Walking the Tightrope to Thrive in the New Industrial Era

July 13, 2023
Manufacturers must strike a balance between managing costs and investing in future production capabilities. Here’s what they should focus their efforts on.

The industrial sector is at a crossroads, where recent contractions coincide with signs of revival. Organizations recognize the need to move from legacy systems to embracing high-tech, modern capabilities but they are grappling with several issues that need to be addressed.

Talent scarcity is one, calling for a change in the way work gets done. Doing more with less is a key challenge. Another issue is the pivot from worrying about disrupted supply chains to de-risking supply chains by bringing manufacturing closer to home and the customer. Nine in 10 organizations plan to invest in new facilities in North America over the next five years to produce closer to where their customers are, according to a survey Accenture conducted with 900 manufacturing executives. In addition, fresh announcements emerge almost weekly from American corporations unveiling plans for new factories—not in China or South-East Asia but in OhioTennessee and Utah. Simultaneously, European property experts are witnessing a surge in the demand for industrial space, influenced by the evolving economic and geopolitical climate.

The third issue that is top of mind for manufacturers is the growing complexity of new product introductions. This complexity is largely driven by the energy transition and product technology advancements.

In this climate, it is imperative to strike a balance between managing costs and investing in future production capabilities. So, let’s delve a little deeper into what manufacturers should focus their efforts on.

Change perspectives. Leaders must abandon the "one and done” cost-cutting mindset. It's time to focus on sustainable productivity enhancements for long-term benefits. We’ve found that 70% of traditional cost-reduction programs fail because the costs removed ultimately return. Industrial businesses are experts at finding cost-savings, but this is often driven through brute force cost reduction rather than by transforming the cost structure to be flexible and able to evolve with the way work gets done through automation and changing the operating model to drive efficiency and productivity across the organization. It’s also about finding the funds that can be reinvested into areas such as new product introduction and customer experience improvements.

Don’t compromise on transformation. Between 2020 and 2022, two-thirds of U.S. manufacturers embarked on wide-ranging organizational transformations to strengthen their resilience. This included investments in digitizing factory operations, facilitating quick adaptation of production lines in response to unforeseen changes in demand and an intensified push to foster collaboration across disparate parts of their organizations.

Now is the time to accelerate and broaden these programs.

Sustainability is the future. Companies might be tempted to delay investments in renewable energy sources and sustainable products for short-term gains. Yet research shows that companies that focus on environmental, social and governance (ESG) issues generate up to 2.6 times more value for shareholders than their peers. Plus, many consumers demand it—even in the face of inflation and rising prices—and CEOs say that positioning sustainability as a core part of the business model is a crucial way to build resilience. 

There are already some great examples of the benefits of sustainability for industry. Cummins launched Accelera as a new brand aimed at advancing a range of zero-emissions solutions, including hydrogen fuel cells, batteries, e-axles, traction systems and electrolyzers to sustainably power a variety of industries—from commercial transportation to chemical production. As a components supplier and integrator, Accelera is decarbonizing applications like buses, trucks, trains, construction equipment, stationary power and carbon-intense industrial processes.

As the Accelera example highlights, the sustainability opportunity for manufacturers lies in pursuing net-zero emissions, zero waste and circular business models in product design, development and production, which often are de-facto mid-to long-term cost-saving and efficiency programs.

Build the technology lead. In Europe, 75% of manufacturers increased cloud services investment over the last two years, and in the U.S. two in three said the same. Technology is crucial for growth.

The future of manufacturing (and sustainability) hinges on advanced technologies like artificial intelligence and robotics for automation, quick decision-making, equipment monitoring and improved recycling.

Siemens Energy is pursuing a transition to hydrogen and renewable energy sources and driving change by harnessing everything from drone technology to artificial intelligence.

New technologies improve predictive maintenance and can detect pipeline leaks earlier than it would be possible to do physically. Drones, camera technology and AI help analyze areas and identify maintenance needs.

Bridgestone, for example, with its tire-centric solutions takes its deep knowledge about the physics and chemistry of tires and combines it with insights from digital twin technology. This helps Bridgestone predict when a tire is wearing out or needs incremental inflation, issues that cause it to be less efficient when it comes to CO2 emissions.

Mobilize the future workforce. In a recent interview, Intel CEO Pat Gelsinger said, “I need a class of workers that are going to be able to create the most efficient factories with the highest automation, metrology, tool efficiency, etc.” This shows how dramatically the nature of manufacturing work is changing. 

Future plants and factories require new skills for emerging roles. However, filling these positions is hard; 40% of surveyed executives struggle most to find IT, automation and robotics technicians. Manufacturers must develop a talent pipeline promoting the sector as “not your grandpa’s manufacturing job” but a modern, digital workplace that young professionals want to choose.  

Outlook for the future

The clarion call for the sector is clear. To thrive in this new industrial era, businesses must negotiate a precarious tightrope with precision and agility. Success requires a fundamental transformation—a shift in mindset, ongoing investment in technology and sustainable solutions, and a readiness to invest in and equip the workforce of tomorrow.

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