2015 Predictions: Manufacturing, Part 1

Stephen DeAngelis

December 30, 2014

James Dyson, the British inventor, designer, engineer, and entrepreneur most famous for his vacuums, once said, “Manufacturing is more than just putting parts together. It’s coming up with ideas, testing principles and perfecting the engineering, as well as final assembly.” Most people accept the fact that we have moved on from the industrial age into the age of information. That does not mean, however, that manufacturing is not important. In fact, manufacturing remains a vital mainstay of almost all economies. The good news is that next year is predicted to be a good year for manufacturing. Emily McMackin (@emcmackin) reports that a recent survey reveals, “At least 75 percent of manufacturers surveyed said they experienced revenue growth in 2014 — up 11 percent over [2013] — and 83 percent predicted more revenue growth for 2015 — up nearly 20 percent from before.” [“Manufacturing in 2015: Economists Predict Landmark Growth, Innovation,” Business Climate Blog, 18 December 2014]

Like most things, however, manufacturing continues to transform as technologies emerge and economics change. A few brave organizations and analysts have offered up their predictions about what the future of manufacturing could hold. One of those organizations is the International Data Corporation (IDC), whose analysts made ten predictions about what to watch for next year in the manufacturing sector. [“IDC Reveals Worldwide Manufacturing Predictions for 2015,” IDC Press Release, 5 December 2014] Since many predictions cover the same topics, I’ll use IDC’s predictions as the starting point of discussion. In this post, I’ll focus on the first five IDC predictions and will finish the discussion in Part 2. IDC’s first prediction involves IT budgets.

Prediction 1: “By 2017, manufacturers will actively channel 25% of their IT budgets through industry clouds that enable seamless and flexible collaboration models.” Companies in the manufacturing sector are moving to the cloud to ensure that they can take advantage of the benefits and opportunities generated by big data analytics and emergence of the Internet of Things (IoT). As IDC analysts point out, manufacturers are finding it necessary to collaborate more both with their suppliers and their customers. Collaboration requires some way of sharing information and, in the era of big data, only the cloud offers a reasonable way to do that. McMackin adds:

“Manufacturers will continue to invest in technology to drive production and efficiency, including up-and-coming technologies like sensors that will connect factories through a single portal, and Web browsers that will double as dashboards for controlling equipment, identifying snags and solving issues remotely. Investments will also increase for predictive maintenance technologies capable of helping manufacturers cut downtime and boost bottom lines.”

John Zegers, director of the Georgia Center of Innovation for Manufacturing, agrees with McMackin. “Software has helped manufacturing achieve terrific efficiencies.” he writes. “According to the CSC Global CIO Survey: 2014-2015, 81 percent of manufacturers feel big data has a positive effect on production and efficiency, and 65 percent believe big data will be a strategic business driver moving forward. That trend will continue, but the lynchpin in 2015 will be the widespread introduction of the Internet of Things (IoT).” [“Six Key Predictions For Manufacturing In 2015,” Manufacturing.net, 15 December 2014] IDC’s second prediction involves quality assurance.

Prediction 2. “In 2015, product quality, including compliance, will underpin two thirds of all IT application investments across the manufacturing organization.” That prediction covers a lot of ground. Ask any Chief Procurement Officer and he or she will tell you that the procurement world is getting much more complicated. On the supplier facing end of the supply chain, a lot of things now come into play that weren’t such a big deal twenty years ago (even if they should have been) — things like sustainability, labor conditions, conflict minerals, resource scarcity, and so forth. On the customer-facing side of the supply chain, product quality obviously plays an important role. In addition, manufacturers have to consider things like adhering to retailer compliance standards. Chargebacks and penalties for violating these standards still plague many manufacturers and big data analytics can help. One of the first solutions my company, Enterra Solutions®, created for a manufacturer was a Compliance Management System that addresses the chargeback problem. Supply Chain Digest highlighted this solution shortly after it was introduced. [“Supply Chain News: Conair Fights Back in Retail Chargeback War,” Supply Chain Digest, 19 October 2010] As the supply chain continues to become more complex, IT application investments, out of necessity, are only going to rise, which is what IDC’s next prediction is about.

Prediction 3. “By 2016, 30% of manufacturers will invest substantially in increasing the visibility and analysis of information exchange and business processes, within the company and with partners.” The IoT will generate massive amounts of data — far more than we’ve seen to date. Part of the information exchange discussed by IDC will involve machine-to-machine communications that will help make business processes and customer relations better. Zegers writes:

“Sensor technologies will drive the concept of connected factories, and will fuel the introduction of mobility-based manufacturing. Web browsers will be used as dashboards to control equipment, identify snags, and make quick decisions that would have previously taken entire teams of people to handle. As connected factories go online, myriad amounts of data will be collected. But 2015 will see that data put to use in a smarter way that makes things operate more efficiently. Even smaller companies in the industry will invest more in 2015 to improve their software operations.”

Supply chain visibility is long sought after goal that has proven elusive. The reason it has been so difficult to achieve is that visibility requires cooperation from every organization in the supply chain from a supplier’s supplier to a customer’s customer. Obtaining that cooperation requires trust and, at a time when cyber breaches are making headlines with greater frequency, trust is a hard commodity to find. Bart Taylor adds, “Manufacturers and business partners are secretive about who they work with. Some operate under strict NDA; others want to protect relationships for competitive reasons. Even as the local supply chains grow, industry will be slow to break old habits and give up information the trade wants.” [“2015 Manufacturing Predictions: The Supply Chain Rules” CompanyWeek, 16 December 2014] I agree with Taylor, but that doesn’t mean that IDC is incorrect when it predicts that new IT investments will continue to improve visibility in the years ahead. It just means that improvement will probably be slow.

Prediction 4: “In 2015, customer centricity will require higher standards for customer service excellence, efficient innovation, and responsive manufacturing, which will motivate 75% of manufacturers to invest in customer-facing technologies.” When you talk about “responsive manufacturing” two things immediately spring to mind: personalization and logistics. Customers want tailored products and they want them quickly. That’s what being responsive is all about. You can’t really talk about personalization nowadays without the topic of additive manufacturing being raised. Additive manufacturing allows “one of” personalization, but it remains to be seen whether additive manufacturing can scale to provide the kind of ROI that most manufacturers require. Taylor notes that even if additive manufacturing isn’t used to produce products directly for customers, it will have a profound impact on product development. “Companies in sectors as diverse as aerospace and outdoor gear are leveraging software and systems, additive processes and new generation of engineers to design and prototype locally,” he writes. “Quality in U.S products and speed to market should improve.” Of course, there are a number of other technologies which the IDC analysts had in mind including technologies that can improve order fulfillment, reduce out-of-stock situations, and improve trade promotion opportunities.

Prediction 5. “By 2017, 50% of manufacturers will explore the viability of micro logistics networks to enable the promise of accelerated delivery for select products and customers.” Micro logistics networks will undoubtedly involve embedded sensors in products and those sensors will be connected via the IoT. In order to make sense of oceans of data being created by such sensors, cognitive computing systems will be required. Cognitive computing systems can monitor, learn from, and offer up actionable insights to decision makers or other smart machines creating a virtuous circle of improvement. Micro logistic solutions will be needed in urban environments where access to retailers or customers is limited (either by geographic impediments like tight streets or governmental policies like pedestrian-only zones). Micro logistic solutions will also be needed to address the needs of those living at the bottom of the economic pyramid where small quantities of products are needed in smaller sizes. These micro logistic scenarios require applications that can help make sense (and money) in environments that have traditionally been low tech, rely on manpower, and have high operational and environmental costs. Finding solutions in these scenarios will require collaboration and analysis, both of which can be enhanced by cognitive computing.

In Part 2 of this article, I will finish discussing the remaining five predictions made by analysts at IDC.