Manufacturing TransformationAchieving competitive advantage in a changing global marketplace

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Manufacturing Transformation Overview

PTC partnered with Oxford Economics to validate a hypothesis on manufacturing transformation. Together, we analyzed the market shifts that are driving transformation, measured the impact of prioritizing different business areas, and identi-fied how firms will create competitive advantage in the future.

An overview of the top-level findings from our study is summarized in this eBook. Download the full report, Manufacturing Transformation: Achiev-ing competitive advantage in a changing global marketplace, for the complete findings and analy-sis, including case studies of leading firms and the results of our economic model.

Oxford Economics

Oxford Economics was founded in 1981 as a joint venture with Oxford University. Since then, they have become one of the world’s foremost independent global research firms.

Headquartered in Oxford, England, with offices throughout the world, Oxford Economic employs more than 80 professional macroeconomic and industry economists—one of the largest teams of economists in the private sector.

Get more information at oxfordeconomics.com

PTC

PTC’s technology solutions help customers transform the way they create and service products across the entire product lifecycle – from conception and design to sourcing and service – to create sustained competitive advantage.

Founded in 1985, PTC employs approximately 6,000 professionals, including 1,300 dedicated service professionals, serving more than 27,000 businesses in rapidly-evolving, globally distributed manufac-turing industries worldwide.

Get more information at PTC.com

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Manufacturing Transformation Overview

Manufacturing Transformation Overview

0 5% 10% 15% 20% 25% 30% 35%

Aerospace and Defense

Automotive

Consumer / Retail / ApparelElectronics / HighTech

IndustrialEquipment 16%

17%17%

17%

16%17%Medical Devices

What is your firm’s industry segment?

What best describes your role? Which best describes your business function? Annual Revenue

In which country is your company headquartered?

0 5% 10% 15% 20% 25%

59%

I report to a C-level executive

41%

I am a C-level executive

United StatesChinaJapan

GermanySouth Korea

Supply Chain / Manufacturing

Product / Engineering

IT

Service

Operations

Finance

Strategy

TaiwanFrance

DenmarkNorwaySweden

Finland

Large: $1.26b – $5b

Very large: over $5b

Medium: $175m – $1.25b

Small: $250m – $750m

21% 25%

25%29%

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Survey Profile

Oxford Economics conducted a global online survey of 300 manufacturing executives across industries, business functions and company size to create a comprehensive view of the manufacturing landscape.

The profile of those respondents depicts a balanced cross section of indus-tries, broad global coverage including Europe and Asia, and a split between C-level executives and their direct reports across business functions. Half of all respondent’s firms generate greater than $1.25bn in revenue.

In addition to the survey, we interviewed leading manufacturing executives and used the survey data to develop an economic model that quantified the business results manufacturers generated.

The complete findings can be found in the report, Manufacturing Transfor-mation, click here to download.

Manufacturing Transformation Overview

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Economic realignment (slump in world trade, rise of emerging markets and recessionary pressures)

Technology (Internet of Things,Big Data, cloud, mobility and social)

More complex, deeper relationships with suppliers and partners

66%

61%

60%

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Top 3 external market shifts

External market shifts are reshaping the global landscape for manufacturing firms, ushering in a new era of competitiveness.

When asked “Which market trends do you expect to have the greatest impact on your firm over the next three years?” manufacturers identified the top 3 shifts as follows:

•Economic realignment: Slump in world trade, rise of emerging markets and recessionary pressures are top of mind for manufacturers.

•Technology: Innovations like the Internet of Things, Big Data, mobility, social, and cloud—will have the second greatest impact.

•Supplier and partner complexity: The increasing quantity and intricacies of supplier and partner relationships ranked third for manufacturing firms.

For the complete list of external market shifts impacting manufacturers along with some significant regional, industry and business function. differences, download the full report.

External market shifts

The top 3 external market shifts that manufacturers expect will have the greatest impact on their firms over the next three years.

Manufacturing Transformation Overview

The need to transform

As a result of these consumer, market and technology shifts, 68% of manu-facturers agree or strongly agree that their firm will be undergoing signifi-cant business process transformation to prepare for future market demands in the next 3 years.

Manufacturing firms will take a variety of approaches to transform their businesses, and adopt multiple strategies in response to market shifts.

68%

68% of manufacturers agree or strongly agree that their firm will undergo significant business process transformation to prepare for future market demands in the next 3 years

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Manufacturing Transformation Overview

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Voice of the customer initatives Performance -based

service contractsDesign, build, and service anywhere68% 65%

58%

Top 3 strategies

When asked “Which strategies do you expect to use to drive revenue and profitability in three years?” manufacturers identified the following as their top 3 strategies:

•Voice of the customer initiatives

•Performance-based service contracts

•Ability to design, build, and service anywhere.

For the complete list of the strategies manufacturers will use to drive revenue and profitability along with some significant regional, industry and business function differences, download the report.

Successful transformation initiatives

Beyond discrete strategies, fresh thinking is needed to respond to global shifts and affect transformative change. We uncovered that successful transformation initiatives were grounded by three broad themes: rethinking strategy and planning, the service imperative and innovation everywhere.

Strategies to drive revenue and profitability

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Manufacturing Transformation Overview

0 20% 40% 60% 80% 100%

96%

59%

50%

49%

Global product development

Systems engineering

Global portfolio management

Global product platform

Rethinking strategy and planning

Strategy and planning will eclipse pure operational excellence as the source of competitive differentiation. In order to become market leaders, firms will strive to improve their capabilities to coordinate strategy and planning by a number of methods.

For example, in three years, global product development will almost dou-ble as a method for coordinating strategy and planning. Likewise, systems engineering will jump 59%, global portfolio management 50%, and global product platform 49%.

For the complete list of the methods manufacturers will use to coordinate strategy and planning along with some significant regional, industry and business function differences, download the report.

Growth in methods to coordinate strategy and planning over the next three years

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Manufacturing Transformation Overview

By 2015, 71% of all manufacturers will use service as a key way to differentiate their products.

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The service imperative

Fresh new thinking around service means a lot more than fixing and main-taining products. The service imperative is a transformation that involves the rise of service as a strategic priority, creating new business models and driving revenue and profitability.

When asked if their firm is enhancing services as a key way to differenti-ate their products, almost two thirds (64%) of manufacturers agreed today. While significant regional differences exist, by 2015, 71% of all manufactur-ers will use service as a key way to differentiate their products.

So which service strategies are firms using now and plan to continue to use to drive revenue and profitability? Download the complete report.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

64%Today

71%3 years from now

Manufacturing Transformation Overview

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Smart Products0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

53%

38%

Innovation everywhere

Innovation involves more than just new products and services, although those things remain essential. Undergoing significant business process transformation to prepare for future market demands requires expanding innovation beyond traditional product R&D to encompass all parts of the enterprise ecosystem.

Strategies driven by “smart products” are one area that is growing more popular, as software-enabled and connected products see a 38% growth over three years, to 53%.

Manufacturers are approaching innovation with a range of techniques, busi-ness models and strategies to drive transformation. For the complete list, download the report.

Growth of smart products enable innovation everywhere

Software-enabled and connected products see a 38% growth over three years, to 53%.

Manufacturing Transformation Overview

% of respondents

Optimizing manufacturing operations has become the price of entry.

Today 3 Years

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

65%

71%

Some opportunity for cost savings from optimizing manufacturing operations still exists

65%

52%

Optimization and cost reduction trends

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Optimization of manufacturing operations becomes routine

One reason for increased emphasis on strategy and planning, service and innovation is that traditional means of creating advantage are running out of steam. However, manufacturers can’t execute on transformation without continuing to improve manufacturing operation prowess.

Over half (52%) of survey respondents report that they have wrung out almost all savings in their manufacturing operations today. While this figure indicates there is still work to be done, 65% of surveyed executives believe that optimizing operations has become the industry’s price of entry rather than a source of differentiation. That number rises to 71% in three years.

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Manufacturing Transformation Overview

Well-executed transformation efforts produce measurable business results, including quantifiable return on investment. The economic impact of busi-ness transformation however, varies according to the areas prioritized.

To see the results of our economic model along with a list of activities that manufacturers identified as creating the most value for firms today and in three years, download the report.