Shifts that are Reshaping Manufacturing
As we speak, fundamental shifts in manufacturing are taking place.
Some trends in technology are obvious and have been discussed threadbare, such as the impact of cloud. Similarly, some business trends have been analyzed frequently enough -- such as the globalization of the supply chain and its impact on procurement.
So, we'll take a closer look at some other key factors that are shaping on how manufacturers in high-tech, discrete, auto-aero and agri products are reshaping the products they build, how they use technology, interact with their customers or run their business operations.
Some of these are technologies, while others are sub-industry and functional focus areas, that have broad impact.
Virtual Operations
"Telepresence isn't just for video conferencing between participants in meeting rooms. Immersive collaboration is also practical and cost-effective within manufacturing and engineering environments."
Immersive collaboration technologies such as tele-presence, desktop sharing, Intelligent Voice Recognition (IVR) have been around for a while. The transformation that customers are asking for is to leverage these to give a same-room effect for operations -- especially operations that require global interactions. For example, bringing together a customer's problem desktop, Salesforce Remedy, level1-support, level2-support and a developer into a single virtual operations center that allows them to solve product problems in a snap is beginning to change how products get fixed, changed and customer issues resolved.
The New Business Intelligence
"India's fourth largest software exporter HCL Technologies is in the process of creating a $1-billion business analytics business that will focus on marketing analytics, operations research and fraud analytics."
BI used to be just for analysis and some amount of technical decision support -- but, as several people have pointed out, executives now want BI tools to make (or help make) the decisions that they used gut-feel for. This is the largest catalyst for business analytics. For example, as a sales VP, I may well want to see how best to reduce the gap between his product list price and pocket price, without affecting the cash flow. The scenario analysis and the decisions, not only shape product pricing strategy, but also how the product is sold and built.
A somewhat different trend is the consumerization of BI; depending upon who you ask, only about 5% to at most 20% of the people who BI tools are meant for, actually use them. The resulting FIX, is through technologies like self-service BI, decision making on your favorite hand-held and vastly improved visualization. Larger numbers of people are beginning to look at optimizing production schedules, mapping ECN schedules to expected cash flow or fine-tuning optimal SLA management. The result is better run manufacturing businesses.
Sensor Networks and NFC
"Based on a return on investment and statistical analysis, there is a global $76 billion total potential market size for the top three wireless smart crop markets."
"Wireless sensor solutions could save $25 billion worldwide in annual healthcare costs in 2012 by reducing hospitalizations and extending independent living for seniors."
While the RFID revolution did not quite take off, as expected, the next trend of adoption of RFID offshoots are here. Near Field Communication, if sources are to be believed, is meant to be adopted across the board by some of the most widely distributed platforms like Android, iphones and e-bay payments, resulting in $75+ billion global NFC ecommerce within the next few years. Sensor networks are already being adopted to make our trains and plants safer, while making landslides and avalanches easier to predict.
As can be expected, in addition to changing products from phones and cars to tractors and POS counters, these networks are changing how manufacturers do business.
Consumer-Innovation Cycle
"Already in 2010, almost 60% of the global increase in consumption came from emerging consumers with China alone contributing as much as the U.S. consumers to global demand growth."
"Within a decade, India is likely to become the world's second-largest R&D center after the U.S. Its innovations will likely benefit not only India, but also the world."
Three trends are critical to note in the consumer-innovation revolution that surrounds us. First, is the localization of innovation and its dispersion across the globe. Countries such as India and China, have over the last few years significantly improved the local brands of cars and phones for example. Second, the visibility of consumer behavior and the need for innovation to satisfy that need has changed -- through product feedbacks, facebook suggestions, participatory community support and the like. Product designers have the ability to change their requirements very quickly and accurately.
Finally, the notion of who-builds-a-product has changed with an entire ecosystem of stakeholders now co-creating and inventing. The impact of this on technology has been immense -- consider collaborative engineering design, as just one example where the above changes is radically changing how we think of design tools.
Supply Chain Risk Management
"Supply chain disruption can cost 10% drop in stock price and takes two years or more for companies to fully recover from disruption." -- Kevin Hendricks, Vinod Singhal
Thanks to the impact on Toyota due to the recent earthquake or the crunch on clothing manufacturers, due to the turmoil in Egypt, most manufacturers of any significant size are waking up to the need for a deep transformation of their risk profiles.
For example, in recent discussions, a particular OEM wanted to move 20% of their suppliers from a $50 million resiliency bracket to a sub $30 million resiliency bracket; thus reshaping their costs in the case of an unpredicted disruption. Several technologies are shaping this possibility -- data consolidation from unstructured sources, to industry and geography specific risk prediction models are being put in place.
Manufacturers are looking at organizational and process changes to transform how they handle various risk probabilities. Most importantly, at least some are re-considering their procurement models and product designs.
Precision Farming & the Instrumented Food Supply Chain
1 billion people worldwide who struggle to afford food, Gallup Survey -- Source: csmonitor, 2011
76 million illnesses are caused by food contamination every year in the United States.
Food Riots in Jordan, Algeria, Egypt, Haiti, Yemen, Tunisia -- Source: Bloomberg, Reuters, 2011
Global Food Crisis Response Program (GFRP) has approved US$1,238.2 million in 35 countries as of Sept. 9, 2010 -- Source: GFRP response list, 2010
China may be compelled to tap some of their $2.85 trillion in foreign exchange reserves to import wheat to feed their hungry people -- Source: The Huffington Post, 2011
Farming equipment that can be remotely managed and can access historical data to decide optimal geography specific soil additives or seed planting distances are here. Smart plants that can be managed for diseases based on the last 50 years of historical data are here. Every manufacturer in the ecosystem of agri-products - from equipment makers to service providers to seed manufacturers are gearing up to solve this most important geopolitical problem.
Food safety norms and regulations are fast changing in many countries, thanks to disease outbreaks and resulting deaths. Products already exist that allow a buyer to trace the farm to fork path of super-market produce. Store-houses, processing plants, sensor systems and our own hand-helds are driving this change in how we buy, sell, process, store food; thus, affecting many discrete manufacturers, and not just agri-companies.
Summary
As noted before, some trends like cloud, globalization, economic shifts will keep on making large impact on the industry as a whole, but the trends discussed here affects CXOs in the manufacturing industry, in some form or the other. In some cases, these CXOs become the targets of these trends, but if they position their products, sales and operations appropriately, they will be the key agents of change to help navigate these market shifts.
Arindam Banerji is head of Technology Consulting, Manufacturing forInfosys
