The revolution won’t wait

June 29, 2017

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Technology Is Dramatically Changing Our Manufacturing Landscape

By Robert McCutcheon

The year began with a renewed sense of optimism among manufacturers given expectations for beneficial changes in tax policy, regulation and infrastructure spending. Despite continued uncertainty regarding the global economic climate, there was a consensus that a more business-friendly environment was on the horizon. Six months later, the sector is still marked by a relatively elevated degree of optimism, but expectations have been tempered as management teams struggle to discern developments on Capitol Hill and what it all means for policy change.

Another year into one of the longest running economic growth cycles in history, industrial manufacturers are learning that uncertainty is the new normal. They’re operating in what is often uncharted territory in terms of accessing cyclicality, volatility and customer order patterns. More akin to chess strategy, rather than checkers, management teams are being forced to think several steps ahead. Investment in innovation remains at the forefront, while cost-cutting exercises have become permanent.

Amidst all this change, one thing is certain: manufacturing executives aren’t waiting for lawmakers to determine the fate of their companies. Technological change is already doing that. We are arguably witnessing the greatest transformation in the manufacturing sector since the industrial revolution. The rapid adoption of advanced technologies is leading to substantial disruption in production processes, cost management, order fulfillment, product life cycles, quality control, hiring and training, among other areas.

The sheer pace of change being driven by new technologies, from artificial intelligence (AI) and advanced analytics to robotics and additive manufacturing, is occurring at a much faster pace than originally anticipated. The competitive environment and the need to develop smarter products at a lower cost has hastened investment and sped-up commercial adoption cycles. There is an ongoing shift underway in multiple segments to transition from just creating products to developing critical solutions.

We see it in the advanced materials used in engines, medical devices and airplanes that are printed using additive manufacturing processes. We’re also witnessing dramatic changes in supply chain management, order fulfillment and speed to market spurred by robotics. And, we see the impact of technology in the integration of AI into a host of what were once just products, but are now solutions that can be monitored and managed in real time from afar. This change requires dramatically different skillsets, putting pressure on companies to find and train qualified workers.

One of the great changes on the horizon relates to mobility. We are in the midst of a demographic and technological transformation that will forever change the way we move people. From autonomous and connected vehicles, to ride sharing and smart cars needing smart roads that will require massive infrastructure investment, we are witnessing unprecedented change.

At the center of this transformation is a culture of innovation that is prevalent across the domestic manufacturing sector. After years of global competitive pressure and, in many cases, a sense of disadvantage, we are now increasingly seeing a leveling of the playing field. US companies are taking the lead in harnessing new technologies to deliver advanced solutions that play integral roles within connected ecosystems, most notably IoT. The lines are increasingly being blurred between technology and manufacturing as entities from both sectors pursue strategic M&A. In turn, industrial manufacturers are playing an incredibly relevant role in driving advancements in fields as diverse as healthcare, aeronautics, energy and transportation.

This a very different environment from only five years ago. We’ll be closing watching what the next six months brings in the industrial manufacturing sector and we’ll be sure to give you an update in January. We won’t surmise what might transpire on the regulatory front. But we will confidently predict a continuation of the rapid adaption of advanced technologies across the sector, further fueling the historic industry transformation underway.

©2017 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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