More than two-thirds of manufacturing executives expect their firms to undergo significant business process transformation over the next three years

The path to transformation for manufacturing

Manufacturers are transforming their businesses in fundamental ways to respond to market shifts and technology trends.

The research by Oxford Economics – presented at PTC Live in Anaheim, California – explores the factors driving a strategic transformation in the global manufacturing industry.

The research, which involved both qualitative and quantitative inputs from 300 executives from around the world, also identifies the strategies that manufacturers are adopting to transform their businesses and differentiate themselves for competitive advantage.

Global manufacturers are at an important industry inflection point, the study found. Market and technological forces are upending many time-honoured assumptions within the manufacturing industry.

As a result, more than two-thirds (68 per cent) of manufacturing executives surveyed expect their firms to undergo significant business process transformation over the next three years.

“Our survey and interviews with market leaders show that manufacturing companies are transforming their businesses in many fundamental ways to respond to market shifts and technology trends,” Lou Celi, president of Oxford Economics Americas, said.

“The priority for manufacturers today is to make better things – creating innovative and distinct products and services that meet customer needs – while continuing to make things better.

“True competitive advantage can only be achieved by tightly coupling the engineering, service planning and execution, management, and production processes through which innovation can evolve from conception to execution, and by creating a closed feedback loop to ensure continual improvement and alignment across the business.”

The research found that successful transformation initiatives were grounded on three broad themes – rethinking strategy and planning, adopting the service imperative and fostering innovation.

The importance of the decisions on how a company engineers, sources, manufactures and services its products, and coordinates these processes eclipses operational execution as a competitive driver for most industry sectors.

For example, the study found that manufacturing executives are placing an increasing importance on the coordination of strategy and planning between engineering and service divisions, growing from 54 per cent of respondents today to 73 per cent in three years.

Historically, the service dimension of manufacturing focused on repair and maintenance. Market leaders are now blending their products and service capabilities into new performance-based offerings.

This will be the key to true differentiation, as well as providing a significant revenue boost and a guaranteed annuity stream. In fact, 77 per cent of C-Level respondents indicated that they will enhance services as a key way to differentiate their products in the marketplace.

Finally it discovered that the emphasis on innovation will grow even more during the next three years with increased efforts in product strategy and engineering.

Reverse innovation is a specific aspect that is growing more popular, as firms design products for emerging markets and bring them to developed ones (35 per cent of surveyed manufacturers practice this today as against 50 per cent in three years).

Based upon the research, Oxford Economics concludes that well-executed transformation efforts can produce significant business results.

To quantify those results for manufacturers, the report includes a business-impact model that estimates how changing transformation priorities – rethinking strategy and planning, greater emphasis on service, and innovating everywhere, including in the area of manufacturing operations – might affect revenue and costs.

According to the study, manufacturers will choose a variety of approaches to transform their businesses, and may adopt multiple strategies in response to market shifts.

Among the more compelling findings are the concept of ‘design anywhere, build anywhere, service anywhere’ along with the continuing trend for smart products, which consist of mechanical components, electronics, and software. Also 3D printing and additive manufacturing will grow 123 per cent in use.

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