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The manufacturing industry is currently witnessing high-impact changes in the business ecosystem, which are driven by the ever-evolving complexity in buyer behavior, technological advancements and competitive pressures. Based on close interaction with the world’s leading manufacturers, and careful observation of business patterns on the ground, experts have outlined the manufacturing industry’s tectonic shifts and aligned them with the emerging future technology landscape.
Industry analysts have increasingly started referring to next generation technologies such as cloud, big data, mobility, and social-driven IT, in various forums. However, technology on its own is not sufficient. It is the changes in the underlying business model brought about by these new technologies that are reinventing manufacturing.
Key Trends Impacting the Manufacturing World
Trend 1: ‘Consumerization’ of manufacturing – from B2B to B2B2C
The newfound focus on end customers is driving the realignment of business systems inside manufacturing organizations. Given the rapid pace and intensity of market demands, legacy processes and systems fail to help organizations perceive and respond quickly to market changes.
As a result, the industry is witnessing an increase in global transformation programs with leading manufacturers reaching out both formally and informally to the end consumers – thereby driving a ‘consumerization’ of manufacturing. In essence, the industry is gradually drifting from the traditional Business-to-Business (B2B) model towards the Business-to-Business-to-Consumer (B2B2C) model. Evidence of this can be traced in the efforts to:
Trend 2: Virtualization and digitization for all – Global collaboration from product design to customer service
The emerging digital journey of the manufacturing industry leverages the power of high performance computing (HPC), Big Data and predictive analytics, mobility, social media, and interactive marketing.
Companies are increasingly opting for virtual collaboration platforms to work with the globally dispersed supplier base, and using simulation, visualization, and virtualization to understand the product behavior and performance under virtual conditions. This not only reduces the time required for testing, but also enables organizations to test many more scenarios.
It allows for seamless collaboration across a geographically dispersed supplier base. Overall, the favorable impact on the time-to-market for the product is very high. Organizations should, therefore, leverage cloud technologies to enable this collaborative and interactive process of design and development, for it contributes immensely to the virtualization process.
Trend 3: Supply chain network economy for better management of B2C aspirations
Supply chain network economy – a network of interrelated supply chains – is emerging as an important concept, because an efficient and close-knit network of partners in the B2B ecosystem is vital for organizations seeking to fulfill their Business-To-Consumer (B2C) aspirations.
Thus, a next generation supply chain that is scalable and provides visibility from the vendor to the consumer, is absolutely essential. This will play a key role in collaboration across the entire process, spanning the range from demand planning to co-innovation and product development. Historically, the demand signals in the traditional push supply chain were typically out of sync with the market realities when they reached the manufacturer.
Today, the visibility of the supply chain has extended all the way from distributor to supplier, allowing for agile planning as well as lower inventory carrying costs. So, while continuous process industries are looking at engaging the distribution channel, aircraft companies are integrating suppliers.
There is an impact on production planning aspects – a shift from ‘Made to Stock’ (MTS) to ‘Engineer and Assemble to Order’ is visible. Today, the large focus is on giving customers options, allowing them to configure product specifications, assess cost implications, and in some cases even visualize the end product. This is not only being witnessed in the discrete manufacturing industry, but is also gaining popularity in the continuous process industry.
Trend 4: Complexity reduction and modularization of business
Having built or acquired a complex set of products, processes, and companies, manufacturing firms are looking for ways to simplify internal business operations while staying in touch with customers. By enriching the established concepts of standardization and harmonization, and by attempting to simplify them, manufacturing firms can bring down the cost of doing business and respond to market shifts faster.
To make it easy for customers to interact with the organization, it is imperative to have a customer-facing perspective which integrates all interface points under a common front-end. The manufacturing industry has gained a lot from the evolution of the retail industry over the last decade in this regard. Focus on modular production facilities that enable faster ‘lift and shift’ operations is coming into play, allowing firms to move their centers of production closer to the point of demand. At the heart of it, lies the inherent componentization and modularization of business.
This modularization is being driven by the critical need to surpass the industry’s time-to-market expectations and to stay ahead of the competition. The ability to mix and match product components further provides the opportunity to create a diversified portfolio which meets the demands of the end customer.
Trend 5: Product design, material science, and sustainability
Today, trends across industries point to an increasing use of materials that are high on performance, low on cost, and even lower on carbon footprint. Sustainable manufacturing not only requires environmentally sustainable end products, but also calls for fundamental shifts in the underlying design, in order to favorably impact the supply-side footprint.
Application of next generation material science technologies on these breakthrough materials enables organizations to create significantly differentiated products. Manufacturing firms that stay ahead of the curve would be able to create significant long term competitive advantage, going beyond the current dimensions of competitive comparisons.
Trend 6: Next Gen technology – Hybrid crossover solutions
We believe that transformation opportunities are numerous when companies cross traditional business boundaries. Hybrid solutions that help such crossovers are mandatory, and this calls for next gen solutions. This is evident in the infotainment industry, where embedded electronics, telematics, mobility, telecom services, and conventional engineering systems are converging to create compelling value propositions.
In addition, mobility, connected marketing, social media, listening services and Big Data-related business insights are accelerating a change in business model to B2B2C. Volumes of published research are available on this topic, leaving no need for elaboration. However, the fact that these technologies are being deployed to solve manufacturing-specific problems today is indicative of an entirely new emerging business process.
A few innovative changes that truly point to the advent of the ‘future of manufacturing’ are the application of mobility to address shop floor productivity and the ‘takt’ rate, utilization of ‘listening platforms’ that digitize a customer’s voice to analyze the implications on product design, etc.
Trend 7: Evolution of the manufacturing model
The demographic evolution of the market, already in evidence for the last decade or so, is driving a fundamental shift in the manufacturing philosophy. Large centralized manufacturing units have now given way to a network of smaller modular factories, which are closer to centers of demand. This places tremendous pressure on logistics and supply chain optimization, as enterprises look to achieving the benefits of lean processes in a widely dispersed setup. Visualization and tracking technology play an important role in this process enablement.
Many of these facts have also been discussed in the IDC Manufacturing Insights report, ‘Rethinking the Factory of the Future’, February 2012, which seeks to understand from the manufacturers where the sources of differentiation will come from in the next five years.
The research indicates that price leadership, customer fulfillment, service leadership, and complexity reduction, are going to be the primary focus areas going forward. The research also highlights the inherent shift of consumption towards custom-built products, modularization, and the emergence of factory networks.
We believe the next gen manufacturer would look very different from the kind we see today. You can expect to see a much more customer-focused and agile set of organizations, as they leverage the new innovations in business and information technology. Traditional businesses will not change, but the convergence of innovative technologies to change business process and models will bring in greater agility.
The new business model based on the mega trends will be the key differentiator between competing firms. Therefore, firms must prepare themselves today to remain relevant tomorrow. Firms that will adapt faster, embrace the digital wave better, and clearly identify the defining elements of the end consumer’s new center of gravity, will remain at the forefront of the industry.
Global manufacturers are trying to reduce operational expenditure, invest in process improvement, utilize existing capacity optimally and increase efficiencies, while maintaining product quality and meeting safety and regulatory norms.
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