29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

LEADERSHIP

Top 10 Predictions for Global Manufacturing in 2018: IDC

By 2020, 60% of manufacturers will rely on digital platforms which will
support as much as 30% of their overall revenue.
IW Sta | Dec 19, 2017

IDC recently released a report, “IDC FutureScape: Worldwide Manufacturing

Predictions 2018," surveying the global manufacturing landscape. When creating
its predictions the firm examined ecosystems and experiences, greater
intelligence in operational assets and processes, data capitalization, the
convergence of information technology (IT) and operations. Most of the group’s
predictions refer to a continuum of change and digital transformation (DX)
within the wider ecosystem of the manufacturing industry and global economy.

http://www.industryweek.com/print/423172 1/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

"Manufacturers of every size and shape are changing rapidly because of new
digital technologies, new competitors, new ecosystems, and new ways of doing
business,” said Kimberly Knickle, research vice president, IT Priorities and
Strategies, IDC Manufacturing Insights. “Manufacturers that can speed their
adoption of digital capabilities in order to create business value will be the leaders
of their industry."

Technologies that will have the greatest impact include cloud, mobile, big data
and analytics, and internet of things (IoT). Manufacturers also have high
expectations for the business value of technologies that are in earlier stages of
adoption, such as robotics, cognitive computing/artificial intelligence (AI), 3D
printing, augmented reality/virtual reality (AR/VR), and even blockchain.

Over the next few years, IDC identified some of the most notable changes in the
industry:

• Redefining how businesses design (or define), deliver and monetize products and services

• Developing new contextualized and customized experiences for customers, employees and
partners

• Increasing coordination and collaboration between IT and line-of-business organizations,

as well as among ecosystem participants

• Changing the nature of work and how it's accomplished with people, process, and
technology coming together

While the predictions offered largely focus on the near- to midterm (2018–2021),
the impact of many of these will be felt for years to come. IDC’s worldwide
manufacturing 2018 predictions are:

Prediction 1: By 2020, 60% of the top manufacturers will rely on

digital platforms that enhance their investments in ecosystems and
experiences and support as much as 30% of their overall revenue.

Manufacturers are looking to digital platforms as the underpinnings for

collaboration and coordination processes, bringing together the essential
http://www.industryweek.com/print/423172 2/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

technology components for the benefit of cloud-based ecosystems — including

employees, customers, suppliers, and partners. The platform facilitates
information exchange and processes, at scale, simplifying connectivity and
ensuring a level of security and trusted business interactions. The platform will be
anchored by an open architecture and open access and, in many cases, by an open
marketplace to support monetizable information flows and new revenue
opportunities. As a result, digital platforms allow manufacturers to more
seamlessly and quickly apply new capabilities, leveraging technology for
"experiences" and supporting revenue generation activities within an ecosystem.
While platforms may support traditional revenue streams online, some new
opportunities will also develop explicitly because of the ecosystem effect.

Prediction 2: By 2021, 20% of the top manufacturers will depend on a

secure backbone of embedded intelligence, using IoT, blockchain, and
cognitive, to automate large-scale processes and speed execution
times by up to 25%.

Most manufacturers will look for their major enterprise applications to be the
means through which they automate and speed execution, using embedded
intelligence. For many, this will happen through intelligent ERP systems, which
integrate IoT for critical data input, cognitive to enhance the analytics, and
blockchain to maintain the integrity of the data and decision making. We're in a
transition stage where systems of record are being replaced by new systems of
intelligence, which retain the core "systems of record" capabilities while layering
in new technologies and capabilities. These intelligent applications incorporate
the four pillars of the 3rd Platform and increasingly embed and leverage the
innovation accelerators — IoT, cognitive computing, next-generation security, 3D
printing, robotics, and even AR/VR. These systems leverage cloud and machine
learning but more generally analytics of all types to manage data coming from
new and existing sources. Some of the outcomes are:

• IoT: Actual product/asset performance data that can initiate preventative maintenance
activities and increase customer satisfaction; inventory tracking to facilitate higher levels of
accuracy in the supply chain, minimizing order delays resulting from inaccuracies

• Cognitive: Advanced analytics to complement existing analysis, focusing more on

identifying patterns and prerequisites for workflows and processes, such as preventative
http://www.industryweek.com/print/423172 3/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

maintenance and customer sentiment to direct sales, identifying customer preferences for
more efficient product innovation

• Blockchain: Data to ensure the authenticity and quality of goods in transit, increasing
product and service quality; speeding processing from order to cash and traceability for data
and contracts

Prediction 3: By 2020, 75% of all manufacturers will participate in

industry clouds, although only one-third of those manufacturers will
be monetizing their data contributions.

The proliferation of IoT-enabled connected products, assets, and processes is

creating a wealth of performance- and location-based operational data, more
quickly and easily, at lower technology costs. Industry clouds are an appealing
option for sharing and analyzing this information. Furthermore, manufacturers
are looking to industry clouds for sourcing and supplier management as well as
working with customers. The cloud provides the mechanism for not only data
sharing, analysis, and collaboration or joint ventures but also integration with
even more data sources, such as environmental conditions (weather or traffic) or
customer demand signals.

Despite the draw to industry clouds, the ability to monetize the participation of
manufacturers in industry clouds is still a work in process. We believe maximizing
the value of operational data requires sharing it with other companies. This will
allow them to apply and analyze the data in the context of larger business
requirements, such as yield, quality, utilization, preventative maintenance, and
customer service. In the most advanced stages, companies will also monetize the
data through the clouds, for example, using aggregated performance data to
create more automated replenishment of inventory or spare parts.

Prediction 4: By 2019, the need to integrate operational technology

and information technology as a result of IoT will have led to more
than 30% of all IT and OT technical staff having direct project
experience in both fields.

The report shows that operational equipment has become widely instrumented,
and increasingly interconnected, with IoT being a major contributor to
http://www.industryweek.com/print/423172 4/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

connectivity. To leverage that connectivity, manufacturers are finding that the

approach requires collaboration between information technology and operational
technology and their respective organizations. OT includes the hardware and
software that monitors and manages operational assets and processes on the
plant floor and in the supply chain, for example, supervisory control and data
acquisition (SCADA), meters, valves, sensors, and data historians. The
fundamental ability to understand the business process, as well as work with the
data that process generates, is leading to changes in how IT and OT work together
on projects. This change is driven by several factors:

• The need to apply new technologies without negatively hampering operational effectiveness

• The recognition that tremendous amounts of data are already available and go unused or
analyzed well past the date when it could impact business decisions

• The spotlight on unique security requirements in operations

In addition to embedding IT in operations and requiring project teams to have

representatives from both IT and OT, manufacturers will also look for new talent
in both organizations to have a broader perspective that connects technology with
business outcomes and requirements. Employees will increasingly take part in
training programs that prepare them for the shift in roles.

Prediction 5: By 2019, 50% of manufacturers will be collaborating

directly with customers and consumers regarding new and improved
product designs through cloud-based crowdsourcing, virtual reality,
and product virtualization, realizing up to a 25% improvement in
product success rates.

Product failure rate is high across industry, in some cases, up to 80%, in large
part because manufacturers don't consistently take the time to understand
customer needs at the front end of innovation. Or they presumed what the market
wanted. This is a lesson the FMCG industry learned decades ago because of a
highly competitive market and varied product portfolio. These same "fast-
moving," dynamic characteristics are making their way into other industries that
traditionally have had a longer product life cycle, such as automotive, heavy

http://www.industryweek.com/print/423172 5/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

equipment, and industrial machinery. Companies in asset-intensive industries

like chemicals also recognize the need for a proactive, flexible approach to
product and process innovation. With the growth and maturation of cloud-based
platforms, the integration of social media–like capabilities within collaborative
innovation systems, and the broader use of simulation and virtualization of
product models or digital twins, the tools are available now for manufacturers in
all industries to progress and modernize their approach to ideation, innovation,
and new product development.

Improving product innovation success rate (31%), better sensing and responding
to customer needs (27%), and developing product-related services (30%) are all
focus areas for manufacturers, according to IDC Manufacturing Insights' 2017
Product and Service Innovation Survey. And 39% of manufacturers are looking to
apply analytics for improved ideation and innovation management — all
indicators that the innovation management process (ideation, costing,
product/formula modeling, and product portfolio management) needs to mature
and extend beyond a small workgroup of marketing and design to include the
extended internal, and external, team. This "team" should include tier 1 suppliers,
partners, and at minimum a core group of strategic customers. Automotive
manufacturers such as Ford and Daimler have emerging initiatives around design
thinking and customer experience design. Crowdsourcing with a broader
audience of customers, prospects, and domain experts should also be a part of
this growing open innovation paradigm.

Prediction 6: In 2020, augmented reality and mobile devices will drive

the transition to the gig economy in the service industry, with "experts
for hire" replacing 20% of dedicated customer and field service
workers, starting with consumer durables and electronics.

The gig economy has been defined to include part-time, temporary, and freelance
jobs. It was one of the indirect consequences of the Great Recessions of 2008 as
full-time workers were displaced and turned to part-time or temporary work to
earn income. In 2017, it has now become a significant portion of the workforce in
the United States and globally in countries that have the digital infrastructure to
support it. This digital infrastructure is a core reason the gig economy is so
popular, even in a non-recessionary market — it enables talent accessibility.
http://www.industryweek.com/print/423172 6/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

Gig economy technology platforms have proliferated, including several that are
geared specifically toward managing services, like HelloTech, which provides
services for computer electronics, including computer repair, smart homes,
networking, and internet. More recently, IKEA, the Swedish manufacturer and
retailer, announced its intent to purchase TaskRabbit, one of the early gig
economy platforms with more than 60,000 freelance workers that range from
handymen to movers to assistants.

IDC has seen the increase of "experts for hire" in manufacturing service–related
roles as customer demands for faster service intersect with digitally enabled
service platforms. Now, customer service representatives have flexibility of both
location and schedule (e.g., working from home Sunday evenings), and skilled
field service workers can respond to more opportunities in the market, servicing
an entire category of product (printers) rather than a specific brand. IDC expects
the trend to expand further with technologies that are now available through
Android and iPhone app store downloads, including PTC's Vuforia Chalk, which
allows peer-to-peer AR through "digital chalk" markups that will help guide a
customer through troubleshooting or self-repair processes.

The benefits to manufacturers include cost savings through a variable workforce

that can be more closely tied to customer demand, access to skilled experts who
would not be traditional hires (e.g., the personal computer hobbyist with another
career), and higher customer service levels. All of this is made possible by the 3rd
Platform — notably, the proliferation of personal mobile devices — and
innovation accelerators like augmented reality, which enable guided repairs and
remote expert instruction.

Prediction 7: By the end of 2020, one-third of all manufacturing

supply chains will be using analytics-driven cognitive capabilities,
thus increasing cost efficiency by 10% and service performance by 5%.

Most of the larger organizations have been investing in supply chain technologies
that can enable the data capture and analysis functions. IDC defines the concept
of digitally enhanced supply chain as something that would leverage internet of
things and sensor data to provide real-time data insights that can essentially serve
as inputs for building a cognitive model. Further, deep learning modules can aid
http://www.industryweek.com/print/423172 7/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

in the creation of cognitive models, which in turn would be the core of a highly
automated supply chain. This will drive cost efficiencies in labor expenditures,
waste reduction, and better utilization of assets. Also, improvements in service
performance will extend to delivery times, allocating inventory to high-priority
orders, and faster new product introductions.

The key sources of this data would be logistics operational systems, warehouse
management systems, shipping manifests from OEMs, dealer management
systems, and point-of-sale (POS) devices. The data thus collected will aid in
creating supply chain models that account for the unstructured data in the form
of environmental, seasonal, and economic factors by creating cognitive models
that can predict the inventory and logistics requirements with a high degree of
accuracy. Organizations have been investing in applications with an aim to
disrupt their existing supply chains and create a competitive differentiation
through increased customer satisfaction levels.

The concept of a cognitive supply chain also allows organizations to proactively

manage inventory by moving it closer to customer demand, which ultimately can
reduce the overall cost of supply chain operations and increase the service levels.
The challenges for digitally transforming the existing supply chains are equally
daunting and would require the complete ecosystem to be at the same level of
maturity coupled in terms of both technology and business processes.

Prediction 8: By 2020, 80% of supply chain interactions will happen

across cloud-based commerce networks, dramatically improving
participants' resiliency and reducing the impact of supply disruptions
by up to one-third.

Today, business networks are the essential enablers of digital transformation. In

fact, recent IDC research highlights how the majority of companies realize the
tremendous potential of expanding their focus beyond the four walls of their
enterprises to collaborate with their business partners. Of the manufacturers that
are participating in cloud-based commerce networks, 54% say they have seen
tangible cost savings, and 44% indicate the networks allow easier access to
suppliers and other types of providers (IDC's 2016 Supply Chain Survey). This
requires a completely different management approach and use of tools than
http://www.industryweek.com/print/423172 8/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

traditional, linear supply chains. As such, companies are restructuring their

supply chains to allow them to be quickly reconfigured depending on the order
volumes and geographic source of demand. At the same time, operators try to
take fixed costs out of the network so that the supply chain profitably operates
regardless of demand level. This cost focus is particularly high when serving
emerging economies where demand is much less predictable.

Since business success will be centered around the timely and effective analysis of
the large data sets generated by business and sensors, it is the view of IDC that
the best supply chains will be those that have the ability to quickly analyze large
amounts of disparate data and disseminate business insights to decision makers
in real time or close to real time.

Therefore, open and flexible cloud architectures will be an essential tool as they
enable data generation from any source (both internal and external to the
manufacturer), comprehensive and fast analysis, and then ubiquitous
consumption (initially with on-premise access as significant but declining over
time).

Prediction 9: By 2020, 25% of manufacturers in select subsectors will

have balanced production with demand cadence and achieved greater
customization through intelligent and flexible assets.

One of the holy grails in manufacturing is how to achieve perfectly fine-tuned

demand-driven (or shelf-driven, in CPG) value chains. This means aligning to the
speed and changing needs of a demanding market without sacrificing the
essential cost optimization results achieved in the past. A lot is being done by
infusing real-time "intelligence" into networked, information-centric processes —
essentially by providing decision makers with up-to-date information regarding
the execution status of the processes they are leading and about the expected
business outcome of their decisions.

Building on these data-driven processes, manufacturers are now ready to launch

digitally executed processes, thanks to the advancement in tools and machine
technology. We see today the market availability of assets that are intelligent (i.e.,
able to take AI-powered decisions) and flexible (i.e., that can perform variable
http://www.industryweek.com/print/423172 9/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

tasks without the need of human intervention, such as intelligent co-robots, 3D

printers, and machines with retooling capabilities).

These assets will be essential to automatically execute operational processes

based on demand-driven order. Today, they — and the flexibility coming with
them — are deployed to augment execution effectiveness and flexibility. Machines
are designed to operate in synergy over an IoT platform, focused on the delivery
of smart products that produce, record, and share information about their
operating status to enable new business models. Elon Musk, founder, Tesla
Motors, when commenting about the company's Gigafactory, which is due to be
the biggest battery factory in the world and will be embedded with the most
innovative technologies, including cognitive intelligence and AI, said, "A factory
deserves more innovation and more engineering skill than the product itself."
Musk added, "We consider [the factory] to be a product. The factory itself is the
machine that builds the machine." In the future, the company will be directly
connected to and informed by market conditions, enabling the near-real-time
operational adjustments of assets performance and resources consumption based
on demand variations. The main impact will be in balancing production processes
with demand cadence and in achieving mass customization (or "lot size 1"). This
transformation will provide a further growth opportunity for companies
deploying advanced automation that will cover all the process where humans
cannot bring any added value.

Different sectors will probably leverage technologies in different ways. In the

fashion industry, we see already the availability of ready-made personalized
clothing. Asset-intensive industries will probably able to reap the economic
benefits of adapting production to demand requests and energy prices. In the
engineering-oriented sectors, companies will establish autonomous end-to-end
processes to deliver individualized and custom-based components and products.
In the pharma industry, opportunities are around the delivery of mass-produced
individualized drugs and treatment.

Prediction 10: By 2019, 15% of manufacturers that manage data-

intensive production and supply chain processes will be leveraging
cloud-based execution models that depend on edge analytics to enable
real-time visibility and augment operational flexibility.
http://www.industryweek.com/print/423172 10/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

Factory execution processes have not yet been much impacted by cloud as much
as other business domains, such as the supply chain. However, this is changing.
The widespread availability of a reliable cloud infrastructure is making cloud a
tool in the hand of process leaders. The opportunity of converting raw data from
the machine level into enterprise-grade information can transform and elevate
the role of shop floors in manufacturing organizations and make them central in
the fulfillment process. To fulfill this promise, companies need to aggregate data
from multiple sources and provide the right information, at the right time.

So far, companies' decisions are mostly torn between two main options: from one
side, an on-premise execution system directly linked to machine data that
guaranteed reliability, and latency, but lacked flexibility and accessibility; from
the other side, a cloud-based system that ensures easy deployability and
collaboration while sacrificing data availability and granularity.

To overcome this, companies will need to reconcile data in the production process
that is execution relevant — that needs very little latency and cannot be
transferred easily via cloud — with data that is visibility relevant for which cloud
could be the best alternative. Interesting enough, IDC Manufacturing Insights'
recent survey highlighted how cloud investment and OT/IT integration will take
very high priority among operational technologies investments, with more than
40% of companies prioritizing investments in cloud software and platforms to
support their OT processes.

Today, the availability of edge analytics that transform the massive amount of in-
machine process data into aggregated and descriptive information is blurring this
dichotomy. Edge analytics allow manufacturers to retain and process the data
where it naturally resides — the machine — while ensuring this data is made
properly visible to next-generation applications with measurable value to the
business. We can refer to this process as "edge-ecution" or execution at the edge.
The number of addressable business processes will grow exponentially. These
hybrid execution models based on and depending on edge analytics will enable
real-time, anticipatory, and adaptive operations.

Source URL: http://www.industryweek.com/leadership/top-10-predictions-global-manufacturing-2018-idc

http://www.industryweek.com/print/423172 11/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

http://www.industryweek.com/print/423172 12/13
29/12/2017 Top 10 Predictions for Global Manufacturing in 2018: IDC

http://www.industryweek.com/print/423172 13/13