The industrial manufacturing industry is in the turmoil, driven by business pressure, market trends and new technologies. This blog describes the anticipated top trends that will affect industrial machinery and components (IM&C) companies between now and 2022. Additionally, I hope it will lay the foundation for the identification of new SAP innovations for IM&C companies.
IM&C Trends and Strategic Priorities
For the identification of the top IM&C trends described below we have considered all trends which are relevant for the lines of business R&D/Engineering, Sales and Marketing, Supply Chain, Manufacturing, and Aftermarket Service.
We classified these trends into five trend categories:
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.
Source: Frank Gens, Chief Analyst IDC (Nov 2016)
All trends have been assessed by considering their desirability and viability, based on the assumption that IM&C companies want to
Most of the trends we have found are in the category “digital supply chain and smart factories”, whereas the top 10 trends are in the area of “servitization & new business models” as shown in the picture below:
Anticipated Top Trends in Industrial Manufacturing by 2022
Here 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 we assume that these 10 trends will “take off” and be important for a larger number of IM&C companies between now and 2022:
Brief Description 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 freelancer and other service providers for selected markets and products, and by providing aftermarket service for products of the competitors, including full service contracts.
Omni-Channel 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 omni-channel customer engagements with digitalized sales processes. Please read my blog “The Consumerization of B2B Sales in Industrial Manufacturing…” and my other blog “Configuration for Front-Line Sale Reps …” for more insights on this trend.
Cross-Industry Networks to Increase the Operational Efficiency Across the Asset Lifecycle
IM&C companies stretch their current business models to go beyond the classical 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. Please read my blog “Pay-Per-Use …” for more details.
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.
Data-based business models will contribute more than 10% to the revenue of German manufacturing companies by 2020 (today: 3%).
Source: VDMA (German Machinery and Plant Manufacturing Association)
More Software and Firmware in Products
Over the next few years, more software and firmware will be embedded in products to provide new product features and functionality, enable digital capabilities, or replace existing physical capabilities through automation.
Manufacturing products and equipment of German manufacturing companies already consist of 30% software and automation technology.
Source: VDMA (German Machinery and Plant Manufacturing Association)
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 it to our top 10 list next year or in the years to come, but for now, industry experts and some of our top customers are focusing squarely on the ones we have covered today.
I am very interested in other thoughts you may have on the top trends in industrial manufacturing. Would you agree, disagree with the top 10 trends described above? Any other thoughts or ideas? I look forward to hearing from you to continue this fascinating discussion.
Dietmar Bohn is a Vice President of Industry Solutions Management at SAP SE, focusing on customer centricity and digital transformation. He brings more than 15 years of CRM experience from both outside and inside SAP and more than 25 years of industry experience. Dietmar has held various executive roles spanning CRM strategy projects, CRM implementation projects, CRM development and CRM product management. Before joining SAP, Dietmar has held different management positions in R&D, IT and Global Sales & Marketing organizations at Heidelberger Druckmaschinen AG. Dietmar holds degrees in Electrical Engineering and in Telecommunications.
IM&C Trends and Strategic Priorities
For the identification of the top IM&C trends described below we have considered all trends which are relevant for the lines of business R&D/Engineering, Sales and Marketing, Supply Chain, Manufacturing, and Aftermarket Service.
We classified these trends into five trend categories:
- Customer Centricity
- Smart Products
- Digital Supply Chain & Smart Factory
- Servitization & New Business Models
- Increased Productivity
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.
Source: Frank Gens, Chief Analyst IDC (Nov 2016)
All 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 we have found are in the category “digital supply chain and smart factories”, whereas the top 10 trends are in the area of “servitization & new business models” as shown in the picture below:
Anticipated Top Trends in Industrial Manufacturing by 2022
Here 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 we assume that these 10 trends will “take off” and be important for a larger number of IM&C companies between now and 2022:
- Increase aftermarket service revenue
- Omni-channel customer engagement and consumer-grade buying experience
- Cross-industry networks to increase the operational efficiency across the asset lifecycle
- Pay-per-use business models
- Plug and produce to increase manufacturing agility
- Smart products, equipped with edge intelligence and IoT capabilities
- IoT to increase revenue through new services
- More software and firmware in products
- Virtual reality and augmented reality in daily operations
- Big data and machine learning in manufacturing planning and scheduling
Brief Description 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 freelancer and other service providers for selected markets and products, and by providing aftermarket service for products of the competitors, including full service contracts.
Omni-Channel 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 omni-channel customer engagements with digitalized sales processes. Please read my blog “The Consumerization of B2B Sales in Industrial Manufacturing…” and my other blog “Configuration for Front-Line Sale Reps …” for more insights on this trend.
Cross-Industry Networks to Increase the Operational Efficiency Across the Asset Lifecycle
IM&C companies stretch their current business models to go beyond the classical 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. Please read my blog “Pay-Per-Use …” for more details.
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.
Data-based business models will contribute more than 10% to the revenue of German manufacturing companies by 2020 (today: 3%).
Source: VDMA (German Machinery and Plant Manufacturing Association)
More Software and Firmware in Products
Over the next few years, more software and firmware will be embedded in products to provide new product features and functionality, enable digital capabilities, or replace existing physical capabilities through automation.
Manufacturing products and equipment of German manufacturing companies already consist of 30% software and automation technology.
Source: VDMA (German Machinery and Plant Manufacturing Association)
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 it to our top 10 list next year or in the years to come, but for now, industry experts and some of our top customers are focusing squarely on the ones we have covered today.
I am very interested in other thoughts you may have on the top trends in industrial manufacturing. Would you agree, disagree with the top 10 trends described above? Any other thoughts or ideas? I look forward to hearing from you to continue this fascinating discussion.
Dietmar Bohn is a Vice President of Industry Solutions Management at SAP SE, focusing on customer centricity and digital transformation. He brings more than 15 years of CRM experience from both outside and inside SAP and more than 25 years of industry experience. Dietmar has held various executive roles spanning CRM strategy projects, CRM implementation projects, CRM development and CRM product management. Before joining SAP, Dietmar has held different management positions in R&D, IT and Global Sales & Marketing organizations at Heidelberger Druckmaschinen AG. Dietmar holds degrees in Electrical Engineering and in Telecommunications.
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