Large global manufacturers are setting their sights on top-line growth over the next two years, focusing on new products, strategic acquisitions and alliances, innovation and increasing production capacity in high-growth markets. According to KPMG’s 2011 Global Manufacturing Outlook*, top-line growth is now the priority for manufacturers worldwide, followed by cost containment and product quality. The focus on growth reveals a clear shift from manufacturer’s strategies for the previous two years which saw top-line growth and cost containment as equally important.
The survey reveals that more than half of manufacturers globally (56 percent) are planning to sell new products in new and existing markets over the next two years (up from 37 percent). In the UK this shift is reflected with 30 percent of manufacturers expecting to sell new products in both existing and new markets (up from 13 percent).
Jeff Dobbs, KPMG’s Global Head of Diversified Industrials comments: “Recent economic events in Europe and US may have likely clouded manufacturers’ optimism somewhat. However, the lessons learned from the economic uncertainty, political instability, and historic natural disasters of the past few years have taught companies they can survive these challenges with lean agile operating structures, enhanced risk management practices, and a focus on innovation. Today we are seeing that despite an increasing set of cost challenges, manufacturers are realigning their business models to prioritize top-line growth.”
Other key findings:
Top 5 countries from which manufacturers expect to increase sourcing over the next 12 – 24 months: China (42%), USA (36%), India (30%), UK (13%) and Germany (10%)
Key challenges for businesses over the next 12 – 24 months: Price volatility on key input costs (44%), uncertain demand (35%), Lack of access to capital and credit (10%)
Top 5 countries for new business growth: China (40%), USA (41%) India (30%), Brazil (20%), Germany (13%)
Primary approach for achieving new growth: Increasing production capacity (28%), Joint Ventures & Strategic Alliances (25%), Investing in research and development (22%)
Stephen Cooper, KPMG’s UK Head of Diversified Industrials, comments: “Many companies emerged from the downturn with significantly reduced cost structures, more cash and liquidity, and an absolute focus on their customers and markets. These businesses have the mindset and strategy to define the standard of success in the next five years.”
Grooming Supply Chains for Growth
To better manage volatility, 56% of manufacturers say they are reshaping their supply chain models. Standardisation is one of the key strategies – 55 percent of manufacturers plan to standardise their production process while 45 percent will require standardised inputs.
Nearly half of respondents say they will invest in technology to improve visibility across the supply chain, the single most important tool for managing risk. Other measures include helping suppliers develop risk management standards and assessing supply chain processes.
*Note to Editors:
About the 2011 Global Manufacturing Outlook
KPMG International commissioned the Economist Intelligence Unit to survey 220 senior manufacturing executives responsible for, or significantly involved in, finance, supply chain, procurement or strategic development. Respondents represent the aerospace and defense, metals, engineering and industrial products sectors, including industrial conglomerates. All participants represent companies with more than US$1 billion in annual revenue; 40% hail from organizations with more than US$10 billion in revenue. Nearly half (47%) of respondents are C-suite executives or board members. They are geographically split between Western Europe (31%), North America (30%) and Asia-Pacific (25%), with the remainder coming from the rest of the world.
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