Large promises and predictions were made in the beginning of 2017. Experts forecasted continued growth, cobotics and 3D printing. How is the manufacturing sector really performing this year? It’s hard to believe, but we are halfway through 2017. Let’s look at how the industry has performed in these first six months and explore factors that have contributed to the industry’s success:

According to the national Association of Manufacturers, the amount of U.S. manufactured goods exports are trending in a positive direction, which is a welcomed trend after fluctuating data in 2015 and 2016.

“Using non-seasonally adjusted data, U.S.manufactured goods exports totaled $353.09 billion year to date in April, up 3.44 percent from $341.33 billion one year ago.”

Globally, data reflects that five of the top six markets are performing better than in 2016 for U.S. manufactured goods than in 2015: Canada (up from $87.23 billion to $89.67 billion), Mexico (up from $74.69 billion to $77.57 billion), China (up from $33.86 billion to $39.34 billion), Japan (up from $19.72 billion to $22.01 billion) and Germany (up from $10.38 billion to $11.21 billion). The only decline was seen in exports to the United Kingdom which was down from $18.37 billion to $17.80 billion.

So how are manufacturers overcoming the slump of previous years? These three factors are largely contributing to the sector’s success.

1. Leveraging Data and Analytics

The first step to leveraging data is making sure your business is equipped with the right technical capabilities. Industrial manufacturers have adopted shop services that introduce connectivity between machines, leaving them with the most comprehensive shop data they have probably ever had. These new services can include condition-based maintenance, which allows for ongoing real-time monitoring of equipment to determine its maintenance needs. Imagine being able to foresee a breakdown before it happens. Leveraging the data provided by these services adds a tremendous breadth and value to the industrial manufacturer, leading to enhanced customer retention and deeper and more lucrative commercial engagements. The important caveat to this type of investment is to make sure there is a specific plan in place to unpack the data once it is collected. Having data is great, but utilizing it to optimize their shops is better.

2. Creating Innovative Pricing

As technology continues to evolve, the traditional pricing model may no longer align with your customers’ expectations. There has been a major shift from the traditional method of pay-for-product to pay-for-performance. The new concept, coined “condition-based maintenance”, is driven by predictive and interconnected industrial technology, like discussed in the previous point. Ideally, condition-based maintenance should translate into fewer technical issues and repairs. As a result, customers will expect different pricing arrangements than in previous years. Instead of basing equipment pricing on products and fixed maintenance or warranty costs, some industrial manufacturers are establishing fee structures that are tied to performance outcomes. [For example, the industrial manufacturer may be paid more if equipment downtime is reduced or if an upgrade improves productivity.] Does this concept make you a little nervous? No worries, many manufactures are taking baby steps in that direction by adopting a blended approach. The blended approach includes both fixed fees to cover some costs and a variable component based on efficiency and productivity gains realized by the customer.

3.Developing Strategic Partnerships

To keep up with evolving platforms, it’s suggested that industrial manufacturers should consider taking a more active role in technology. The first step is to observe, evaluate, and then model the technological advances that are applicable to your processes. However, it’s important to recognize that it can be challenging to face technological advances in your industry alone. In many cases, partnerships with startup technology firms have become necessary because their capitalization on the “Internet of Things” market. It is important to understand that any alliance comes with risks. Industrial leaders need to find a balance of collaboration while maintaining flexibility when contracting and deciding on partner selection.

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The take-away is that the manufacturing industry is performing well. US manufactured goods are up and exports are continuing to grow in four of the largest markets. However, growth doesn’t come without growing pains. It is important to keep your eyes on industry trends.

Sources:
http://www.nam.org/Newsroom/eNewsletters/Monday-Economic-Report/2017/Monday-Economic-Report—June-5–2017/
https://www.strategyand.pwc.com/trend/2017-industrial-manufacturing-trends
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