Capgemini recently launched "Manufacturing in 2020", an in-depth study into how manufacturers expect to do business in 2020 compared to today. Based on responses from over 150 manufacturing companies in eight countries, the study identifies a number of key findings about possible changes in the coming years:
1. Manufacturing will become increasingly global by 2020, with around 80 % of manufacturers expected to have multi-country operations, compared with just over half today.
2. Supply chains will also increase in complexity and consolidate. Half the companies surveyed said they will be using fewer suppliers by 2020, but 40 % said they will be using more distributors as increased competition drives them to reach new markets.
3. Manufacturers appear uncertain what actions to take about green issues, but as political and social pressure increases around emissions reduction, urgent action will be required to reach 2020 targets.
4. Differences between the manufacturing industries in developed and emerging markets will also continue to evolve.
Globalization: Accelerated competition at home and the growing sophistication of developing markets will have driven manufacturers to increasingly source, manufacture and sell internationally by 2020. There will also be a significant shift from manufacturing in one country to manufacturing in many as companies seek to localize production. The large labor cost differentials that proved so attractive in encouraging companies from developed nations to shift or outsource manufacturing to emerging economies are already showing some signs of erosion. Well-established sources such as China and India were predicted by many to remain popular with manufacturers, with several new markets also mentioned including North, sub-Saharan and South Africa as well as Cambodia.
The changing nature of the supply chain: Companies expect to involve suppliers and customers to a greater degree at all stages of the manufacturing process. This will contribute to increasingly shortened product lifecycles. Generally, suppliers and distributors will play a greater role in helping manufacturers to cope with the demands of local markets with 50 % of respondents predicting this for 2020. All the companies surveyed also expect to be relying more on overseas suppliers than they do today which is good news for logistics service providers.
Respondents also generally agreed that supply chains will increase in complexity by 2020 to include more distributors but, fewer suppliers. Competition and the opening up of new and emerging markets is forcing companies to seek an ever-greater number of customers, which implies a downstream expansion as more distributors and resellers are engaged to satisfy this demand. There are also efforts to source more suppliers locally to the manufacturing plant because of the cost of transport, with some even reconsidering their offshoring strategies. Capgemini predicts that this will result in some manufacturing previously offshored to gradually flow back to Europe and the US as the total cost of shipping negates the labor cost reduction.
The growing importance of sustainability: The findings show that energy price volatility has become the biggest current driver for emission reduction for more than 40 % of respondents. For those manufacturers with energy intensive processes, energy prices have become a significant burden. According to the research, reducing emissions is currently a particularly high priority for companies from both India and China.
Key regional differences: The study also reveals that by 2020, manufacturers in developed nations will have moved away from mass production towards greater specialization as they seek to find more profitable ground higher up the supply chain. Conversely, companies from emerging market countries will have moved from low-profit localized manufacturing to a more standardized, high-volume approach. Chinese companies, for example, expect the proportion of standardized products they make to double by 2020, implying a significant increase in mass production capability whereas companies from Germany and the UK predict a trend away from localization to more standardized international products by 2020.
"The manufacturing industry will change significantly over the next ten to twelve years, but with careful planning and preparation, manufacturers around the world can position themselves for competitive advantage," said Nick Gill, Global Manufacturing Sector Leader, Capgemini. "Closer collaboration with customers and suppliers and the systems put in place to manage this will be key to future success. In addition, manufacturers should be planning now for the upturn following the current recession and preparing for a more fluid movement of manufacturing between plants. With the complexity of the supply chain predicted to increase significantly along with greater concerns about supply chain disruption, manufacturers must ensure they have the necessary systems in place to support their business."
This study, jointly conducted by Capgemini and IDC, was based on telephone interviews with 152 respondents in manufacturing companies from China, France, Germany, India, Netherlands, Sweden, the UK and the US. All interviews were conducted in local languages, except in India, where English was used. The individuals interviewed were of a senior level and involved in strategic decision making. The largest proportion of companies represented is classified as general manufacturing with high-tech, steel and automotive also well represented.
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