Industrial manufacturers inhabit a world littered with uneasiness. Global demand for manufactured products is growing at a snail’s pace. Output is expected to increase just 3.1 percent in 2016 and 3.4 percent in 2017, according to the International Monetary Fund. Growth is dampened by Brexit concerns and political uncertainties. Foreign trade is at historically low levels, and, although oil prices have recovered a bit recently, they are not rising enough to undo the collapse in drilling and concomitant retraction in the rest of the energy supply chain.
More problems could be in the offing. New nationalist governments around the world, including the United States, are threatening to further undermine the free flow of goods, creating more uncertainty and constraints upon manufacturing growth. The ripple effects of any attempts to reset trade agreements would be felt in the industrial manufacturing sector; manufacturers with plants in Mexico and China could see their business models decline quickly under the weight of increased import duties and tariffs. Many will take a wait-and-see approach, delaying capital expenditure investments until more clarity on actual policies emerges.
In a slow-growth environment such as this, productivity gains are paramount. And that could be a boon for industrial manufacturers. Indeed, industrial manufacturers can best serve their customers (and themselves) by designing tools and equipment that improve the efficiency, costs, and performance of factories and other capital projects. Whether enhancing their or their customers’ plants, industrial manufacturers have an opportunity to profit from innovation strategies that build upon advanced manufacturing concepts and the potential of the industrial Internet.
In order to do this, industrial manufacturers must become more aggressive and deliberate in their investments. They should focus on developing technology platforms and new operating models that enable connected products and services and integrate their customers’ operations. For customers, the desire for efficiency and quality improvements are a given, but companies increasingly want visibility deep into their supply chains: They want connectivity tools that provide insight into production levels, inventory and capacity availability, quality levels, and order status from all their suppliers. Capital asset developers are seeking similar capabilities in dealing with the engineering and construction firms that build their projects.
There is a remarkable opportunity here. Yet the industrial manufacturing sector remains risk averse, unwilling to spend on new machinery, software, and talent during a period of protracted slow growth and limited proven solutions. In a recent PwC survey, only 30 percent of U.S.-based industrial manufacturing senior executives said that their companies were planning to increase spending on information technology in the subsequent 12 months. The remaining companies are likely to fall behind.
Of course, new investments alone aren’t enough. Industrial manufacturers need additional skills as well; they must figure out how to manage a superabundance of new data so that it becomes useful and not overwhelming; adapt technology to run their own supply chains and operations more seamlessly; monetize digitization; find talent adept at industrial software programming and analytics; and build strategic partnerships that won’t compete for market share. Below are six actions for 2017 that can help industrial manufacturers profit despite the significant challenges they face.
Productivity Boost
In a slow-growth environment such as this, productivity gains are paramount. And that could be a boon for industrial manufacturers. Indeed, industrial manufacturers can best serve their customers (and themselves) by designing tools and equipment that improve the efficiency, costs, and performance of factories and other capital projects. Whether enhancing their or their customers’ plants, industrial manufacturers have an opportunity to profit from innovation strategies that build upon advanced manufacturing concepts and the potential of the industrial Internet.
In order to do this, industrial manufacturers must become more aggressive and deliberate in their investments. They should focus on developing technology platforms and new operating models that enable connected products and services and integrate their customers’ operations. For customers, the desire for efficiency and quality improvements are a given, but companies increasingly want visibility deep into their supply chains: They want connectivity tools that provide insight into production levels, inventory and capacity availability, quality levels, and order status from all their suppliers. Capital asset developers are seeking similar capabilities in dealing with the engineering and construction firms that build their projects.
There is a remarkable opportunity here. Yet the industrial manufacturing sector remains risk averse, unwilling to spend on new machinery, software, and talent during a period of protracted slow growth and limited proven solutions. In a recent PwC survey, only 42 percent of U.S.-based industrial manufacturing senior executives said that their companies were planning to increase spending on information technology in the subsequent 12 months. The remaining companies are likely to fall behind.
This is part one of a two-part article. Look for part two on April 7.
