KPMG’s new report provides a comprehensive overview of the global manufacturing sector in 2013.
On the growth front, a third of all companies, and 47% of larger companies (over US$5 billion in revenue), are looking to mergers and acquisitions; 44% say they will invest in Greenfield opportunities in growth markets.
Manufacturers maintain that investment in R&D is essential for growth: 42% of respondents expect to invest 4% or more of revenue in R&D and innovation over the next 24 months which is 15 percentage points higher than the level being invested currently, according to the findings. 68% of respondents say their R&D will largely be incremental, with a focus on enhancing existing products and lines, 31% plan to invest in breakthrough innovation.
Innovation borne out of the supply ‘network’
The KPMG 2013 report points out that the classic reference to a global manufacturer’s suppliers as a ‘chain’ is giving way to the growing view of a supply ‘network’ where collaboration and innovation can thrive.
“As companies step up investment in innovation, whether in search of breakthrough R&D or incremental improvements to existing products and services, they are increasingly looking to their supply network for ideas,” Dobbs commented.Just over half of respondents (51%) say that partnerships with suppliers will define the direction of innovation, and over the next 2 years, 57% expect at least 10% of their revenues to come from innovations.
Yet paradoxically, the biggest challenges manufacturers say they have with regard to innovation is aligning it to the business strategy (34%), and the complexity in collaborating with suppliers and partners (32%).
“Supply chain partners will play a critical a role in a manufacturer’s innovation strategy as part of their investment in R&D,” KPMG’s Dobbs said. “Mitigating the challenges of collaborating with partners is complex; close familiarity with who your suppliers are and how they operate will certainly help optimize performance.”
KPMG’s Dobbs said he believes notable shifts in the way companies are redefining and investing is indicative that manufacturing is on the verge of a “hyper-innovation era.”
“The sector may appear to be slowly evolving, but it is on the cusp of explosive change in the next 3 to 5 years. The prolonged stage of intense competition, modest growth and a hyper-focus on cost reduction has made companies exceptionally fit.”
“With new data technologies proliferating to enhance partnering, shared efficiencies and visibility, we’ll start seeing some breakthrough and disruptive innovation in manufacturing – not only to the products but also to the process.”
© 2017 KPMG Audit LLC, the Mongolian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.