New Research Identifies Path to Transformation for Manufacturing Industry
Oxford Economics Study Shows How Adjusting Priorities Can Enable Large Manufacturers to Increase Revenue by up to $200M, Reduce Costs by up to $100M
ANAHEIM, CA and NEEDHAM, MA - June 10, 2013 - At PTC Live Global 2013, PTC (Nasdaq: PMTC) today released the findings of a ground-breaking study by Oxford Economics that explores the factors driving a strategic transformation in the global manufacturing industry. The research, which involved both qualitative and quantitative inputs from 300 executives from around the world, also identifies the strategies that manufacturers are adopting to transform their businesses and differentiate themselves for competitive advantage.
Global manufacturers are at an important industry inflection point, the study found. Market and technological forces are upending many time-honored assumptions within the manufacturing industry. As a result, more than two-thirds (68%) of manufacturing executives surveyed expect their firms to undergo significant business process transformation over the next three years.
"Our survey and interviews with market leaders show that manufacturing companies are transforming their businesses in many fundamental ways to respond to market shifts and technology trends," said Lou Celi, president of Oxford Economics Americas. "The priority for manufacturers today is to make better things - creating innovative and distinct products and services that meet customer needs - while continuing to make things better. True competitive advantage can only be achieved by tightly coupling the engineering, service planning and execution, management, and production processes through which innovation can evolve from conception to execution, and by creating a closed feedback loop to ensure continual improvement and alignment across the business."
Key Transformation Initiatives
The research found that successful transformation initiatives were grounded on three broad themes:
- Rethinking strategy and planning: The importance of the decisions on how a company engineers, sources, manufactures, and services its products, and coordinates these processes eclipses operational execution as a competitive driver for most industry sectors. For example, the study found that manufacturing executives are placing an increasing importance on the coordination of strategy and planning between engineering and service divisions, growing from 54% of respondents today to 73% in three years.
- Adopting the service imperative: Historically, the service dimension of manufacturing focused on repair and maintenance. Market leaders are now blending their products and service capabilities into new performance-based offerings. This will be the key to true differentiation, as well as providing a significant revenue boost and a guaranteed annuity stream. In fact, 77% of C-Level respondents indicated that they will enhance services as a key way to differentiate their products in the marketplace.
- Fostering innovation everywhere: The emphasis on innovation will grow even more during the next three years with increased efforts in product strategy and engineering. Reverse innovation is a specific aspect that is growing more popular, as firms design products for emerging markets and bring them to developed ones (35% of surveyed manufacturers practice this today, vs. 50% in three years).
Based upon the research, Oxford Economics concludes that well-executed transformation efforts can produce significant business results. To quantify those results for manufacturers, the report includes a business-impact model that estimates how changing transformation priorities-rethinking strategy and planning, greater emphasis on service, and innovating everywhere, including in the area of manufacturing operations-might affect revenue and costs. The model assumes a "prioritization curve" that tracks the emphasis placed on each of these three transformation activities and estimates financial results. For example, a manufacturing firm with $5 billion in annual revenue and a 20% profit margin could increase revenue by as much as $195 million and reduce costs by $96 million by increasing its prioritization of strategy and planning activities from moderate to high.
"The Oxford Economics study provides valuable insights into how the manufacturing industry is responding to the need for new sources of competitive advantage," said James E. Heppelmann, President and CEO, PTC. "This research is consistent with PTC's mission of helping manufacturing companies prioritize their strategy, planning and service activities. By delivering technology solutions that transform the way that products are created and serviced, we enable customers to transform their businesses to achieve ongoing product and service advantage."
According to the study, manufacturers will choose a variety of approaches to transform their businesses, and may adopt multiple strategies in response to market shifts. Among the more compelling findings are that:
- The concept of ‘design anywhere, build anywhere, service anywhere' will grow 125% in three years.
- Products get smarter. Smart products, which consist of mechanical components, electronics, and software, will see a 38% growth on the world's stage.
- New service business models come of age. By 2015, the use of performance-based service contracts will be used by 65% of manufacturing. Additionally, in the next two years, 56% of firms will embrace remote diagnostics.
- 3D printing and additive manufacturing will grow 123% in use.
- The supply chain becomes a key strategic asset. The number of manufacturers increasingly leveraging their supply chains will nearly double to 57% in three years.
The research findings across industries, geographies, company size, and business functions are detailed in the report: Manufacturing Transformation, available for download here.
About the Survey
PTC commissioned the global survey of 300 manufacturing executives across such geographies as USA, China, Japan, and Germany, which was conducted during the first quarter of 2013. Survey participants represented six primary market sectors: Aerospace and Defense, Automotive, Consumer/Retail/Apparel, Electronics/High Tech, Industrial Equipment, and Medical Devices. Half of all respondent's firms generate greater than $1.25B in revenue annually. Quantitative research was supplemented with in-depth interviews with leading manufacturers, including John Deere, Santa Cruz Bicycles, Ingersoll Rand, and Emerson.
About Oxford Economics
Oxford Economics was founded in 1981 as a commercial venture with Oxford University's business college to provide economic forecasting and modeling. It is now one of the world's foremost independent global advisory firms, providing reports, forecasts and analytical tools on 190 countries, 100 industrial sectors, and over 2,600 cities. Its global economic and industry models and analytical tools give Oxford Economics an unparalleled ability to forecast external market trends and assess their economic, social, and business impact. For more information, please visit www.oxfordeconomics.com
PTC (Nasdaq: PMTC) enables manufacturers to achieve sustained product and service advantage. The company's technology solutions transform the way products are created and serviced across the entire product lifecycle - from conception and design to sourcing and service. Founded in 1985, PTC employs over 6,000 professionals serving more than 27,000 businesses in rapidly-evolving, globally distributed manufacturing industries worldwide. Get more information at www.ptc.com.
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