The market headwinds of intense global competition, slow to modest growth, public sector budget constraints, and Euro-zone instability continue to challenge industrial manufacturing companies to transform their business models and their cost structures in ways unimaginable only a few years ago. In the midst of the continuing focus on cost, some might say that manufacturers have hunkered down to weather the storm. To the contrary, we believe this year’s Global Manufacturing Outlook (GMO) reveals that these companies are positioning themselves for a new era of growth driven by innovation, collaboration across the value chain, and rapidly changing manufacturing and decision support technology.
On the innovation front, nearly one-third of the respondents to this year’s survey indicated that they intended to pursue “breakthrough” or “disruptive” innovation strategies in the product development area. Further, there was a marked (15 percent) increase in the number of respondents increasing their R&D budgets to 4 percent or more of their revenue, an upward trend we believe will continue over the next 2-3 years. Finally, the innovation process is quickly shifting to a “partnership model” bringing together internal resources, customers and suppliers, third party research, and external funding sources. Speed to market, enhanced products, and the right innovation business model will ultimately be the differentiator in the battle for global market share.
The economic impact of the evolution of the supply chain over the past few years has been dramatic. The concept of nearshoring or sourcing/manufacturing closer to the end market to reduce cost and risk was a hallmark of the post-recession recovery. As the recovery gained momentum, new models of cooperation and collaboration between OEM’s and the value chain helped to optimize processes and further reduce cost. As you will see from the 2013 GMO, the next wave of supply chain gains will be the most dramatic yet, with a new spirit of partnership, transparency, and visibility across the value chain creating enormous economic value from a technology-enabled demand-driven supply chain.
Underpinning the new models in innovation and supply chain is the extraordinary advancement in the technology to support everything from the R&D and manufacturing processes to decision support and data analysis tools, as well as supply chain visibility and other business intelligence needs. The emergence of niche players coupled with the capabilities of the traditional players will make this a technology-rich environment for global manufacturers. Exploiting these technologies and managing the resulting explosion of data will be critical to remain at the top of the competitive heap.
One thing we know for sure, the volatility that we have seen the past 5 years will continue and the strategies, relationships, and tools to compete in this ever-changing environment must become much more sophisticated. We hope that you will find this year’s GMO thought provoking and stimulating as you consider your company’s plans for driving growth and prosperity in the continuing “manufacturing renaissance.”
Global Sector Chair, Industrial Manufacturing