In the past 10 years, we’ve seen the forces that shape the manufacturing industry – such as regulation, global competition and emerging markets – increasingly shrink profit margins. With so little room to maneuver, companies had to increasingly focus on cutting cost to maximize their ability to stay competitive. The perceived solution to this issue was for a long time seen in offshoring. Cheaper labor costs in South America and Asia allowed US manufacturers to continue their growth at the expected rates over the first two decades of the 21st century.
This industry trend that is estimated to have moved between 3 and 4 million manufacturing jobs abroad seems like it’s due for a sharp decline. While it’s true that recent regulatory changes have highlighted and sped the process up, the writing has been on the wall for quite a while already. For example, the average level of Chinese manufacturing wages has increased exponentially in the past 5 years and has now tripled compared to the 2005 numbers .
Now, with the new tax reform being passed and other favorable regulation on the horizon, “reshoring” is starting to look ever more attractive to US manufacturers. In fact, the rate of job return announcements hit an all-time peak in 2017 . Finally, these market forces have set the stage for considerable growth in the industry in 2018.
It is becoming clear that taking full advantage of the anticipated period of growth will be crucial for organizations looking to be the future industry leaders. The stakes are certainly high and the slightest miscalculation can end up having longstanding consequences. This is why it makes sense that the investment dollars within manufacturing organizations are increasingly going towards Internet of Things (IoT) initiatives. In fact, BCG predicts that IoT spending will exceed $260B by 2020 .
This development is only natural as we’ve seen IoT technologies move from mere ‘science projects’ to key initiatives in organizations in virtually any industry. In their book: Leading Digital , authors George Westerman, Didier Bonnet, and Andrew Macafee presented their research that shows that “Digital Masters” (companies that effectively align both the business side and the technology side of their investments) boast 9% higher revenue generation efficiency and 26% higher profitability.
The architecture of IoT is something most executives are well acquainted with by now: sensors gather, networks transmit and store the data while analytics processes it, visualizes it and makes it actionable. Still, despite IoT being a widely known concept with obvious value and a proven ROI, BCG’s survey of 380 US manufacturers found that the technology adoption rate has been slower than expected.
This certainly has to do with the fact that the manufacturing industry is highly averse to any type of disruption and considering a company-wide initiative of this type seems to have disruption written all over it. Additionally, most companies simply don’t have dedicated internal teams they can spare to carry out a project of this scope.
What many manufacturers have found is that selecting an outside partner that understands the industry challenges and has the expertise necessary to complement the resources already present within your organization determines the success of your digital transformation.
We help organizations bridge the gap between the need to maintain undisrupted production and the need to maintain competitive advantage by gathering actionable data and identifying optimization opportunities through IoT – bringing the future of digital manufacturing to today’s manufacturers.