By Oliver Knapp

It’s no secret that traditional manufacturing has taken a hit in the last few decades. Companies have been under immense pressure to cut costs while ensuring quality of complex goods. While the measures adopted so far have been mostly successful, a number of trends have reached a crossroads – and the old ways are proving not to be sufficient anymore. So much so that, as revealed in a recent Roland Berger survey of around 200 respondents from around the world, 51% of those executives wanted to halt manufacturing products in-house and focus on becoming asset-light institutions instead. However, this might be letting a rare opportunity for transformation get away.

Because manufacturing is heralding in a new era, according to Roland Berger’s latest study “Next Generation Manufacturing gets ready to roll” – one that goes beyond cost-cutting measures to include other important factors, like risk management, sustainability, supply chain governance and company values, when it comes to competitiveness. The challenges are undeniably many, but they also constitute an opportunity. If companies are willing to reevaluate their manufacturing strategy, what was once a liability can be turned into an asset with a competitive edge.

The decisive shift that the manufacturing industry is currently going through was inevitable and, in the end, necessary. Given what the world now knows about the climate crisis, obstacles to the global supply chain and the humanitarian problems in outsourcing, manufacturers must change their ways or resign themselves to a slow and steady decline.

While there is no quick-fix solution, next generation manufacturing will enable companies to turn into a value generator by leveraging six megatrends to their advantage – and thereby propel themselves into the future.

The six megatrends shaping next generation manufacturing

Each of the six megatrends provide waves of opportunity for forward-thinking businesses. The strength of these trends will vary from region to region – for example, offering sustainable goods and services will not be an optional concern in Sweden where sustainability ranks high. Companies that seize and implement these trends in their production and operations will open the door to turning their manufacturing into a true value generator once again.

Trend 1: Sustainability

Although sustainability is not yet a priority in every country, green initiatives are no longer an extracurricular activity for companies; they constitute a core business pillar mandated by a combination of social and political pressure. Sustainability-focused companies – particularly those with ESG mandates – are already the preferred choice for investors and consumers alike. Companies can reduce their manufacturing footprint by switching to renewable electricity, adapting processes to carbon-neutral solutions and bringing production to the local level.

Trend 2: Localization

Several countries are looking to boost their local economies and reinforce regional capabilities by bringing manufacturing back to their home turf. Additionally, the Covid-19 pandemic, politicized tariff spikes, transportation disruptions, terrorism and more have laid bare the flaws and disastrous ripple effects of a global supply chain. To gain competitive advantage, it is important to have a long-term outlook that offers the best trade-off between factors such as flexibility and resource availability over short-term cost-saving benefits.

Trend 3: Populism

Governments worldwide are facing increasing pressure to provide secure, lucrative jobs for their citizens. To meet this demand, many politicians are touting manufacturing as the “golden solution”, even though this may not be the case. Regardless, when these public policies are put in place to promote local production, manufacturers may be forced to move their operations home or else face hefty tariff and tax fees. Manufacturers can insulate themselves to an extent by increasing operational resilience and agility, which in turn will allow them to respond to unpredictable events quickly and effectively.

Trend 4: Industry disruption

Technological advancements have been leading to disruptions with far-reaching consequences within the manufacturing industry for a while now. The shifting trends and near-constant innovations have left manufacturers struggling to adapt. In this scenario, companies can either meet disruption with disruption – by rehauling their current business models, or by establishing new partnerships and collaborations (with suppliers and shareholders alike).

Trend 5: Mass customization

Where manufacturers once used to mass produce one item to save costs, now they must meet the growing technology-driven demand for customized goods. The challenge at first glance seems nearly insurmountable, but manufacturers can take this an opportunity to consider new business models that rethink value creation for the customer.

Trend 6: Digitalization

Of all the trends reshaping manufacturing, digitalization is the one leading to unprecedented change. Today, factories can be digitized nearly completely, and there are already promising results. Companies should embrace the advancements digitalization can bring with technology such as artificial intelligence, smart technology and more, but they should also take extra care to ramp up cybersecurity measures and be aware of hacker attacks from countries outside their jurisdiction.

Ready for what’s next

Next generation manufacturing is not something that can be achieved overnight. But by embracing it, companies will be able to differentiate themselves on a broader set of criteria and boost their competitiveness.

Roland Berger’s study lays out the steps on how to become a next generation manufacturer. The interactive “NGM opportunity spiderweb” also demonstrates how companies can position manufacturing as a true value generator now. To find out how to leverage the six trends to your advantage and usher in a new era for your manufacturing company, download our study.