The Big Reset for the Manufacturing Industry -- Get Ready for 2021
How businesses are preparing for a new era that will change every facet of their operations.
By Philip Stoten • Originally published
Opinions expressed by Entrepreneur contributors are their own.
2020 has been a tumultuous year for manufacturing and no-one in the C-suite has been excluded from the impact of this perfect storm of disruption. I am in a privileged position talking regularly to the great and the good of the manufacturing and supply chain world. In my conversations with CEOs, COOs, CTOs and CMOs, I am seeing the dawning of a new era. A big reset is underway in the way companies operate, from the fundamentals of their business models, their operating procedures, work-from-home strategies, right through to the way companies market and sell their products.
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So, what's in store for the twenties, and how can you make sure you're ready for 2021?
Following the trauma of 2020, I still believe the twenties will roar once again and deliver the most innovative decade in history. Necessity is the mother invention and this year's pandemic has created the mother of all necessities! It's been an extreme accelerator of creativity and innovation, a tumult that has forced companies to rethink and adapt.
An EMS revolution is underway
For those directly involved in the strategy of manufacturing and supply chain, it has been necessary to reassess decades-old business models. The EMS (Electronics Manufacturing Services) industry is close to fifty years old and has changed little since the period of rapid growth in the nineties and the turn of the Millenium.
Supply drives the traditional model. EMS companies build capacity, often on a grand scale, and they sell that capacity. Their performance is closely linked to how well they can utilize that capacity. Emerging models turn the supply and demand equation on its head to focus on demand, utilizing elastic capacity constantly available in the market. These business models are gaining traction. What's more, these models are far more digitally enabled than their predecessors, and often more customer or user friendly. This is not dissimilar to the model employed by industry disruptors like Uber, who shifted the from a supply-based taxi model to one focussed on flexible on-demand capacity, wrapped in an intuitive digital interface.
Many companies are leading this disruption, including those who have created digital manufacturing ecosystems for parts, like 3D Hubs, Fictiv and Xometry. There are also those in the PCBA (Printed Circuits Board Assembly) and box build space like MacroFab and Tempo Automation, as well as exciting new entries like Launchpad.build who are using AI to create assembly instructions and instant prices for smaller volume manufacturing or CloudNC who are developing an autonomous CNC factory in the UK, which will be the model for factories around the world.
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These bold ambitious disruptors are just the tip of the iceberg, with hundreds more working to digitally transform an industry that has for too long relied on tribal knowledge and outdated planning and execution methods. They're leveraging key ingredient technologies, like AI, Machine Learning, adaptable automation and robotics, to shake up an industry that many see as stuffy and outdated.
The incumbents in the industry, with impressive capacity and capability, are not unaware of the challenges presented and are on their own journey of digital transformation while considering the existential challenge that is moving from a supply model to a demand-led solution.
The race to be smarter
I've said repeatedly that the challenge of the late nineties and the early noughties, the quest to be the biggest or the cheapest, is a relic of the past. Now, those that outsource their manufacturing want a solution that is digital, agile and resilient to whatever disruptions are lurking around the corner. Now, the challenge for every EMS company is to be the smartest.
The biggest players face the biggest challenge. They have a footprint dominated by China and are having to review it as the brands they serve explore the best location for their factories. They have longer, more complex supply chains. They need to adapt fastest to survive and thrive in this post-pandemic world.
These traditional EMS companies are also digitally transforming, some at speed. The more advanced will benefit from the changes occurring in the industry. They are able to adapt quickly and have the resources to invest in transformation and the development of their footprint and asset base. They are acutely aware of the changes occurring and are exploring how to prepare for the new phase of the development of their industry. They are transforming their factories, their customer-facing systems, their business practices and even exploring their own new business models.
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The picture is not black and white. It is not all about the new entrants and the disruptors. The traditional EMS model has much to offer and certain products, particularly higher volume consumer goods, are ideally suited to very large scale production. Whatsmore, smaller EMS players operating in narrow niches, like specific industries or geographies where specialist knowledge is highly valued, are likely to remain the preferred solution. However, the manufacturing industry must adapt to create space for all of these models. I expect hybrid solutions to appear and EMS companies to start acquiring the upstarts eating their lunch. And who knows even some of these exceptionally well-funded upstarts might acquire the odd EMS company.
Looking ahead to the future
The COVID-19 pandemic, although not the ultimate cause of the industry's tumultuous change, has focussed and accelerated it. The current reality is hastening transformation and pushing executives, investors, customers and even governments to look more closely at the way the manufacturing industry operates. Just over a year ago, I wrote a column suggesting that 2020 would be a pivotal year for the industry. I was right, but not in the way I expected. I don't think anyone saw it coming. Having seen what has happened this year, I remain convinced that this is a pivotal time and the twenties will be the most innovative decade of our history. The world is changing and the manufacturing industry is changing with it. This decade will be one of the most exciting ever as a new EMS industry emerges.
