Author: Tia Nowack, Associate Editor, IMPO
Every January, companies make predictions about the year ahead and what trends they should expect. Bobby Bono, the U.S. industrial manufacturing leader at PwC, has assembled a list of trends he is predicting for the manufacturing sector moving forward. Bono believes that some of the key challenges industrial manufacturers may face include expecting demand to remain muted in the near term, customers taking longer to make decisions on new orders, investment levels remaining weak, especially in India and China, and more stringent emissions rules causing higher capital expenditures.
According to Bono, areas of focus for 2014 among industrial manufacturers will be around diversifying and improving the product portfolio mix to adapt to changing market conditions, acquisitions to further broaden capabilities and increase geographic reach, increasing security effectiveness, monetizing non-core assets, and customizing products and services according to customer needs.
Below is a summary of Bono’s predictions by category. For more insight on trends that are impacting business, please visit PwC’s website.
Areas of Focus
Growth in long-term attractive markets (particularly emerging markets) which adds long-term stability and strength to earnings
Diversifying and improving the product portfolio mix to adapt to changing market conditions
Acquisitions to further broaden capabilities and increase geographic reach
Structurally improving operational performance across the enterprise
Reassessing supply chain so that large projects are executed well
Increasing effectiveness in the security area
Conducting a majority of M&A work outside the US
Improving margins and cash flows, and generating strong shareholder returns
Realigning efforts toward opportunities for future growth and improved profitability
Monetizing (divesting) non-core assets and focus on core businesses
Winning new customers around the world, while keeping a close watch on costs and asset levels
Customizing products/services according to customer needs
Modifying pricing to maintain or improve margins
Key Challenges
Companies’ results are impacted by volatile currency movements
Emerging markets are experiencing slowdowns in sectors such as mining, infrastructure, etc.
Investment levels remain weak, especially in India and China, as projects see delays and cost overruns
Declining commodity prices are starting to limit some of the investments
Cautious consumer spending is causing slowdowns in some industries (e.g., electronics)
More stringent emissions rules are causing higher capital expenditures
Pricing competition in low end products, especially in China and Europe
Economic recovery is slow and is taking longer than expected
Demand is expected to remain muted in the near term
Customers are taking longer to make decisions on new orders
Customers are trimming production schedules and tightly controlling their inventory levels
Strategic Initiatives
Manufacturing costs and productivity initiatives
Initiatives to right size overhead costs for the current level of revenues
Aligning structural cost to the slower pace of demand in the current environment
Improving productivity and optimizing use of assets to control costs
Restructuring actions aimed at reducing headcount and improving cost savings
Optimizing supply chain to reduce costs either through higher supplier discounts or operational improvements
Monitoring growth of costs vs. growth of sales
Managing costs prudently with a sharp focus on select investments
Aligning cost structure to better leverage the markets as they return to growth
Debt reduction/working capital management/capital deployment
Deriving more efficiencies with vendors and customers to drive working capital benefits
Reducing leverage in the current environment, improving working capital conditions
Prioritizing near-term cash redeployment toward debt reduction
Optimizing inventory to reduce working capital needs
Returning capital to shareholders through share buybacks and higher dividends
R&D/product development/expansion
Broadening the product base and vendor base to win new customers
Adding more products to become a one-stop shop for customer supply chain needs
Penetrating the value chain of the diversified, industrial end-user population
Investing in innovation and product development opportunities that have expansion potential (from both a geographical and customer point of view)
Focusing on localizing products according to geographies
Increasing spending on engineering and sales resources
(Source: http://www.naylornetwork.com/gea-nwl/newsletter.asp?issueID=37860)
Recent Comments