Manufacturers Now Aim for Value over Volume

Manufacturers are emerging from the recession optimistic about their business prospects. More than 60% of those surveyed by the Economist Intelligence Unit say market opportunities are good and likely to get better, a message in line with the latest economic trends. Manufacturers are leaner after the downturn, and hungry for new markets. Building closer relationships with their customers is also a priority. For many, that will mean adjusting their business models, either by offering more after-market services or products that are more closely tailored to their customers' needs. This form of high-value, or value-added, manufacturing is proving to be an increasingly popular business model for the industry.


These are among the findings of "Aiming higher: How manufacturers are adding value to their business," a new report by the Economist Intelligence Unit, sponsored by Siemens PLM Software and Microsoft. It is based on a survey of more than 350 manufacturing executives worldwide.


The research also finds that although output is growing globally, access to capital is still a major issue for manufacturers. Other concerns include costs of transport, energy and raw materials. But in the main, the manufacturing sector is optimistic that business will continue to improve.


A key finding of the report is that producers are confident in their ability to innovate—a central aspect of high-value manufacturing—but most acknowledge they will have to continue to boost their innovative capabilities. Over the past year, 40% increased their investments in research and development, while 19% took on board more highly skilled workers.


However, manufacturers cite some big obstacles to innovation and new product and service development, including costs (53% of respondents), uncertainty about customer demand (39%) and lack of appropriate in-house skills (38%). To overcome some of these hurdles, many are prepared to partner in the coming year: with suppliers (57%), large corporate clients (42%), technology providers (39%) and consumers (22%).


The report further shows that almost one in five is even prepared to partner with a rival, to share resources in the face of competition, and two-thirds say that they are already actively engaged in "open innovation," sharing ideas with third parties rather than trying to develop them entirely in-house.


Many manufacturers (36% of the survey sample) are now developing products for the green market, or making their processes more eco-friendly. In some cases, this is driven by consumer demand; in others by regulatory pressure.


"Manufacturers were hit hard by the recession," says report editor Iain Scott. "We've found that many have used the downturn to take a good look at what they offer and see whether they can boost that with new or additional services. The smart operators are realising that business as usual is no longer an option."


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