: “diverse; easy and flexible; expert, appropriate and transparent; and reliable and sustainable.”

According to analysts, these money managers are already upgrading their use of next-level financial management tools, turning away from traditional cash management services, like bank loans.

Commentary from CFOs surveyed highlights the need for more specialized, custom financing. Some executives pointed to their collaboration with a dedicated finance specialist to find the right type of loan, a resource that provides more long-term support for manufacturing firms, they said.

Alternative forms of financing, including invoice, asset and inventory finance, are more commonplace for manufacturing CFOs, the research showed. Asset finance was the most commonly cited form of financing for these professionals, cited by 70 percent of CFOs.

Siemens Financial Services, however, did not explore the role of other types of financial tools — ERP systems, treasury management software and the like — to assess how they’re gaining traction within modern manufacturers.

Still, the findings represent a shift in the way CFOs view the financial resources available to them, Siemens Financial Services said.

“By enabling their companies to acquire essential new-generation technology, manufacturing CFOs are at the forefront of managing a major shift in the industry,” said Siemens Financial Services Head of Commercial Finance for the Americas Gary Amos in a statement announcing the whitepaper.

“Against this backdrop,” he continued, “smart financing techniques have now achieved strategic status for forward-thinking businesses aiming to establish competitive success in increasingly demanding, fast-paced global markets.”