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The Future Is Bright for Manufacturing

The role of manufacturing in the global economy is evolving. What will the future hold? A fascinating report published last November by the McKinsey Global Institute attempts to answer that question. Manufacturing the Future: The Next Era of Global Growth and Innovation combines macroeconomic analyses with industry insights from McKinsey’s global operations experts.

Their conclusion? For forward-thinking companies, the future for manufacturing is bright.

“Over the next 15 years, another 1.8 billion people will enter the global consuming class, and worldwide consumption will nearly double to $64 trillion,” writes James Manyika, lead author of the report. “Developing economies will continue to drive global growth in demand for manufactured goods, becoming just as important as markets as they have been as contributors to the supply chain. And, a strong pipeline of innovations in materials, information technology [and production processes] will give manufacturers the opportunity to design and build new kinds of products, reinvent existing ones, and bring renewed dynamism to the sector.”

To take advantage of emerging opportunities, manufacturers will need to adopt new ways of thinking and doing. “Manufacturers will no longer succeed by ‘copying and pasting’ old strategies into new situations,” the report warns. “They must develop a granular understanding of the world around them—and plan their operations strategy to compete in it.”

First, manufacturers must understand the dynamics of their particular industry. Are their operations energy- or labor-intensive? Do they require local sources of raw materials? Do they depend on a steady stream of innovations or new models to compete?

Second, manufacturers must develop a detailed view of their markets to tailor products and supply-chain strategies to specific subsegments. For example, the researchers believe that segmenting the Chinese market on a national or even a regional basis will be inadequate. Rather, manufacturers could target 22 distinct market clusters independently.

Third, manufacturers must match granular insights with granular operations strategy. This will be critical for capturing new opportunities in developing economies. For example, “a consumer product manufacturer was frustrated in its attempts to enter an emerging market, until it conducted detailed on-the-ground research,” the report notes. “Only then did it learn that, unlike in every other nation where it sold this particular product, consumers in this emerging market required packaging that could be reused for other purposes after the contents were used up.”

New data-gathering and analytical tools can help manufacturers identify opportunities to serve new markets, better manage supply chains, and drive innovation. But, to make use of “big data,” manufacturers will need to better collaborate across functions and geographic locations.

Are you ready? Take a look ahead. Invest in your people, plants and products. The future is bright. Download a copy of the report here:

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