2017 Manufacturing & Logistics Industry Trends
The rapid change in consumer demands and advances in technology have caught up with the manufacturing industry and require it to rapidly adapt and adopt the new norm. Here are some highlights of key drivers where our clients are asking for help.
Industry 4.0 – Industry 4.0 which “connects embedded system production technologies and smart production processes to pave the way to a new technological age which will radically transform industry and production value chains and business models.” was conceived in 2010 based on the increasing use of cyber-physical systems (CPS). In 2011, Industry 4.0 was coined and the German Federal Government made it a “Future Project”. IIoT (Industrial Internet of Things) is enabling the advancement of this “industrial revolution” and creating fast paced change in the sector. The IoT is a crucial—perhaps the most crucial—element of Industry 4.0. The IoT concept has gained traction in recent years as the importance of connectivity—both in creating products and services and increasing satisfaction among customers and clients—has become better understood. Currently, a host of connected technologies is advancing rapidly, including high-quality sensors, more reliable and powerful networks, high-performance computing (HPC), robotics, artificial intelligence and cognitive technologies, and augmented reality. Taken together, these technologies can change manufacturing in profound ways.
Adoption of Industry 4.0 is real and requires patience, strategic analysis and prudent investment with a definitive ROI.
The economic factors in play for 2017 include a new Administration that fully supports a domestic manufacturing environment. Productivity gains in the U.S. combined with rising labor costs outside the U.S. have made our market more competitive. In a sector that is traditionally very low growth (3%) with slim margins, this requires transformation to take advantage of the shift in economics and sentiment.
In a slow-growth environment such as this, productivity gains are paramount. And that could be a boon for industrial manufacturers. Indeed, industrial manufacturers can best serve their customers (and themselves) by designing tools and equipment that improve the efficiency, costs, and performance of factories and other capital projects. Whether enhancing their or their customers’ plants, industrial manufacturers have an opportunity to profit from innovation strategies that build upon advanced manufacturing concepts and the potential of the industrial Internet.
Customer Experience – industrial customers are feeling the “amazon effect” and wanting faster response times to orders, better customer service and multiple platforms to order from. No more EDI or fax orders. Customers want more personalized products leading to more customization demand which then drive the need for more innovation, process and production configurations.
One critical challenge for manufacturing and logistics is the number of unfilled jobs and the expanding skill gap that is occurring in the U.S. Skills needed to support Industry 4.0 are not traditional but revolve around data analytics, robotics, customer experience, innovation and product management. These new skills are in demand in other industries (Silicon Valley) so that makes them very expensive to acquire.
The crucial risk point with IIoT and IoT is cybersecurity and ensuring that manufacturers do not take it for granted and define the right procedures, invest in advanced monitoring technology and resources to maintain barriers to cyber criminals.
Data, Data and More Data – Now more than ever with IIoT, advanced robotics data is being captured and stored at an exponential rate. By upgrading their technical capabilities, industrial manufacturers can bundle a variety of services enabled by connectivity and data, replacing the increasingly outmoded model of selling one big complex machine under warranty and a service agreement for maintenance and repair. These new services can include condition-based maintenance, which involves ongoing real-time monitoring of equipment to determine its maintenance needs; collaboration with customers on a day-to-day basis to customize asset optimization; and predictive performance management for large and small projects and equipment. With this approach, the breadth and value of the services provided by the industrial manufacturer can enhance customer retention and lead to deeper and more lucrative commercial engagements.
In summary, manufacturers have warmed up to the new technologies and customer requirements that are transforming the industry. The question now is will they modify their business models enough to leverage the trends or be too conservative and risk narrower growth and margin percentages.
Contact Moss Davis, Principal
Manufacturing & Logistics Industry Lead