Hans-Georg Kaltenbrunner, VP of manufacturing industry strategy at JDA, outlines the critical trends which will be shaping the manufacturing industry in the next year and beyond.
CPG companies can no longer ignore the impact of social media on consumer buying behaviour
In the past, consumer product demand planning was solely based on factors such as seasonality, trends and historical data. However, today’s consumers have become a lot more sophisticated, are always online and social media has become a good indicator of what will influence their buying behaviour. Its influence is now so significant that CPG companies can no longer ignore it – unstructured data from social media influences will now to make up 20% of the demand forecasts, and manufacturers must be prepared to glean insight from it. Point of sale information alone is no longer sufficient to predict buying behaviour trends.
CPG companies need to offer a personalised experience to successfully compete in the future
Traditionally, the notion of value was based upon brand recognition, price, features and availability; today this is extending to the overall customer experience. Millennials are now making up a significant share of the buying consumer, and they are looking for an emotional and lifestyle connection with products. While the trend of manufacturers going direct to the customer isn’t necessarily new, it will be those CPG companies that take a leaf out of Apple’s book and deliver a great, ‘experience’ as their USP who will prosper. Personalisation will also play a large role in this, as consumers look for products that are unique to them (e.g. Nike now gives you the option to design your own trainers). Manufacturers need to quickly start recognising this trend and ensure their supply chains can support this change effectively. Brand loyalty programs from CPG companies will compete with similar programs from retailers.
Smartphones and tablets will become the norm on the manufacturing floor
As we are seeing in many other industries, in manufacturing we will see a shift away from traditional enterprise software systems to consumer-style business applications. These role and task-orientated applications, accessed via smartphones and tablet devices, will provide manufacturers with the opportunity to reconnect with their workforce, take process driven insights and apply it to the manufacturing floor. Those manufacturers who fail to recognise this shift and invest in their workforce and manufacturing equipment connectivity, risk failing to attract the next-generation of employees where such technology is the norm.
We will see the emergence of customised production on a large-scale
Through the combination consumers wanting a more personalised service and advances in technology we will see the emergence of customised production on a large scale. Increasingly there is little wiggle room when it comes to reducing production costs; instead we will see manufacturers broaden their product categories as they look to differentiate and add value. Key to the success of such an approach will be the need to segment supply chains in order to meet customer demand and maximise profitability.
Cost-focused manufacturers will become laggards
Those manufacturers that are solely focused on cost will become laggards. Innovation (and greater profits) will come from those high-end manufacturers who are product and customer service focused. Some manufacturers are now at a crossroads deciding who they want or need to be in the future.
3D printing will signal the death of the low-end manufacturing sector
As the cost of 3D printing reduces, we will see more and more quick-turn manufacturing businesses emerge, providing lower-end manufactured products such as small replacement parts. However, in the long run, just as the travel industry went from selling airline tickets to travel agents to online self-service, 3D printing will eventually relegate traditional manufacturers to producing high-end systems. Medium end systems will be manufactured by 3D shops, while low-end one-off manufacturing will eventually be done by consumers themselves. This supports the overall trend to make CPG products unique and individual.
3D printing will boost manufacturing globalisation and resign inventory concerns to the past
3D printing will boost globalisation for many smaller manufacturing businesses, who in the past couldn’t afford an in-country service centre. For low volume products they will now be able to use 3D printing to get products manufactured (and subsequently) shipped at low cost. In addition, manufacturers’ inventory concerns will now be resigned to the past as spare or component parts can be manufactured in-country and on-demand. As product design and production cycles reduce, manufacturing supply chains will need to become much more agile and operate in real-time. In the future simple spare parts, plastic toys or cases for smartphones, will be primarily sold globally by downloading a 3D printing file.
The Internet of Things (IoT) will see the rise of the intelligent manufacturing supply chain.
IoT will start to take greater hold across over the next few years, providing manufacturers with greater intelligence across their supply chain. Through embedding sensors (e.g. RFID chips, QR codes) into goods/parts, manufacturers will be able to track their movement across the supply chain in real-time, which in turn will lead to much more efficient planning and production. More intelligent chips attached to products will actively tell the work centre machinery and equipment what next manufacturing processing steps are needed. IoT will also support future demand planning and fulfillment, as the technology will be able to intelligently alert manufacturers and distributors that certain goods will need restocking ahead of time (e.g. vending machines, printer cartridges and fridges ordering supply when needed). Machinery and equipment will actively send performance information back to the manufacturer in order to detect early the need for service/maintenance or spare parts replacement before the breakdown occurs. Most mid-range and premium cars have that capability already; the automatic arranging of service appointments is the natural next step.