Manufacturing is coming out of a turbulent year. Rising demand, supply chain instability and rapidly evolving customer needs have put manufacturers on their toes.
Here are three manufacturing industry trends to watch in 2022:
The emergence of the digital thread.
IoT devices, IIoT-automated plants, engineering simulations and digitized customer experience – the hallmarks of smart manufacturing – generate petabytes of data. Leaders must connect these “digital threads” to drive operating efficiency and quality, improve brand loyalty and customer experience and link information about a product as-designed, as-built through to as-serviced.
Manufacturers will need carefully developed digital threads to continuously feed product performance data back to engineering and improve the quality and performance of new designs. This means manufacturers will need to prioritize their comprehensive data strategies in 2022. And let it be known, “digital threads” require increased investment.
Sustainability becomes key to the corporate agenda.
Sustainability and sustainable development are becoming top of mind for manufacturing leaders. While environmental, social and governance (ESG) has always been part of the sourcing conversation, it is now solidifying as a board-level item requiring a systematic vision and roadmap.
Industry 4.0 represents an excellent opportunity to boost sustainable manufacturing—by focusing on and scaling new technologies in the manufacturing process. This has the potential to immediately improve system efficiency and reduce resource consumption with the combined effect of less waste.
Vigilance in measuring and maintaining transparency as well introduction of circular economic models into enterprise supply chains will pave the path toward a successful carbon-reduced footprint and fulfilment of ESG targets. We can anticipate increased investment in sustainable manufacturing in 2022.
Monetization of software and services by auto OEMs.
Automobile makers have been investing billions of dollars to transform their business operations and improve the customer experience. Up to now, most of that investment has gone toward enhancing the cockpit experience and various infotainment options. Interestingly, that investment has not generated material top-line growth.
In 2022, automotive companies will begin to monetize new software and services to generate incremental revenue. This will likely take the form, in many cases, of annuity-based subscription revenue from services that will also serve to pump up company stock value. Leading automaker Stellantis announced an ambitious plan to generate $22.5 billion in annual revenue from software and services by 2030. GM recently announced a new Chief Digital Officer with similar responsibilities and goals.
Expect these lofty objectives to lead to new partnerships by which automobile manufacturers can more rapidly achieve their goals. Case in point, Ford’s recent announcement about its partnership with Salesforce around software development.
ISG helps manufacturers prepare for the future. Contact us to find out how we can help you.
About the authors
John has 35+ years of providing global enterprises with practical, yet strategic vision to drive meaningful change through complex programs, that extend business value through the effective use of today’s exploding Digital capabilities. John is a senior leader for many multinational enterprises in Capital Goods manufacturing. John leads the North American Industrial Manufacturing segment for ISG and is regarded as a global thought leader, regularly advising on emerging technologies and operating model changes to drive innovation.
David Lewis is a seasoned technology research and advisory executive with significant experience helping clients navigate turbulent market conditions and achieve significant and sustainable cost reduction across Technology and Business Operations functions. He works across all industries helping enterprises develop and execute integrated holistic cost optimization strategies that are actionable. His cost optimization work is supported by ISG’s market leading data and delivered rapidly in a self-funding fashion. David has worked with Fortune 1000 companies across industries on large scale transformational initiatives and digital and disruptive technology programs. He has also negotiated and managed sourcing engagements valued in excess of $10B across IT and business process functions. David has a strong track record of developing and maintaining C-suite relationships.
Christian Decker is Partner at ISG, leading the Smart Manufacturing vertical in EMEA. He has sound technical and business skills to offer, bringing to ISG client projects a wealth of professional. He has gained his experience over a period of more than 17 years as an IT Product Manager, Service Manager, Team Manager and Management Consultant. His expertise encompasses Portfolio-Management, IT Sourcing Strategy, IT Infrastructure Outsourcing, Service Design and Product-Management, Transition Management as well as IT Service and Cost controlling, P&L responsibility and Benchmarking.