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Ready to lead, but struggling to keep pace: survey highlights challenge of manufacturing in the digital age

Manufacturers ready to lead, struggling to keep pace

Leading transformation efforts with agility is dominating the agenda of CEOs according to the 2018 KPMG Global Manufacturing Outlook.

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KPMG International

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Nearly 66 percent of global manufacturing CEOs say acting with agility is the new currency of business and that if they are too slow, they will be bankrupt, according to the 2018 KPMG  Global Manufacturing Outlook.

The survey findings, revealed today, show that while CEOs are ready and energized to lead their organizations into the digital future, 70 percent feel the lead times required to move large, resource heavy organizations in a new direction are daunting. More than 50 percent say Boards have an unreasonable expectation for a ROI on digital transformation. And while CEOs recognize the need to keep up with market disruptors, mistakes prove costly on a large scale and many CEOs have not yet taken the steps required to radically change outdated ways of doing business. Some 33 percent agree their organization is struggling to keep pace with technological innovation.

Yet global manufacturing CEOs are positive about the opportunities for change and growth, with 95 percent of CEOs agreeing the fourth industrial revolution is an opportunity, not a threat.

“Manufacturers are at vastly different stages of transformation, and while some have organized well and started early, ROI is far from guaranteed and many are overwhelmed by the sheer scale of change required to realize benefits of digitization,” says Doug Gates, Global Chair of KPMG's Industrial Manufacturing practice. “Starting this journey is absolutely critical. Lay out a long-term strategy and roadmap. Start with steps that will achieve near-term value while laying the foundation for the new business opportunities that will come from interconnectivity and a broad access to data.”

Machines will augment workers

The future for the manufacturing workforce is bright, with 66 percent agreeing that AI will create more jobs than it eliminates, and the same amount predicting that data scientists will be the most sought-after experts in manufacturing. And while predictive analytics are not prized, with 50 percent having low regard for their ability to predict trends, AI is seen by CEOs as having a strategic benefit rather than one of cost savings. And similarly to CEOs across industries, manufacturing CEOs believe intuition is a key growth driver. Says Gates, “the full benefits of digital transformation are unlikely to materialize unless the strategy encompasses the entire organization. It entails embracing new technologies in the back office, across shop floors and into the supply chains.”

Cyber security is paramount - manufacturing industry primed for attack

Manufacturing CEOs believe cyber-attacks in the industry are a case of “when, not if.” Cyber security worries are greater in manufacturing than other global industries, with only 50 percent feeling well prepared to identify new cyber threats, 14 percentage points fewer than CEOs in other industries. Says Gates, “as manufacturers increasingly rely on connectivity between systems and processes, and most importantly suppliers and partners, there are new areas of vulnerability to protect against. Readiness to respond to any cyber event should be forefront on CEOs minds as they implement new technologies.”

Globalism offers both opportunities and threats

With 55 percent of CEOs agreeing that a return to territorialism is the greatest threat to business growth (ahead of cyber security and disruptive technology), it's clear that today's geopolitical uncertainties are seen to have a uniquely worrying effect on manufacturing compared to other sectors. However, CEOs also see emerging markets as a source of growth for the next three years, with Eastern Europe, Central America and Asia Pacific topping lists for possible expansion.

“There is a long journey ahead for our sector, but it's a time of great excitement and change,” says Gates. “I would urge manufacturers to embrace the new and transform themselves using the latest technology at hand, whether it be robotics, 3D printing, advanced analytics, the Internet of Things, the cloud or blockchain.  As Industry 4.0-driven digital transformation continues to accelerate, envision what your organization may look like at the end and get started.”

To read the full report please visit www.kpmg.com/gmo.

Methodology

The 2018 Global Manufacturing Outlook report is based on data from 300 manufacturing industry CEOs. This data was part of the 2018 CEO Outlook, a survey of 1,300 CEOs in 11 countries, conducted in early 2018 by Forbes Insights on behalf of KPMG International. To support the data, KPMG International conducted a series of interviews with executives at manufacturers around the world. Their experience, combined with the views of KPMG professionals and sector leaders, provide valuable insights for today's manufacturers. Additional supply chain research was sourced from “Supply Chain Predictions for 2018 from Gartner” published February 8, 2018 in the Supply Chain Digest.

About KPMG International

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 154 countries and territories and have 200,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

For more information, please contact:

Lauren Mostowyk
KPMG International 
+ 1 416 777 3155
lmostowyk@kpmg.ca 

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