In the last few years, manufacturers have gone through an extraordinary period of disruption. COVID-19 triggered the first round of shocks, upending economies and our personal lives practically overnight. Today, we’re facing more economic pressure and uncertainty in the form of high inflation and geopolitical conflicts, raising the prospect of recession and pressuring businesses to prepare for the worst.
Of course, disruptions and risks are not unfamiliar to manufacturing leaders who have been navigating the growing forces of change in their industry, including recurring supply chain disruptions, labor shortages, and a widening skills gap. Meanwhile, the effect of climate change has injected new uncertainties into the sector, with sustainability no longer an option but an imperative for manufacturers worldwide.
The good news is that advancements in the industry are turning these challenges into opportunities. The spread of connected products and other new services, for example, are driving profitable new business models while the growth and maturity of sophisticated technologies such as artificial intelligence, machine learning and IoT are enabling smart manufacturing to flourish. What’s more, the growing adoption of cloud-based IT solutions—and all the innovation it offers—is continuing to unlock new growth potential for companies.
Welcome to manufacturing in the “New Next,” a world in which the disruptions we’ve gone through have made businesses more resilient, adaptable, and better equipped to harness the forces of change that will continue to define manufacturing in the years ahead.
To discover how top manufacturers are coping with the recent crises and how they are tackling the challenges and opportunities ahead, Oracle teamed with IndustryWeek to conduct a comprehensive survey of nearly 300 manufacturers across the globe with greater than $500 million in revenue.
Executives told us that a big share of the operating complexities that existed in the manufacturing industry before the pandemic only became more acute after the crisis unfolded in 2020. Yet the industry tackled these challenges with remarkable speed, executives said, stimulating innovation and digitization across manufacturing companies worldwide.
Indeed, it wasn’t a surprise to see that 50% of companies in the survey said their business performance wasn’t negatively impacted by the pandemic. Despite the disruptions, a third of the execs said they managed to hit their production performance targets, and almost half beat their initial projections. As much as 14% of respondents said that the pandemic actually had a significant positive impact on their companies—and 30% said it had a mild positive impact.
Still, the New Next in manufacturing will continue to test their ability to drive business growth, executives said. They named a host of external challenges at the top of their lists, including a mix of supply chain disruptions, eroding margins, and changing market and consumer demand (28%). Many executives said they were still struggling with the health impacts of COVID-19 (19%). And many others (17%) said that environmental concerns (climate change, ecosystem degradation) were among the top issues they’re facing.
Growth can also be held back by internal difficulties, executives said, including access to a skilled workforce (21%), shrinking budgets (15%), and efforts to improve the company’s culture (14%), along with aging technology and equipment.
As a whole, the survey aligns with other industry research we’ve been tracking, and we can see manufacturers forming a consensus around six key imperatives they’re pursuing to sustain a competitive advantage in the New Next:
Achieving these goals will require decisive investments in technologies, people and innovation—the sooner, the better. The results of the research suggest that the competitive gap is widening between those manufacturers who are investing and those who are not.
Digital transformation in the New Next is a journey, and many manufacturers already have a head start. In fact, 35% of manufacturers are already getting a return on investments made to digitizalize their operations, and 40% more are actively implementing. In addition, 33% are realizing ROI integrating smart technologies designed to improve performance, while 30% more are at the implementation phase.
As they embark on their journey, manufacturers should keep their sights on the broad vision for the enterprise. Start by focusing on the areas of greatest need, whether it’s finance, HR, supply chain or sales, and progressively build a “digital thread” connecting every process.
Oracle brings the world’s leading suite of cloud-based applications to help manufacturers in all facets of their operation. At its heart is a scalable high-performance cloud infrastructure that unleashes continuous innovation with regular updates and new technologies such as voice interfaces, AI, machine learning, blockchain and IoT—all designed to help manufacturers build creative new products and services to transform the customer experience.
Armed with modern cloud technologies, manufacturers now have the power to harness the forces of change and drive growth and innovation in the New Next.
Brent works with leaders to create high-performance, purpose-driven teams and organizations. As co-founder of Fathom, he champions an approach to executive coaching, strategic planning, leadership development, succession, and transformation that prioritizes people and relationships. As a result, his clients don’t simply plan their futures, they bring them to life through the energy of organization-wide involvement in, and commitment to, generating organizations that perform beyond what their history, or their industry says is possible.
Beyond Fathom, Brent is an advocate, advisor, and accomplice for those committed to create a better future for the people they touch, and is a sought-after speaker on the topics of leadership, purpose, and community. He has oriented his life around helping people create conditions for their success, and is the creator of the personal development company Purpose Practiced where he uses his personal transformation experience as a place from which to mentor others on their growth journey.