The Future of Manufacturing: 2020 & Beyond

The manufacturing industry has some mega challenges ahead of it. In order to thwart off roadblocks such as skilled labor shortages, price slashing, increased costs, tariff uncertainty, global economic risks and downturns, the following strategies identified in the 2020 Manufacturing Industry Outlook report by Deloitte are being executed to cope with the ever-changing landscape.

Survival Strategies in a Fast-Changing Market

1. Focus and realign on key markets or customer segments

In the past, manufacturers used diversification as a growth strategy. However moving forward, there is a push to go back to the basics and keep business as tight and lean as possible. Manufacturers are gaining direct financial rewards by cutting down on diversification and focusing on their core business. This means fewer handshakes (overall M&A deal volume has gone down), but in return, deals with a higher value are being made instead.

2. Go digital or go home

There’s a lot of pressure on manufacturers to keep up with the 4th industrial revolution. With so much uncertainty and risk in terms of the global state of the economy and tariff wars, manufacturers are turning to something they can control – technological advancements. Becoming an autonomous powerhouse and building up their “digital muscle” is essential in their risk mitigation strategy. Integrating artificial intelligence, cloud computing, advanced analytics, robotics, and additive manufacturing to the value chain is the key to competing in this new era.

3. Strategic digital partnerships

Building a strong ecosystem is the next emerging trend in manufacturing. Manufacturers recognize that adapting to all this fast-paced change cannot be achieved alone. Establishing technology partnerships to help them gain a competitive edge in their supply chain is one of the main strategic plays happening right now.  No other industry is adapting to tech at such a velocity. In fact, manufacturers develop new business models and customer value at five times the rate of other industries.

4. The move to renewable energy sources

We are seeing more and more alternative methods of power generation from renewable energy sources being implemented. The benefits of being socially responsible and reducing our carbon footprint are paying off for manufacturers. There is a growing belief amongst top leaders that social responsibility is fundamental to profitability. This commitment to clean energy and “doing good” is more than just talk now as reports are showing true results from these types of efforts.

The State of the Industry

To get a big picture on the state of the manufacturing industry, we assembled some interesting facts that illustrates everything from the top manufacturing challenges today to what’s inside the factory of the future.

1. Top 10 Manufacturing Industry Challenges

  1. Labor shortage
  2. Global competition
  3. Automation
  4. Increased material costs
  5. Transportation and logistics costs
  6. Regulations and policies
  7. Geopolitical risks
  8. Sustainability
  9. Cybersecurity
  10. Traceability

2. Shifting Production Trends

The trade war has caused a change in the geographical landscape. US imports from China are declining, but imports from Mexico and Vietnam are increasing.

US imports from China were down 12.7 percent in the first eight months of 2019 versus the same period in 2018. US imports from Mexico were up 5.9 percent, and US imports from Vietnam were up 37.4 percent.

In just a short period of time, manufacturers have been forced to react and shift their production in order to seek tariff-friendly situations, leaving other countries a chance to step in and benefit from the political shifts and policy changes.

3. Facts on the Labor Shortage

The top concern for manufacturers today is the labor shortage. How did we get to where we are today? The labor shortage is due to baby boomers retiring and the next generation opting for college or university instead of skilled trades. According to research conducted by Deloitte and The Manufacturing Institute, over the next ten years, manufacturers will likely need to add 4.6 million manufacturing jobs – 2.4 million of which may go unfilled.

4. Top 20 Countries in the World by Manufacturing Output

List of the top manufacturing countries by total value of manufacturing in millions of US dollars:

  1. China: $4,002,752M
  2. United States: $2,173,319M
  3. Japan: $1,007,330M
  4. Germany: $832,431M
  5. South Korea: $440,941M
  6. India: $408,693M
  7. Italy: $310,897M
  8. France: $273,971M
  9. United Kingdom: $251,985M
  10. Mexico: $208,498M
  11. Indonesia: $207,017M
  12. Russia: $203,988M
  13. Brazil: $180,541M
  14. Spain: $180,264M
  15. Canada: $160,531M
  16. Turkey: $146,077M
  17. Thailand: $135,927M
  18. Switzerland: $129,162
  19. Ireland: $115,591M
  20. Saudi Arabia: $100,232M

5. Smart Factories & the 4th Industrial Revolution

A smart factory is a highly digitized and connected production facility. They are the factories of the future and the whole movement is still in its infancy. The smart factory is considered an important outcome of the fourth industrial revolution or Industry 4.0. The industry revolution timeline below illustrates the 4 major milestones that have occurred from 1784 to today.

What does a smart factory look like?

Don’t get confused with all the lingo. These are other terms being used for Smart Factory: Lights out manufacturing, dark factories, connected factories, digital factory, and the latest term by WEF (World Economic Forum) for factories leading the 4.0 revolution are called “Lighthouses”.

Most Automated Plants in the World

We’ve collected some real-world examples of the true “smart factory” trailblazers out there. The ones we’ve highlighted already have a massive head start compared to their competitors. 

Many of the factories being recognized as the leaders in the 4th industrial revolution are located in Europe and China.

  • Johnson & Johnson DePuy Synthes (Cork, Ireland): This medical device manufacturing facility has invested big time in the Internet of Things. The IoT technology is being used to create digital twins of physical assets for advanced machine insights that have lowered operating costs and machine downtime reductions.
  • Bosch Automotive (Wuxi, China): These guys are leading the way in Data Analytics. They are a German-Chinese joint venture that manufactures high efficiency and low emission diesel engine parts. By implementing radio-frequency identification-based tool management, embedding sensors to machines and analyzing real-time machine data and inventory, the factory renovated its infrastructure and is able to eliminate output losses and predict machine interruptions before they occur.
  • Schneider Electric (Batam, Indonesia): Schneider Electric is leading the way in the 4th industrial revolution. With multiple sites that keep being recognized by the World Economic Forum as being a “Lighthouse” of the future. The Batam location, along with the site in Le Vaudreuil France and Wuhan, China has implemented a wide range of technologies. From smart sensors, alarm prediction management, site benchmarking, and augmented reality for greater visibility into operations.
  • Procter & Gamble (Rakon, Czech Republic): This plant is known for its ability to change production lines in the blink of an eye. With a fully automated process in place, one manufacturing line can go to another without manual intervention. They’ve got an end-to-end synchronization analytical model that gives them complete supply chain agility.
  • Henkel (Düsseldorf, Germany): Henkel’s Laundry & Home Care business unit developed a cloud-based data platform that connects 30+ sites and 10+ distribution centers in real-time. This helps to meet growing customer and consumer expectations on service and sustainability while achieving double-digit cost and inventory reductions.

As we can see, the manufacturing world is changing faster than ever. As an essential industry to the state of the global world economy, manufacturers have no choice but to switch strategies and adapt to all the external pressures. Overall, forecasters are optimistic that we are recovering from the tough years and that we can expect it to slowly rebound.

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