THOUGHTS

Industrial Machinery Manufacturers Need to Recalibrate

Aug 30, 2016

As developing countries drive growth and customer demand shifts in the Industrial Machinery industry, there are some challenges that industrial machine manufacturers must face to take advantage of emerging opportunities and gain competitive advantages.

The Industrial Machinery industry is one of the largest and most competitive industries in the world. It is a highly fragmented, increasingly globalized industry. The Industrial Machinery industry is undergoing significant changes as developing countries drive growth and expand their operations and new technologies surface and customer demand shifts, thus creating challenges for industrial machinery manufacturers. The industry faces other challenges such as the rising demand for services and customization of services, slow design processes, product lifecycle management, and the need for global flexibility. To take advantage of the opportunities and competitive advantages available in the industry, companies must first find ways to address these key issues moving forward.

Rising Demand for Services in a More Competitive Environment

In the Industrial Machinery industry, customer demands are changing, and these changes have significant impacts on machine manufacturing companies. Customers are increasingly demanding more services including installation, maintenance, demonstration, and repairs to accompany the machinery they purchase. Added services represent a significant portion of ownership, as well as accounting for nearly a quarter of the total revenues in the industry. This presents challenges for companies in an increasingly competitive environment, especially as companies attempt to increase their margins and lower overall costs. Added services can provide opportunities for companies, but for some it may be challenging to implement service programs in an increasingly fragmented global market.

Restructuring a Slow Design Process to Reduce Delays and Increase Profits

Slow design process is the second challenge encountered by many companies in the Industrial Machinery industry. Companies in the industry spend a considerable amount of capital on R&D; however even with this spending, the design process can still be slow for some products. The process starts with mechanical engineers designing a machine, which is then turned into a physical product. Once the physical product is constructed, electrical and controls engineers lay out the electrical system and program the machine’s controls. Any issue that requires reworking or adjusting at this point leads to costly delays, increased expenses, and could be the difference between a profit and a loss. Creating virtual prototypes and receiving input from controls and electrical engineers at an early stage would structure this process more effectively. Companies can also use strategies such as top quality management (a custom manufacturing type used to improve the product and process) or lean management (looks to eliminate inefficiencies and reduce costs) to improve the product, reduce manufacturing time, and lower production costs.

Integrating Digital and Smart Technologies into Product Lifecycle Management

Product lifecycle management (PLM) must adapt as digital and smart technologies emerge in the marketplace. It is important to integrate PLM into the entire value chain, from production to service. In addition, companies must create integrated hardware and software to help unify PLM. This approach must combine traditional PLM that deals with hardware and application PLM that deals with software. New PLM strategies present challenges for industrial machinery companies as they require high initial investments. While new technologies can provide competitive advantages in the long run by enabling more efficient PLM, the initial expense can be a challenge for manufactures.

Streamlining Development and Production to Meet the Demand for Customization

Just as customers have started demanding increased services, demand has also shifted towards increased customization of products. Today’s customers are demanding products that are easier to use and upgrade, and have the ability to exhibit increased customization according to their specific needs. In addition to customization, there is also a demand for improvements in reliability, accuracy, power, and output. As competition increases, these innovations must be produced rapidly and at low cost. Therefore, companies must streamline their development and production process to meet this demand and remain competitive. This demand for specialty and niche products is driving the increased customization of products and shortening product life cycles.

Ensuring Flexibility in Fragmented and Uncertain Global Markets

As the Industrial Machinery industry becomes more globally driven, the ability to take maximum advantage of regional cost differences and capitalize on growth opportunities in emerging markets becomes more significant. In this important growth area, the lack of an existing global expansion strategy has created challenges for many companies.  Global markets are fragmented and uncertain, and dealing with foreign governments at a local or national level can be difficult. As difficult as global flexibility can be, the expansion of operations globally is essential to ensure flexible sourcing and cost-effective and regionally targeted products. Emerging economies in developing countries are expected to account for significant growth in the industry, and as a result, they will provide dynamic opportunities for manufacturers.

On the whole, there are several challenges facing companies in the Industrial Machinery industry. However, those that can overcome these challenges will enjoy a significant competitive advantage. The first mover advantage is significant, especially as competition becomes fiercer because most of the challenges in the industry revolve around improving processes and opportunities in emerging economies. As companies look to expand globally, and consumers demand more from companies, players in the industry must respond effectively and efficiently to remain competitive. Improving PLM and taking advantage of new technologies to streamline operations and production processes may be expensive at first; however, once implemented, it can provide significant benefits in the long run. An increase in demand for customization is also driving shorter product life cycles and demanding personalized machines. These significant challenges are not insurmountable, and present potential opportunities for industrial machinery companies.

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