Large, carbon-emitting factories. Developing countries. Low wages. Mass producing one identical item after another. These are the images that come to mind when most people think of manufacturing. But not for long.
Today, manufacturing is entering its most exciting phase: Next Generation Manufacturing (NGM). Around the globe, six megatrends - sustainability, digitalization, mass customization, localization, populism and industry disruption - have reached a tipping point, offering a unique opportunity for manufacturers to ride the wave and reshape the sector. Manufacturing has been a key driver of economic prosperity since the mid-nineteenth century. Even today, traditional manufacturing remains the backbone of the world economy, generating an estimated 17 percent of global GDP—and more, if related services are included. The last few decades, however, have seen the role of manufacturing and its public perception start to decline. As the importance of sustainability has grown, so too has the sector’s deteriorating contribution to climate change. Outsourcing to developing countries has also become more scrutinized and is losing public favor. In addition, major world events have shed a light on the failures of the global supply chain that most manufacturers rely upon. Covid-19, the Suez Canal blockage and, most recently, the Ukraine-Russia crisis have all forced companies to rethink their global footprint and supply chain network. The next crisis is no longer a question of “if” but “when”. Hence, companies must be quicker and more agile than traditional manufacturing would allow, when it comes to implementing risk mitigation strategies.
One of the traditional goals of manufacturing has always been to keep costs low and production high. Now, shifting trends and customer preferences have tweaked the criteria that production is assessed. Outsourcing production operations to countries with cheaper labor, for example, has gotten considerably more difficult, thanks to public attitudes as well as stricter government regulations. This, in turn, has led to increased efforts in both digitalization and localization. Companies would like to become “asset-light” and leave the manufacturing duties to someone else entirely. They would rather be responsible only for the design, branding, marketing and sales. But this is not always possible due to the legacy of physical assets such as factories, the workforce, restrictions on location and investment requirements. Or if the USP lies within the manufacturing process itself. Adopting greater digitalization can also prove difficult and pricey.
Given the numerous challenges, stepping away from manufacturing may seem like the prudent measure, but, in the long-term, it is a strategic mistake. By distancing themselves from manufacturing and viewing it as a liability, companies set their business up for hurdles down the road and will eventually lose out on gaining a competitive advantage in a turbulent environment. NGM is a strategic solution that enables companies to embrace and agilely adapt to challenges and achieve long-term success.