2015 Predictions: Manufacturing, Part 2

Stephen DeAngelis

December 31, 2014

In Part 1 of this two-part series, I focused on the first five of ten predictions made by International Data Corporation (IDC) analysts concerning the future of manufacturing. [“IDC Reveals Worldwide Manufacturing Predictions for 2015,” IDC Press Release, 5 December 2014] In this article, I’ll address the final five predictions made about the manufacturing sector.

“Prediction 6. By 2018, 75% of manufacturers will be coordinating enterprise-wide planning activities under the umbrella of rapid integrated business planning.” Integrated business planning is predicted to be the successor to Sales & Operations Planning (S&OP) processes. A couple of years ago the editorial staff at SupplyChainBrain wrote the following about S&OP: “Everybody does it, but few really understand it.” [“Divulging the ‘Secret Sauce’ of S&OP,” SupplyChainBrain, 9 October 2012] S&OP is a cross-functional process and integrated business planning simply expands the number of functions involved. In another article published shortly after the one just mentioned, the editorial staff at SupplyChainBrain wrote: “More and more companies are turning to sales and operations planning (S&OP) to align different areas of a business around the same goals, while those already experienced in S&OP are shifting to a more advanced version of the process known as integrated business planning (IBP).” [“Keys to Successful SOP Implementation,” 28 November 2011] One obstacle to corporate alignment is corporate silos. Historically, corporate silos have resulted not only in siloed functions but in siloed data. That meant that each department was using its own version of the truth to make decisions. Alignment simply can’t take place when that occurs. That is why integrated business planning, which uses integrated data and analytics, is gaining popularity among businesses.

“Prediction 7: By 2016, 70% of global discrete manufacturers will offer connected products, driving increased software content and the need for systems engineering and a product innovation platform.” What this prediction really says is that the Internet of Things (IoT) is quickly becoming a reality. One of things holding back an even more rapid emergence of the IoT is the implementation of standards that allow devices to talk to one another. Sansa Security states, “The biggest problem with IoT devices today is that most of them cannot interoperate with IoT devices from other manufacturers. This is due to an inherent weakness in the implementation of common security protocols. This weakness also means that multiple devices from different manufacturers cannot be operated through a single user interface on a computing device. In 2015, expect this obstacle to be corrected. If we don’t see the first shipment of products that offer device interoperability and the ability to control devices through a single user interface by 2015, expect to read about product roadmaps from the major consumer electronics makers that promise to include these functions in future devices.” [“Sansa Security Reveals 2015 IoT Predictions,” Sansa Security, 9 December 2014]

Prediction 8: “By 2018, 40% of the top 100 discrete manufacturers and 20% of the top 100 process manufacturers will provide Product-as-a-Service platforms.” In the software sector, we are already software-as-a-service examples proliferate. For example, Microsoft offers its Office Suite as a software-as-service offering and Adobe offers Photoshop and Lightroom the same way. Eventually, Products-as-a-service will also be embraced by discrete manufacturers as well as process manufacturers and that will be the beginning of what is being called a circular economy in which the resources used to produce products are tracked from sourcing through recycling. This is not a new idea. Back in 2010, the Ecobusiness Exchange wrote, “One could pay a monthly subscription for the product to the service provider who provides the product as part of the service delivery for the length of the contract. At the end of the contract the service provider takes back the product and either recycles or reuses it for another client.” [“Product As A Service – PAAS,” Ecobusiness Exchange, 23 June 2010] To further illustrate how this business model works, the article provides a telecommunications example:

“This type of service is starting to emerge: mobile phone providers provide a phone with a monthly contract and regularly upgrade the phone as an encouragement to stay with them. This model could be improved if they took back the old phones at the point of the upgrade or contract end. Then re-used or recycled them by giving to other contract holders at a lower cost or recovered components. This model has a number of benefits:

  • The scarce materials in the phone are reused.
  • Provides greater access to mobile technology at lower cost potentially for users in developing countries where access to mobile technology can save lives.
  • Delivers an enhanced reputation to the provider and helps secure limited resources as the precious metals used in phones are likely to be in future short supply.”

To learn more about the concept of a circular economy, read my article entitled “Embracing a Circular Economy.”

Prediction 9: “In 2015, 65% of companies with more than ten plants will enable the factory floor to make better decisions through investments in operational intelligence.” One of the biggest changes we’ve seen and will continue to see in the manufacturing sector is the automation of the factory floor. Your grandfather’s blue collar jobs are being taking over by robots and they won’t be coming back. As noted in Part 1 of this article, John Zegers, director of the Georgia Center of Innovation for Manufacturing, agrees that connected factories represent the future. [“Six Key Predictions For Manufacturing In 2015,” Manufacturing.net, 15 December 2014] 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.”

It’s not just the connectivity that will enable the factory floor to make better decisions, it will be the fact that sensors on the factory floor will be connected to a cognitive computing system that can sense in real-time and respond appropriately to what is happening during the manufacturing process.

Prediction 10: “Investments that enable digitally executed manufacturing will increase 50% by the end of 2017, as manufacturers seek to be more agile in the marketplace.” This transformation will be part of what supply chain analyst Lora Cecere (@lcecere) calls the outside-in supply chain — a supply chain that is demand driven. Bart Taylor agrees. He writes, “A diverse, empowered supply chain will transform manufacturing as a new generation of agile companies — suppliers and contract manufacturers armed with technology — meet the needs of OEMs. Companies able to serve multiple industry sectors will do the best.” [“2015 Manufacturing Predictions: The Supply Chain Rules” CompanyWeek, 16 December 2014]

Bonus Prediction: Zegers adds another prediction about manufacturing that is not included in the IDC list. He predicts that reshoring will continue, but at a slower pace. He writes:

“Manufacturers typically evaluate seven critical areas when it comes to operational decision making: transportation and energy costs; market demand for their products; rising labor costs in China and other developing nations; access to talent, tax, and regulatory policies; availability of capital; and currency trends. In 2015 we will see jobs continuing to come back to America as trends around these divergent areas continue to work favorably for bottom lines. But this reshoring will happen in a more targeted way, with natural gas use serving as a driving factor in some cases.”

If reshoring slows, it will be because oil prices remain low. Rapidly rising transportation costs were probably the greatest motivator for reshoring in the past. Taylor, however, disagrees that reshoring will slow. He believes the rise of additive manufacturing will “accelerate reshoring … by providing companies a foothold to test and make more things, even in small batches, locally.”

All of these analysts believe that in 2015 manufacturing will experience growth. Zegers writes, “A report issued in December 2014 by the Institute of Supply Management stated that manufacturing revenues are expected to increase in 15 different manufacturing industries in 2015.” He is especially sanguine about manufacturing in the United States. “2015 will launch a new wave of domestic manufacturing,” he writes, “as the industry sees broader growth. One reliably strong trend has been the national Purchasing Managers Index, which stood at 58.7 in November 2014. Rooted in a solid expansion of manufacturing activity, this index allows us to look forward and reasonably expect between four and five percent growth in domestic manufacturing.” That should make a happy New Year for a lot a folks.