Components of change: Top trends in industrial manufacturing by 2022


The industrial manufacturing industry is in turmoil, driven by business pressure, market trends, and new technologies. By 2022, industrial machinery and components (IM&C) companies should anticipate and plan for trends that will directly affect their viability and priorities.

IM&C trends and strategic priorities

To identify the top IM&C trends, we considered all trends that are relevant to the lines of business R&D/Engineering, Sales and Marketing, Supply Chain, Manufacturing, and Aftermarket Service.

We classified these trends into five trend categories:

  1. Customer Centricity

  2. Smart Products

  3. Digital Supply Chain & Smart Factory

  4. Servitization & New Business Models

  5. Increased Productivity

According to the IDC, by 2020, 50% of the Global 2000 will see the majority of their business depend on their ability to create digitally-enhanced products, services, and experiences.

Trends have been assessed by considering their desirability and viability, based on the assumption that IM&C companies want to:

  • increase revenue

  • increase profitability

  • improve customer experience and satisfaction

  • increase the transparency in business and market

  • improve employee satisfaction

Most of the trends identified fall into the category “digital supply chain and smart factories,” while the top 10 trends are in the area of “servitization & new business models” as shown below:

Anticipated top trends in industrial manufacturing by 2022

Following are the top 10 trends we have identified in our discussions with SAP industry experts, IM&C companies, and business consultants. We have also considered valuable sources from analysts such as Gartner (e.g., the Gartner Hype Cycle for Emerging Technologies 2017), and assume that these 10 trends will take off and be very important for a larger number of IM&C companies between now and 2022:

  1. Increase aftermarket service revenue

  2. Omni-channel customer engagement and consumer-grade buying experience

  3. Cross-industry networks to increase the operational efficiency across the asset lifecycle

  4. Pay-per-use business models

  5. Plug and produce to increase manufacturing agility

  6. Smart products, equipped with edge intelligence and IoT capabilities

  7. IoT to increase revenue through new services

  8. More software and firmware in products

  9. Virtual reality and augmented reality in daily operations

  10. Big data and machine learning in manufacturing planning and scheduling

Breakdown of the top 10 trends for IM&C companies

Increase aftermarket service revenue

Shift the revenue mix towards aftermarket service revenue by extending the service offerings portfolio (including IoT-powered service offerings), entering new markets, partnering with freelancers and other service providers for selected markets and products, and by providing aftermarket service for products of the competitors, including full service contracts.

Omnichannel customer engagement

Driven by the customers of IM&C companies who expect the consumerization of B2B sales and simplified sales processes with consumer-grade buying experience, original equipment manufacturers will transition to true omnichannel customer engagements with digitalized sales processes. You can read more on these trends here and here.

Cross-industry networks increase operational efficiency across the asset lifecycle

IM&C companies stretch their current business models to go beyond the classic value chain from the initial design to the final disposal, creating cross-industry networks to increase the operational efficiency across the entire asset lifecycle. “Digital twins to manage build and usage,” including simulation of the build phase, play a major role here, providing all asset information to all relevant parties, such as the vendors of the asset as well as to the customers, operators, and service providers.

Pay-per-use business models

IM&C companies will offer pay-per-use as an additional business model for software and digital services, as well as for their machines and equipment. Equipment-as-a-service contracts for auxiliary products, as well as for products for their customers’ core business will become commonplace.

Plug and produce to increase manufacturing agility

As part of their industry 4.0 journey, manufacturing companies are leveraging plug and produce approaches to increase their agility in manufacturing, like bringing new machines to a manufacturing line on the shop floor with easier system integration. Smart plug and produce enabled products with edge intelligence will be an integral part of a self-optimizing, or lights out manufacturing system.

Smart products equipped with edge intelligence and IoT capabilities

IM&C companies are already equipping their products with edge technologies, IoT capabilities, and integrated machine learning technologies, and this trend will continue to grow over the next 5 years.

IoT to increase revenue through new services

Manufacturing companies want to leverage IoT technologies and infrastructures to provide new services for the sales and marketing line of business to increase revenue generated from products and digital services, drive new revenue from data and data-related services, as well as for the aftermarket service line of business, including an increased spare parts business, and also revenue driven from new professional services.

According to the German Machinery and Plant Manufacturing Association, data-based business models will contribute more than 10% to the revenue of German manufacturing companies by 2020. Today that number is 3%.

More software and firmware in products

Over the next few years, more software and firmware will be embedded in products to provide new features and functionality, enable digital capabilities, or replace existing physical capabilities through automation.

Virtual reality and augmented reality in daily operations

Industrial manufacturers will continue to leverage virtual reality and augmented reality in their daily operations, especially in field service management, where service technicians can use virtual and augmented reality technologies for guided repair in remote environments in certain countries or for particular products.

Big data and machine learning in manufacturing planning and scheduling

Industrial manufacturers have begun to utilize machine learning algorithms, a key component of artificial intelligence, to leverage all available, valuable data sources and big data technologies to improve manufacturing planning and scheduling processes.

Of course, there are many more important trends than the ones listed above, and some of them might make our top 10 list next year, or the years that follow, but for now, industry experts and some of our top customers are focusing squarely on the ones we have covered today.

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This post originally appeared on the SAP Community, and was republished with permission.

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Dietmar Bohn

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