Global Manufacturing Industry Analysis

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Global Manufacturing Industry Analysis

Key Takeaways

  • Manufacturing downtime, labor shortage, need for a self-service platform, cyber security threats, and automation challenges are some pain points in the global manufacturing industry within the past 3-5 years.
  • Green manufacturing, integration and API, IoT, and Shift from B2B to B2C are some trends in the global manufacturing industry within the past 3-5 years.
  • A recent study by Aberdeen Research revealed that 82% of manufacturing firms witnessed unplanned downtime in the past three years.

Introduction

The research brief provides information on the pain points and trends in the global manufacturing industry within the past 3-5 years.

Pain Points in the Global Manufacturing Industry

1) Manufacturing Downtime

  • Manufacturing companies depend on continuous production processes to achieve production capacity. Any unplanned factory downtime can adversely damage the business in various ways, including lost money in material waste, labor costs, and utilities.
  • A recent study by Aberdeen Research revealed that 82% of manufacturing firms witnessed unplanned downtime in the past three years.
  • Industry studies also show that manufacturers have to deal with up to 800 hours of downtime, on average, per annum, inflicting hourly losses ranging from about $10,000 to $260,000 for industrial plants and annual losses of $50 billion on the manufacturing sector.
  • Additionally, unplanned downtime leads to a decrease in customer loyalty. 46% of respondents (decision-makers) to a survey conducted by ServiceMax and GE Digital revealed that they could not deliver customers' orders on time due to unplanned downtime.
  • Tackling unplanned downtime in the manufacturing sector provides firms with opportunities for increased productivity in profits and output, decreased overhead costs, and brand reputation.
  • Firms can track the amount and cause of downtime and implement preventive maintenance measures to achieve these benefits.
  • Since information is king, the ability to monitor production lines, gather data based on patterns, and share the data "with trusted service providers for additional analysis and insights" are essential in reducing downtime costs.
  • Additionally, firms can implement maintenance alerts, alarms, etc., to identify downtime problems as they arise, predicting, and preventing them in the future.
  • Founded in 2015, MachineMetrics provides tools that help firms implement preventive maintenance programs. By combining big data and machine learning algorithms, the platform enables firms to predict when certain parts of machines will fail and plan for replacements prior to them failing. MachineMetrics collects each downtime event and classifies them based on their severity for easy and immediate action.

2) Labor Shortage

  • Labor shortages result from the older generation (Baby Boomers) leaving (retiring from) the manufacturing workforce in droves.
  • Other than the Baby Boomers reaching retirement age in droves, other factors contribute to this challenge, including the perception of manufacturing as dangerous and dirty work and the existing employees experiencing burnout from working long hours.
  • In 2018, a Rhino report recorded that this was the "biggest" pain point experienced in the manufacturing sector. In a 2019 study, manufacturers said it was the "top issue impacting" their firms. However, this was still the case in 2021, 3 years later, during which talent shortage "continued to be a problem in manufacturing."
  • A Manufacturing Institute skills gap and future of work study revealed that more than 2.4 million manufacturing jobs, with an economic potential of $2.139 trillion in 2020 alone, would remain unfilled between 2018 and 2028 as the older generation retires.
  • Additionally, 40% of manufacturers on a global scale report skilled labor shortages, according to a ManpowerGroup survey.
  • The benefits of solving labor shortages in the manufacturing sector include improved productivity, meeting production deadlines, and overall efficiency.
  • To gain these benefits, manufacturing companies could consider programs designed to empower lower-skilled employees into more skilled workers. They could also partner with universities and colleges to facilitate entry-level hiring, providing younger employees with apprenticeship programs.
  • Companies could consider offering attractive perks to keep some of the older highly skilled generation beyond their retirement dates.
  • A startup by the name of Path Robotics develops autonomous welding robots expected to solve in part the expected severe labor shortage among welders in the manufacturing industry.

3) Customer Need a Self-Service Platform

  • The low adoption of customer self-service platforms within the manufacturing industry is a pain point. The digital age has availed these technologies to the sector in the last five years, yet, manufacturing appears to remain analog as far as customer experience goes, leading to customer frustrations.
  • Customers are frustrated about needing to use phones to reach manufacturers for updates, including order updates, new proposal requests, etc.
  • Most manufacturers agree that customers need a self-service digital portal. However, their primary concern was the lack of resources to build and manage these platforms in-house. A scenario that a Forestor study revealed. According to its findings, "SAP hybris (now Commerce Cloud) requires a team of 12 full-time employees to keep it running smoothly."
  • A Salesforce Research report illustrated that high-performing managers were 1.6X more likely than underperforming managers to have increased their customer experience budgets in the last two years.
  • Implementing and encouraging the usage of customer self-service portals would lead to improved customer experience, followed by customer loyalty.
  • Companies can achieve these benefits by investing in chatbots "to make the experience even easier - this way, consumers never have to leave your site to submit an inquiry." They can also outsource the functions of their in-house self-service portal to managed providers.
  • For instance, Corevist, a startup B2B software company, provides manufacturers with a platform that offers real-time SAP integration and manages their entire web channel infrastructure without engaging additional IT resources.

4) Cyber Security Threats

  • Manufacturers are increasingly facing threats of security breaches and ransomware incidents as they become increasingly digital in their manufacturing processes.
  • Back in 2019, at least 50% of manufacturers reported falling victim to some form of data loss, but 2020 broke all records for data breaches, with 2021 keeping pace.
  • Since 2016, the number of organizations reporting a shortage in cyber security experts increased from 45% to 53% in 2019. Without the necessary experts to attend to such threats, detecting and blocking become next to impossible.
  • Losses caused by a data breach can cost a manufacturing company, on average, $3.86 million. Therefore, one of the best ways to tackle this threat is to train employees to detect the early signs of a security breach. The other way is to update systems on a routine basis.
  • Manufacturers are also implementing security frameworks, i.e., the Zero Trust Security (ZTS) framework to secure every level of their operating systems and networks.
  • MobileIron is one startup that's driving change in this area. The software company has developed "a mobile-centric, zero-trust enterprise security framework" for manufacturers.

5) Automation Challenges

  • A technology advances, manufacturers are under constant pressure to boost efficiency by adopting automation processes. Unfortunately, the problem arises for many manufacturers as automation is both expensive and unaffordable.
  • Additionally, due to the investment and resources required, some manufacturers still do not "have a full picture of what smart automation actually does."
  • Maximizing automation is important for cutting costs and increasing efficiency.
  • As a result, some startups have started offering automation as a service. For example, manufacturers that cannot afford autonomous robots can rent them and employ them in their workforce.
  • ZappyAI, a British startup, provides a solution that uses ML to automate manufacturing processes. The solution "analyzes and interprets different manufacturing-related data including order fulfillment, data entry for accounts payable and receivable, inventory reports, and purchases data."

Trends in the Global Manufacturing Industry

Green Manufacturing

  • Manufacturing companies have increasingly adopted sustainable manufacturing practices in the past five years.
  • They are motivated to preserve the environment and reduce costs through smart, money-saving business strategies resulting from green manufacturing practices.
  • Some of the sustainable activities they pursue include "repairing equipment rather than replacing it, reducing and reusing waste, using energy more efficiently, and getting more power from renewable energy sources."
  • This trend is driven by studies indicating that more people, especially the younger generation prioritize firms prioritizing sustainability in their manufacturing. According to a Forbes report, "68% of millennials bought a product with a social or environmental benefit in the past 12 months."
  • US-based scaleup LumiShield and Dutch startup Bambooder are driving this trend in the manufacturing sector.

Integration and API

  • As demand for technology continues to increase for the manufacturing sector, the need to integrate the technologies to get the most out of them spiked in the last five years.
  • Thus the rise in the global demand for Application Programmer Interfaces (APIs) in manufacturing picked up steam in 2018. The APIs market was valued at $1.2 billion in 2018, growing at a CAGR of 32.9% beyond 2021.
  • APIs are a set of tools that facilitate the integration of two or more systems to allow manufacturers to obtain more valuable insights.

Internet of Things (IoT)

  • IoT enables all devices connected via a network to communicate. The industrial IoT can include a wide array of tools, vehicles, and products connected via a network on the factory floor.
  • Year after year, industrial IoT has topped the trends list due to its adaptability and innovation.
  • A 2016 MPI Group study found that about 31% of production processes "incorporate smart devices and embedded intelligence."
  • According to an industry expert, Michael Strand, "IoT and predictive analytics are having a major impact on manufacturing, offering exciting new opportunities for connecting operations and transforming business processes."
  • Emocean enables Smart Factories.

Shift from B2B to B2C

  • Manufacturers have in recent years made strides to transition from focusing on a business-to-business (B2B) model to a business-to-consumer (B2C) model.
  • This is because a B2C model offers benefits including increased profits, faster time to market, price control, brand control, and better customer data.
  • Therefore, manufacturing firms are selecting platforms that combine and support both modules.

Research Strategy

The research team leverage data from the most reputable sources in the public domain to provide information on the pain points and trends in the global manufacturing industry within the past 3-5 years. We thoroughly reviewed reliable media sites, market research databases, and more.

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