Opportunities and Risks Shaping the Future of Manufacturing

An improved global economy is leading to a long-awaited rebound in manufacturing. With this boost comes both opportunities and risks for the manufacturing sector’s success.

Johan Stakeberg

An improved global economy is leading to a long-awaited rebound in manufacturing. Orders for new durable goods have increased steadily, bringing jobs and an uptick in the economy to regions around the world. 

With this boost comes both opportunities and risks for the manufacturing sector’s success. Emerging markets outside of the United States and Europe, as well as technologies like the Internet of Things (IoT), will play a critical role in shaping the future of this space.

To prepare for 2018 and beyond, manufacturers must identify these opportunities and risks, and set plans in place to navigate this ever-evolving world. Those who succeed will not only boost financial performance, but also enhance the customer experience. 

What are some of the biggest opportunities for manufacturers to succeed? 

As manufacturers across industries and verticals sought new and alternative ways to boost revenue and margins, many companies moved production to areas like China and India to decrease costs. While manufacturing slowed down in China after decades of intense growth due to rising labor costs, negative environmental impacts and intellectual property theft, the country’s "Made in China" initiative aims to modernize factories with advanced manufacturing technologies like robotics, 3D printing and the Industrial Internet of Things (IIoT). As this initiative pans out, manufacturers will have to weigh if China is still the most cost-effective option, or if it’s more economical to bring manufacturing back to the United States or Europe. 

Additionally, many of the world’s businessesregardless of industryare moving to subscription-based models. In the manufacturing space in particular, this means customers agree to in-use hours set forth in a service level agreement, essentially creating a model where customers are buying a service instead of a product itself. This "power by the hour" model is already prevalent in the aerospace industry, and is starting to emerge in similar industries like high-tech and heavy equipment. 

What disruptors do manufacturers face in today’s changing world?

Manufacturers face more disruptors than ever. One of the most prominent risks comes from third-party parts providers entering the service parts space, especially companies based in far-east and African countries and major e-commerce players like Amazon and Alibaba. Manufacturers must adopt new business practices and invest in sophisticated cloud-based technologies that enable them to remain competitiveand winagainst these large, well-known brands. Customers will pay for convenience, and brand loyalty is less of a factor than ever, so the manufacturers that succeed will make the necessary enhancements to compete. 

While each industry faces its own unique challenges, several emerging technologies are starting to play a major part in mostif not allmanufacturing sectors. Artificial intelligence (AI) and machine learning are powering a shift to predictive maintenance, replacing parts before they have even failed. Companies like Uber, Amazon and Zappos have made the on-demand economy the norm, and these high levels of customer expectations have carried over into other industries. Leading manufacturers must adopt emerging technologies to compete, especially on the service side of the business, equipping products with sensored parts that are constantly feeding data back to the manufacturer in real-time. The companies that aggregate this data and act on it to deliver an improved customer experience will win.  

What does the future look like in manufacturing?

The future of manufacturing lies in after-sales service. More service-related conversations are occurring at the C-level, and the head of service now has a seat at the table. According to The Service Council, upwards of 27 percent of manufacturers’ total revenue comes from service and provides a gross margin of 39 percent, says Bain and Co.and executives are taking note. 

To increase the efficiency of after-sales service and maximize financial performance, manufacturers will have to shift from a break-fix, reactive model of service to one that maximizes product uptime. Early adopters of this mindset will lead the way, properly leveraging IoT to meet demanding customer expectations. The future of service moves from a "just-in-case" model to "just-in-time," and those that move in this direction will win.

For more insights on the subject, read Syncron's latest report, 2018 After-sales Service Predictions: Strategies for Empowering Manufacturers to Deliver Game-Changing Value, in its entirety.

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