It was Heraclitus, a Greek philosopher, who said, “Change is the only constant in life,” highlighting the strong need to always expect and plan for change throughout our lives. This is certainly true for the manufacturing industry as cultural and technological changes increasingly place unexpected demands on businesses.
While change in and of itself is nothing new, the accelerating pace of change creates risks and opportunities in the markets manufacturers serve and the way in which they manufacture. The changes include, but are not limited to, geopolitical instability, changing business models, cybersecurity concerns, digitally connected products and increasing customer demands. Choosing to ignore these changes does not prevent them from affecting your organization but does require a more rapid and dynamic response to stay ahead of the competition. Adaptability and responsiveness are now competitive advantages as manufacturers strive to stay at the forefront of business changes and demands.
The following trends serve as examples of the changes impacting manufacturers today and the markets they serve:
XaaS via Connected Products
The term Anything as a Service (XaaS) – the essence of cloud computing – is becoming the new business model. This can be thought of in the context of jobs to be completed with the assistance of connected products. General Electric pioneered XaaS by rethinking their jet engine manufacturing business and offering to sell thrust hours versus selling just the physical engines. To do this effectively, data access and intelligence is needed to optimize the outcome. The Internet of Things (IoT), connected products and advanced analytics enabled by machine learning make this possible across a growing number of use cases.
XaaS is rapidly expanding to products much less expensive than multi-million dollar jet engines. For example, fast food restaurants don’t necessarily want to buy fryers. They do, however, need to reliably deliver fried food. The expectation is that the kitchen equipment manufacturer will monitor and service the fryer via connected products to eliminate downtime.
These expectations shift the internal focus of the manufacturer. Products are being re-engineered to be IoT-ready and support remote monitoring. Information systems capable of serialized track-and-trace and lifetime unit history must be created. Service-based intelligence rather than traditional mechanical features becomes the imperative for winning the next fryer or aircraft engine order.
Rising Transportation Costs and Changing Retail Landscape Require Supply Chain Adaptability
Rising and fluctuating transportation costs consistently impact manufacturers. To protect margins, manufacturers need to ensure they have the right inventory, in the right place, at the right time, to minimize costly movements. This increases global sourcing costs and creates new opportunities to push final assembly closer to the customer. Regional contract manufacturers are becoming a critical part of the greater manufacturing strategy. Transportation costs also create incentives for 3D printing/additive manufacturing as printing products on-site can help to avoid shipping costs.
Changes in retail can impact who manufacturers sell to and introduce new market opportunities. 44 percent of online sales last year went through Amazon. 50 percent of product purchase searches start on Amazon. Online purchases of food are increasing at 20 percent annually. How should manufacturers respond to these changes?
Are your products significantly differentiated or delivered at a low enough cost to compete against products in the local store and all products available globally? How quickly can your supply chain respond to new market opportunities and adapt to new business requirements? Can your manufacturing operations and delivery supply chain match the “two-day” delivery mindset of the online shopper? As a manufacturer, how do you prepare for similar disruptions or respond to an unexpected competitor entering your market as Amazon recently did with the introduction of privately branded dog food?
Avoiding the Dinosaur Trap – Will Your Products Become Extinct?
Digital cameras devastated the film market. Smartphones have greatly reduced the market for analog and digital cameras. Other trends have the potential to overturn entire manufacturing sectors. CRISPR technology is a genome editing tool that is faster, cheaper and more accurate than previous DNA editing techniques. For life sciences manufacturers, it has the potential to upend the business model of treating chronic illnesses by providing a cure. In another example, autonomous vehicles are causing suppliers to reconsider how they design interior seating where it is less about driving comfort and more about the riding experience. Will there even be a demand for steering wheels or rear view mirrors for these vehicles? Many manufacturers will have to transition to evolved products and business models or risk disappearing forever.
So, how well does your organization respond and adapt to changing business, technology and customer demands? Do your enterprise solutions effectively support a rapid response to change? Are you considering new and advanced technologies like IoT, machine learning, blockchain, data lakes or other initiatives to dynamically address changing business demands? Find out how Amtico International relies on their ERP to stay ahead of change.
Now is the time to thoroughly evaluate your organization’s ability to adapt to business changes for improving production efficiency, exceeding customer expectations and becoming an Effective Enterprise.