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SURVEY RESULTS & ANALYSIS
2020 Manufacturing Trends How to Remain Resilient in the Face of Uncertainty
Table of ContentsWelcome 3
Key Findings & Methodology 4
Demographics of Respondents 5
Survey Questions, Responses, & Analysis 6
Conclusions 26
We surveyed top executives in manufacturing to get a pulse on the latest challenges and opportunities present in the industry. Our survey was designed with the intent of unlocking insights that manufacturing companies can use to better prepare for 2020.
As we move into the new decade, many manufacturers are gearing up for a potential recession that can impede the exponential growth they have experienced in 2019. While the manufacturing sector reported strong growth in Q1 and Q2, the recent U.S. manufacturing purchasing manager index (PMI) report recorded a reading below 50 — pointing to a contraction.
The question then becomes, how will manufacturers respond to this economic shift? What impact will it have on operations, pricing, and efficiency in light of increasing industry regulations? And what role will technology play in helping companies remain competitive in a saturated market driven by tight margins?
We hope that our survey can answer these questions while providing perspective and clear direction in 2020. If there is one thing we are sure about, it is that agility and data will be instrumental for success. If you have any questions or would like additional resources on manufacturing trends, please let us know.
Sincerely, Alithya
Welcome 2020 Manufacturing Trends: How to Remain Resilient in the Face of Uncertainty
www.alithya.com 3
4
• Despite the headwinds of a potential recession, 68% of manufacturers surveyed expect their annual growth to be higher than the industry projected growth rate of 3.9% for 2020.
• 84% of respondents reported knowing who their most profitable customers are.
• Profitability, regulatory compliance, rising material costs, and effective use of data were cited as the top concerns for manufacturers.
Key Findings
• 83% of participants stated trade and tariffs are significantly impacting their business and that they will make every effort possible to pivot and respond to changes.
• The top three technological priorities for manufacturing companies in 2020 are:
– ERP
– CRM
– Business Insights and Analytics
We conducted a 23 question survey to derive insights around the manufacturing industry’s most pressing business challenges and opportunities. Over 120 manufacturers participated in the study. We have collected, tabulated, and summarized their responses into a robust report of key findings and takeaways. The goal? To equip manufacturers with the right business intelligence that will help them shape their growth initiatives for 2020 and beyond.
Methodology
www.alithya.com
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Demographics of Respondents
Take a look at the following graphs to get a general profile of our survey participants. While responses were collected across several manufacturing sectors, the top three were food and beverage, industrial, and building products. The job level of respondents was mostly comprised of managers with a strong emphasis from top executives. More than half of the respondents are from organizations with annual revenues of more than $250M.
Food & Beverage
Industrial
Building ProductsConsumer Packaged Goods
Chemical
Medical DevicesDiscrete Manufacturing
Computer/Electronics
Market Textile Pharmaceutical
Life ScienceOther
Manager/
Senior Manager
Directo
r
Partner
Vice Presid
ent/
Senior Vice
President
C-Level
Other
United States
CanadaOther
84%
14%
2%
28%
20%
7%
14%11%
21%
36%32%
21%
12%
Less th
an
$249 Milli
on
$250 - $500
Million
$500 Milli
on
- $1 Billi
on
More than
$1 BIllion
0% 5% 10% 15% 20%
Industry Country
Job LevelOrganization’s Annual Revenue
0%
10%
20%
30%
0%
10%
20%
30%
40%
Survey Questions, Responses, & Analytics
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In 2019, leading indicators predict the manufacturing industry growth rate at 3.9% annually. How does your organization’s expected growth rate compare to this average?
Question 1
Expectations with regard to growth rates in the manufacturing industry are optimistic, with 62% of respondents anticipating growth to be in line with or above average in the upcoming year compared to 68% in 2018.
In 2018, the projected growth rate for manufacturing was 6.6%, significantly higher than in 2019. In turn, the 2019 projected growth rate was 3.9%, which indicates a potential economic slowdown.
Answer & Key Finding
In spite of a potential downturn, 67.9% of manufacturers have a positive outlook on business growth in 2020 according to Deloitte’s 2020 Manufacturing Industry Outlook. Similar to our findings in 2018, the tight labor market will continue to add pressure and slow down growth in the manufacturing sector. Tariffs and their impact on trade flows will also continue to add uncertainty and hamper growth for the industry.
Takeaway
0% 5% 10% 15% 20% 25% 30% 35%
Our growth rate is expected to be higher than 3.9%
Our growth rate is expected to be in line with 3.9%
Our growth rate is expected to be lower than 3.9%
Not sure/ Don’t know
33%
29%
22%
16%
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Which of the following best describes your attitude/outlook on the future of manufacturing industry?
Question 2
Almost three-quarters of participants are concerned that the manufacturing industry will take a downturn and negatively affect their company. This confirms the suspicion of many manufacturers that a recession is looming close.
Answer & Key Finding
Findings from a study issued by the National Association of Manufacturers support the general concern that the economy will take a nosedive in the upcoming year and negatively impact the manufacturing industry. Approximately 68% of manufacturers reported a positive outlook in Q3, down from 79.8% in Q2 and 89.5% in Q1. A large swath of manufacturers cited the lack of quality talent as the primary issue fueling the sector’s feelings of uncertainty and concern.
To combat the war on talent, manufacturers must double down on their talent acquisition strategies to remain competitive in the upcoming year. This may require the purchase of new technologies to achieve this objective.
Takeaway
I’m not at all concerned about the industry; I’m confident that my company will prevail
I’m slightly concerned that the industry will take a downturn and negatively affect our company
I’m somewhat concerned that the industry will take a downturn and negatively affect our company
I’m extremely concerned that the industry will take a downturn and negatively affect our company
28%
31%
33%
9%
0% 10% 20% 30% 40%
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Which of the following best describes how much your organization will invest in capital projects in 2020?
Question 3
When it comes to preparing for the future, 85% of respondents reported continuing or increasing their capital investment amidst recession concerns.
Answer & Key Finding
Survey results are in line with the National Association of Manufactures 3rd Quarter Manufacturers’ Outlook study, which reported a 1.1% uptick in capital investments over the next 12 months. As Industry 4.0 picks up steam, investing in capital projects will help manufacturers streamline business processes by replacing outdated equipment and incorporating smart technologies across the plant floor. Undertaking initiatives of this type is a surefire way to boost productivity and enhance the bottom line, a sentiment that is corroborated in Deloitte’s latest research report.
Takeaway
Significantly less than in 2019
Somewhat less than in 2019
About the same as in 2019
Somewhat more than in 2019
5%11%
51%
22%
11%
Significantly more than in 2019
0%
10%
20%
30%
40%
50%
60%
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Which of the following most accurately describes your organization’s market share?
Question 4
Similar to the findings of our 2018 report, 69% of manufacturers cited domestic business as the dominant region for market share growth over international. A marked difference from the 11% making international gains.
Answer & Key Finding
With tariffs putting pressure on trade flows and pricing, it makes sense that most manufacturers will continue to focus on growing their domestic footprints in 2020.
Takeaway
Domestic business represents more market share than international business
Domestic and international market share is about the same
International business represents more market share than domestic business
Not sure/ Don’t know
69%
15
11%
5%
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Which of the following best describes your organization’s connections with its customers and their insights?
Question 5
About half of respondents consistently collect and utilize customer insights, with 33% stating that they don’t currently use them to better engage with customers. This provides an opportunity for improvement but also highlights the need for manufacturers to start making better sense of their data.
By aligning Customer Support, Field Support, and BI/Analytics, companies can better leverage their data to elevate their customer experience to positively impact their bottom lines. This shift ultimately points to the implementation of AI initiatives to facilitate customer engagement endeavors.
Answer & Key Finding
In a study conducted by Bain & Company, companies that excel at customer experience grow revenues 4%-8% above their market. Utilizing tools like AI can help automate customer-centric activities to enhance the customer experience. According to an article in Forbes, organizations that can apply real-time AI to IoT data can gain substantial business value, including as much as a 38% uplift in profitability by 2035.
Takeaway
We consistently collect customer insights and use it to build lasting connections with them.
We collect some customer insights, but it doesn’t impact our relationships with them
We do not collect customer insights currently
3%
52%33%
12%
None of the above
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How would you describe how your organization utilizes data?
Question 6
Only 32% of manufacturers collect and utilize data regularly, with 43% currently working on a plan to draw insights. An opportunity exists for the 18% of respondents who collect data but don’t use it and the remaining 8% that do none of the above.
Answer & Key Finding
According to an article in Forbes, data is one of the most vital assets for any company regardless of size. It can improve decision making across all facets of an organization, boosting the bottom line. While many small to mid-size market companies may want to jump the gun and implement new technologies to get access to this resource, doing so without a data strategy in place is a recipe for failure. To that end, manufacturers looking to harness the power of data should tie their data strategy to their business strategy.
Takeaway
We collect data and utilize it regularly
We collect data and are working on a plan for effectively utilizing it
We collect data but we don’t have a plan for utilizing it
We do not collect data or utilize it at all
32%
43%
18%
8%
0% 10% 20% 30% 40% 50%
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Are you aware of which customers are most profitable to your company?
Question 7
The perception of 84% of the respondents is that they know who their most profitable customers are.
Answer & Key Finding
In an article published by McKinsey, it was noted that while most manufacturers collect vast amounts of data, many only use it for tracking purposes. This presents a missed opportunity as the data collected could also be used for improving operations, enhancing the customer experience, and identifying opportunities for growth.
One of the reasons manufacturers fail to use the data collected in this manner is the lack of an integrated business ERP solution. Investing in such a system would provide manufacturers with the needed business analytics and visibility to make actionable decisions.
Takeaway
Yes
No
Not sure / Don’t know
6%
84%
10%
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Are you aware of which products are most profitable to your company?
Question 8
A staggering 91% of manufacturers reported a deep understanding of which products are most profitable to their company.
Answer & Key Finding
Understanding your most profitable products is paramount to success in today’s globally interconnected economy. It’s what helps manufacturers determine which products to expand and shrink. According to Accenture, adopting a product profitability analysis metric makes the best use of data by:
• Showing the resources required in the value chain
• Demonstrating the functional impact per cost center and staff, including theeffect on any outsourced step in the value chain
• Painting the impact of changes in input costs, product specification, resourcelevels, and productivity
Takeaway
2%
91%
7%Yes
No
Not sure / Don’t know
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Which of the following best describes your company’s primary focus?
Question 9
Over half of the participants cite profitability as a top priority, with overall growth following close behind at 45%.
Answer & Key Finding
It’s not surprising that profitability is a top priority for most manufacturers when you consider the increase in industry regulations, workforce shortage, and the impact of tariffs. Companies that want to survive in 2020 will have to get creative in addressing these three areas to yield additional revenue.
Takeaway
3%
45%52%
Overall growth is our top priority
Profitability is our top priority
Neither
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Which of the following best describes your primary focus with respect to profitability?
Question 10
When it comes to profitability, 70% of respondents said that both total revenue and profit margin are the primary focus of their overarching growth strategy.
Answer & Key Finding
Manufacturers that can harness the power of speed, agility, and business intelligence should see an uptick in business growth in 2020’s volatile market. Addressing the skills gap is another surefire way to positively impact the bottom line. According to an article published by the National Association of Manufacturers, approximately 2.4 million jobs can go unfilled by 2030, putting $2.5 trillion worth of GDP at risk and stalling the sector’s growth.
Takeaway
Total revenue
Profit margin
Both total revenue AND profit margin
Neither total revenue NOR profit margin
6%
18%
70%
2%
Don’t know/ Not sure 4%
0% 10% 20% 30% 40% 50% 60% 70% 80%
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Which of the following challenges most impacts your business (select all that apply)?
Question 11
The top challenges impacting manufacturing businesses include regulatory compliance, the rising cost of materials, and the ability to use data effectively.
Manufacturers spend a lot of resources on regulatory compliance and trade agreements. When you combine these factors with the increase in material and labor costs and price reductions, it drives the cost of doing business up while taking a toll on the bottom line.
Answer & Key Finding
According to the National Association of Manufacturers (NAM), the average manufacturer pays about $19,564 per employee to comply with federal regulations. And smaller firms with fewer than 50 employees spend 2.5 times the amount of their larger counterparts. Companies that invest in digital initiatives are better able to combat the impact of federal regulations on their bottom line.
Takeaway
Regulatory compliance
Rising material costs
Effectively utilizing data
Increasing labor costs
Trade agreements/tariffs
0% 5% 10% 15% 20% 25% 30% 35% 40%
Price reduction pressures
Visibility across all systems
Driving speed to market with innovations
Market volatility
Too many disparate systems
System obsolescence
Developing repeatable & scalable processes
36%
33%
33%
30%
28%
26%
26%
22%
22%
22%
21%
20%
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Which of the following best describes how trade agreements/tariffs affect your business?
Question 12
About 83% of respondents feel that trade agreements and tariffs are either top of mind or important to their business. This creates a greater sense of concern about the ability of manufacturers to cost-efficiently execute trade agreements. It can be argued that this concern can be attributed to the decision to grow in domestic markets versus international ones.
Answer & Key Finding
Takeaway
They are top of mind and we try our best to react
swiftly when things change
They are important, but not crucial and our business makes
every effort to keep up and make changes to our business
They don’t have a strong impact on our business, so
we rarely react to them
21%
62%
15%3%
They don’t affect my business at all
It’s not surprising that most respondents find tariffs and trade agreements top of mind as most, if not all, are feeling their negative impact. When countries participate in trade wars, it leads to a waterfall effect that results in a reduction of economic output, income, and employment, as mentioned by the Tax Foundation.
Deloitte published an article listing the steps manufacturers can take to address these changes, which are:
• Stay nimble through scenario planning by developing processes that allow forquick and decisive action:
• Invest in STEM talent to facilitate automation and smart manufacturing
• Optimize supply chain continuously for more effective and reliable alternatives
• Invest in innovation to reduce dependency on third-party products
• Invest in automation
0%
20%
40%
60%
80%
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Which of the following best describes the part that mergers and acquisitions (M&A) play in your business strategy?
Question 13
On the subject of mergers and acquisitions, 40% responded that they had been involved in M&A in the past and plan to be the future. In contrast, only 15% said they were involved in a merger and acquisition and do not plan to be moving forward.
Answer & Key Finding
Findings from our survey are in line with Deloitte’s 2020 Manufacturing Industry Outlook report. Despite strong M&A activity between January and August 2019, with three $500+ million deals, the activity has tapered off as we near the end of the year. Smaller companies that decide to partake in M&A to diversify their core competencies and expand their product lines should look for a holistic ERP solution to ensure their success.
Takeaway
We were involved with M&A in the past and plan to be in the future
We were involved with M&A in the past, but do not plan to be in the future
We were not involved with M&A in the past, but plan to be in the future
We were not involved with M&A in the past, and we do not plan to be in the future
None of the above
40%
15%
15%
20%
10%
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With regards to your organization’s supply chain process, please rate how satisfied you are with your level of visibility into this aspect of your company?
Question 14
Almost one-third of participants report being very or extremely satisfied with their organization’s supply chain process. Half of the respondents are somewhat satisfied, which opens up the opportunity for improvement.
Answer & Key Finding
As consumer behavior continues to shift and evolve, manufacturers must become savvier to remain competitive in today’s saturated market. In an IBM study referenced in a Supply Chain Dive article, 87% of chief supply chain officers say it is extremely difficult to predict and manage supply chain disruptions, with 84% citing visibility as the biggest challenge.
Visibility into your supply chain is critical because it is directly tied to forecasting demand for a product. Without that insight, you’re unable to accurately determine how much of a product you must produce, if the product is genuinely profitable, and how much product you must have in inventory to meet consumer demand.
Takeaway
Not at all satisfied
Not very satisfied
Somewhat satisfied
1%17%
50%
30%
Extremely satisfied
Very satisfied
2%0%
10%
20%
30%
40%
50%
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Thinking about your organization’s priorities with regards to product innovation, please rank the following in order of importance (1 being the most important and 9 being the least important) primary focus?
Question 15
The top priority when it comes to innovation is improving efficiency and productivity, allowing companies to be leaner and more focused on bottom line profitability. Surprisingly, traceability and tracking of material in addition to collaboration across all business units were ranked as the lowest priority.
However, it can be argued that the implementation of new technology like automation, IoT, and business intelligence will not only make a company more efficient and productive, but also inherently provide insight into traceability and tracking of materials. And hence, the lower prioritization of those two items.
Answer & Key Finding
Working faster and smarter is the name of the game for manufacturers who want to stay ahead of the curve. In a study conducted by Microsoft, it was projected that by 2021, there would be 36.13 billion IoT devices. And sales of collaborative robots are expected to increase by 159% between 2018 and 2020. To derive actionable insight from these new systems, manufacturers should collect the data generated under a centralized system like an ERP.
Takeaway
0% 5% 10% 15% 20% 25% 30% 35%
Efficiency and productivity
Customer input
Changing consumer demands
Prototype development and testing
Speed to market
Sustainability of future supply
Raw material pricing volatility
Traceability and tracking of materials
Collaboration across business units
32%
18%
11%
10%
9%
7%
7%
5%
1%
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Thinking about your organization’s technology priorities, please rank the following in order of importance (1 being the most important and 8 being the least important).
Question 16
ERP and CRM are top tech priorities, with collaboration and portals ranking the lowest. For many manufacturers, IoT and machine learning tends to be considered more conceptual than practical. This would explain the slow adoption of emerging technology across all manufacturing sectors.
Answer & Key Finding
Implementing new technology is a great way to attain a competitive edge, but manufacturers must be mindful that technology is a tool, not a strategy. It will not magically solve all your problems straight out of the box. To be successful, it must be approached strategically with a long-term view of how the technologies will help you attain your business goals.
Connecting with an implementation partner is a great way to ensure adoption success as they can help you connect business processes, suggest the right tools for your organization, and integrate your data sources under one dashboard.
Takeaway
ERP
CRM
Analytics and BI
Cloud migration
Connected Field Services
IoT and Machine Learning
Collaboration
Portals
0% 5% 10% 15% 20% 25% 30%
29%
24%
18%
9%
7%
5%
5%
4%
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Thinking about your organization’s sales priorities please rank the following in order of importance (1 being the most important and 9 being the least important).
Question 17
When it comes to sales, the top priorities are improving processes, forecasting, and accuracy. Many of these elements tie into CRM and the maturity of the manufacturer’s sales organization. However, to accurately predict future purchases and orders and optimize timing, forecasting must be accurate. This increases the importance of data quality and visibility to make those decisions.
Oddly enough, tracking activity, progress reporting, and actionability were considered the lowest priorities, which goes against the grain of what it means to compete in today’s digital economy.
Answer & Key Finding
It’s not enough to implement a new CRM tool and expect to garner actionable insights. If the sales team is not being pushed to track their activities, develop progress reporting to make sure they are hitting revenue targets, or gather insights into customer data to impact relationships, then the organization will not have actionable data to make the right decisions. Manufacturing companies must invest in both the tool and their team to drive results.
Takeaway
Improving Processes (or Sales Processes)
Forecasting
Accuracy
Visibility
Resource Allocation
Tracking Activity
Progress Reporting
Actionability
0% 5% 10% 15% 20% 25% 30%
28%
23%
18%
14%
8%
4%
4%
2%
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Which of the following best describes the executive team’s view on technology within your organization?
Question 18
Approximately two-thirds of respondents feel that executives value technology and are open to incorporating it into the organization. This confirms the hypothesis that technology is top of mind for manufacturing companies and plays a significant role in helping them compete in the marketplace.
Answer & Key Finding
According to Deloitte, many manufacturers are focusing their efforts on building “digital muscle.” This refers to the application of AI, cloud computing, robotics, and more to increase flexibility in global supply chains and streamline operations.
Takeaway
They value technology and are open to incorporating it into our organization
They are uncertain about technology, but view it as necessary
They have trouble seeing the value in technology within our organization
and are resistant to it
0% 10% 20% 30% 40% 50% 60% 70% 80%
64%
25%
11%
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0%
20%
40%
60%
Not at all effective
Not very effective
Somewhat effective
Extremely effective
Very effective
Thinking about your organization and their digital communications (emails, portals, e-commerce, and webcast), how effective is your communication with customers and suppliers?
Question 19
With over half of the respondents reporting their organization’s communications as somewhat effective, there is a large opportunity for manufacturers to optimize and improve their digital communication strategies.
Answer & Key Finding
Those in the manufacturing industry must incorporate a customer-centric focus in their business strategies. In Microsoft’s 2019 Manufacturing Trends report, 50% of surveyed customers said they would switch brands due to a negative experience, and 75% said they prefer personalized experiences.
To meet these demands, manufacturers must push for more in-depth collaboration across customer and supplier relationships, sales, service, and operations teams. A single platform, like CRM or ERP, with an intuitive interface, can increase productivity by reducing the time spent looking for information and drive innovation with collaborative tools.
Takeaway
1%5%
56%
32%
7%
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ConclusionPreparing for What Lies Ahead
As manufacturers continue to grapple with the increase in tariffs, regulatory compliance,
and material cost, many are turning to technology and data
make better decisions.
While 2019 started with strong economic growth both in the U.S. economy and manufacturing industry, readings from PMI’s 2019 August report indicate that an economic slowdown is imminent.
As a result, manufacturers have doubled down on their efforts to combat this reality with many adopting a positive outlook when it comes to their projected growth in 2020, as indicated in our survey results:
• About 85% of survey respondents arepreparing to continue or increase capitalproject spend in 2020 in lieu of a potentialrecession.
• Over 50% of participants plan to be involvedin a merger and acquisition as part oftheir growth strategies to increase corecompetencies, enhance their product mix, andreach new markets.
As manufacturers continue to grapple with the increase in tariffs, regulatory compliance, and material cost, many are turning to technology and data to make better decisions. According to our research, the vast majority reported that their executive teams are open to incorporating new technology.
However, responses gathered showed that gaps still exist in the knowledge and implementation of smart technologies like modern CRM and ERP tools.
This presents multiple opportunities in the following areas:
• Utilizing customer data and insightseffectively
• Optimizing efficiency and productivity
• Improving sales processes and forecastingfor better visibility with data
• Incorporating technology into theirorganizations to streamline systems
• Increasing the effectiveness of digitalcommunication with better data
• Maximizing satisfaction with supply chainprocesses
With industry 4.0 picking up steam, now is the time for manufacturers to invest in smart technology that will transform and enhance the way they do business.
This is even truer as business models continue to become more customer-centric. It’s the age of the customer, and those companies who leverage technology to deliver better customer engagement will be rewarded.
To successfully achieve a customer-centric approach, organizations have to break the data silos by connecting disparate systems under one centralized platform.
They must also upgrade outdated equipment with a cloud-based application that allows them
to collect and analyze data to procure real-time analysis that will enable better decision making.
When approaching the implementation of new technology, manufacturers should take a strategic approach and prioritize their investment by determining which tool would provide the best ROI: Analytics, ERP, CRM, Portal, Collaboration, etc.
Ultimately, the acquisition of these platforms will empower not just the sales organization but the entire workforce. In today’s uncertain economic climate, adopting a lean and agile approach is key to surviving the potential of an economic downturn.
About Alithya ALITHYA GROUP INC. IS A LEADER IN STRATEGY AND DIGITAL TRANSFORMATION IN NORTH AMERICA. Founded in 1992, the Company counts on 2,000 professionals in Canada, the United States and Europe. Alithya's integrated offering is based on four pillars of expertise: strategy services, application services, enterprise solutions and data and analytics. Alithya’s Microsoft practice covers a wide array of capabilities, including Dynamics, Azure, IoT, AI, business and advanced analytics, digital solutions, application development and architecture.
alithya.com | [email protected] | 866-420-7624
C O N TA C T U S
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