One of the trends we’ve identified is the interest by diversified industrial companies to streamline businesses and realign around key markets or customer segments to further drive results. We’re seeing an increase in mergers, acquisitions, and divestitures as these companies recalibrate their capabilities.
Deloitte 2020 Manufacturing Outlook: The Keys to Weather the Storm
Q&A with Paul Wellener | Deloitte LLP
Can you give us a quick background of the 2020 Manufacturing Industry Outlook? What should manufacturers expect in 2020?
The underlying theme of the 2020 Manufacturing Industry Outlook is that the coming year promises to bring continued volatility and uncertainty. Manufacturers may want to identify ways to increase resilience in their operations, build their ‘digital muscle’ across areas like supply chain, and double down on the core of their portfolios.
In light of some of the ongoing market uncertainty, what have industrial companies been doing to shore up their market position?
One of the trends we’ve identified is the interest by diversified industrial companies to streamline businesses and realign around key markets or customer segments to further drive results. We’re seeing an increase in mergers, acquisitions, and divestitures as these companies recalibrate their capabilities to crystalize their value propositions. We’re also seeing manufacturers reach out to the ecosystem, creating partnerships that increase their digital momentum. Our analysis shows that one in four deals in the manufacturing space over the past two years can be linked to companies with digital value propositions. Infusing digital into manufacturing operations, from the factory floor to the supply chain, has been shown to drive higher productivity and output.
In your 2019 Outlook, you noted the historically tight labor market as a potential constraint on the industry’s momentum. Looking back, how have companies fared this year? What should they expect in 2020?
This year has seen muted job growth in the manufacturing sector, adding an average of 5,000 jobs per month to date in 2019, compared with an average of 22,000 jobs per month in 2018. Even with the slowdown in hiring, manufacturers still report difficulty filling critical jobs. We expect this situation to continue in 2020 as the search for talent, especially talent with digital skills, remains competitive. Companies can offset this through internal reskilling initiatives and plugging into the broader talent ecosystem that includes academic and vocational training efforts aimed at upskilling the labor workforce for the manufacturing jobs of the future.
What steps can manufacturers take in the year ahead to navigate this volatility and grow in a potentially slower economic environment?
One of the biggest levers we see that manufacturers can engage is the move toward building their digital foundation. Our research shows that digital ‘muscle building’ can be one of the leverage points to increase flexibility in global supply chains. Applying artificial intelligence, cloud computing, advanced analytics, robotics, and additive manufacturing to the value chain can increase visibility and transparency, allowing manufacturers to make faster changes to operations in order to respond to market-based threats or opportunities.
How are environmental, social and governance (ESG) issues affecting the current industrial manufacturing space?
Corporate social responsibility is increasingly important for manufacturers. Our research has identified a subset of manufacturers that see their societal initiatives contribute toward profitability. One area where this is playing out is through a commitment toward green and clean energy. Sixty-four percent of manufacturers surveyed plan to source a significant percentage of their electricity from renewable resources over the next five years. We expect manufacturers to continue to experiment with multiple renewable energy resources like solar, wind, hydro, and geothermal in 2020, seeking ways to diversify their energy dependency and reduce costs.
About Paul Wellener
Paul is a vice chairman, Deloitte LLP, and the leader of the US Industrial Products & Construction practice with Deloitte Consulting LLP. He has more than three decades of experience in the industrial products and automotive sectors and has focused on helping organizations address major transformations. Paul drives key sector industry initiatives to help companies adapt to an environment of rapid change and uncertainty—globalization, exponential technologies, the skills gap, and the evolution of Industry 4.0. Based in Cleveland, Paul also serves as the managing principal of Northeast Ohio.
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