The manufacturers in the Industrial Manufacturing sector who were digitally advanced before the pandemic and those who accelerated their digitalization during the crisis, came out as winners. In our report on emerging trends in this sector, we see clearly that this was the most important factor to reach the same levels as in 2021.
The industrial manufacturing sector managed to neutralise the impact of the pandemic and attained pre-pandemic levels in 2021. Businesses that want to participate in the upcoming growth period and function through the volatility of an exceptionally quick economic recovery may find that business agility is paramount.
Keep a look out for mega trends
It is important to watch out for major trends as they will shape the sector over the coming years. In our thought leadership paper ‘Emerging trends in the Industrial Manufacturing sector’ we deep-dive into mega trends across the key sub-sectors Metal, Aerospace and defense, Machinery and Building and Construction.
Mega trends
Building supply chain resilience
Supply chain disruptions are among the major hurdles faced by manufacturers. The pandemic along with other geo-political issues have added more complexity and disruptions to the industrial manufacturing sector globally, along with other disruptions like the Russia-Ukraine war, Suez-Canal blockage, semiconductor shortage, labor shortage, raw material shortage and factory closures during the pandemic.
Hence, it is very important for industrial manufacturers to maintain a healthy balance between being resilient and cost-effective while having an agile system to ensure efficient supply chain mechanisms. This section of the report further highlights key actions taken by manufacturers to minimize the impact along with the strategies to manage supply chain risks. Automation and digitalization, offshoring to near-shoring/re-shoring, from “just-in-time supply chains” to “just-in-case supply chains”, integrating supply chain management into structural decision making, among others are a few models.
Sustainable manufacturing
In the global economy today, adopting sustainable and ethical business practices is an imperative for the industrial manufacturing sector to remain profitable. The relevance of ESG and sustainability programs has grown to the point that neglecting these might have larger and more significant consequences.
- Companies may experience greater financial risks for neglecting the effects of policies and practices on the environment.
- Companies may also harm the shareholder value if faced with government sanctions, criminal actions and any damage to the reputation.
Sustainability in business practices has the potential to positively impact companies’ financial performance, business excellence, and stakeholder relationships. The preference for companies that embrace ESG is rising among investors, regulators, employees as well as consumers.
Industry 4.0
Technology plays a vital role in managing industrial manufacturing, particularly in areas such as inventory, supply chain and operations management. Unlike before, customers are at the center of every industry, and they dominate the product strategy.
Industry 4.0 is the creation of a digital manufacturing firm that is not only connected but also communicates, analyzes and uses data to motivate more intelligent actions in the real world. This transformation can provide information around the entire value chain which can help manufacturers in multiple ways such as designing strategies to manage the supply chain; preventing wastage of resources; improving the production rate and manage risk of surplus production; enhancing communication between employees; controlling distribution of goods; developing smart products for different market segments; delivering excellent customer experience.
This section of the report further highlights the penetration of Industry 4.0 in the key sub-sectors of industrial manufacturing.
Emerging competitive landscape
The ongoing turbulence surrounding adverse global events has created immense pressure on industrial manufacturing players to evaluate new opportunities in the market for sustaining a competitive environment. New revenue models have the potential to provide recurring cash inflows, offer more agility and flexibility, affirm relationships with suppliers and ensure success and growth.
Rising prices, shifts in traditional business models to innovative models, emergence of new start-up ecosystem and increasing consolidation in the industry via M&As are few salient themes leading to competition between the industrial manufacturing players to affirm their position. This section of the report highlights the impact of these salient themes on the key sub-sectors.
Peter Lindström
Partner, Head of Industrial Markets
KPMG i Sverige