3D Printing The Next Layer Collapsing Technology?

3D Printing The Next Layer Collapsing Technology?

Robert McCutcheon PwCWe all expect 3D Printing, also known as Additive Manufacturing, to be a disruptive. Or is it everyone who expects it? Will 3D Printing become the next technology to collapse layers in manufacturing just like the software and communications layers I’ve been discussing?

PwC just reported on its 2015 survey of manufacturers’ experiences and attitudes toward the technology. The results are somewhat mixed, as you would suspect given how new the technology is and how rapidly it is gaining acceptance.

PwC’s Robert McCutcheon posted a blog on LinkedIn introducing the latest results. I’m quoting the post here:

There are many different types of technology that are at the fingertips of manufacturers looking to become the next Factory of the Future. But there’s still that hesitation, there’s still the question: Is 3D printing (3DP) just hype?

According to PwC’s recent study, it’s not. In fact, it’s become quite clear that the technology, also known as additive manufacturing, is crossing from a period of experimentation to one of rapid maturation. Industrial 3D printers, once almost exclusively used for prototyping, are now on some of America’s factory floors and being rolled out on production lines.

How do we know?

Two years ago, PwC tested the waters to figure out to what extent U.S. manufacturers were adopting 3DP into their operations and how they expected the technology to play out in the future. In our latest report, we share what’s changed and the three most significant shifts that have emerged:

  • More “doing,” less experimenting: Fewer manufacturers (17% versus 29% two years ago) are simply experimenting with 3DP to figure out how to use the technology. Now, just over half are using it for prototyping and final-products versus 35% two years ago.
  • Greater expectations: Two years ago, just 38% of manufacturers expected 3DP to be used for high-volume production over the next 3-5 years. Now, 52% do. Interestingly, we saw a drop from 74% to 67% in the number of manufacturers that expect 3DP to be used for low-volume, specialized products.
  • 3DP is still disrupting, though how it’s disrupting continues to evolve: Twenty-two percent say it will be disruptive to restructuring supply chains. The same percentage say it will threaten intellectual property.

Eighteen percent believe it will change relationship with customers. Two years ago, the primary concern was how it would disrupt the supply chain.

In “3D Printing comes of age in US industrial manufacturing“, we dive further into these three shifts and uncover sentiment from 2014 versus today. What’s clear is that the growth in 3DP and the range of ways it’s being implemented is demonstrating 3DP will be an important discussion to how manufacturers are assessing, shaping and expanding their businesses.

However, no matter where one is on the adoption scale, there are questions that must be addressed.

PwC Industrial Manufacturing Trends 2016

PwC Industrial Manufacturing Trends 2016

The PwC Industrial Manufacturing Trends 2016 post has been released. Check it out. There are some interesting ideas.

The authors Stephen Pillsbury and Robert Bono cite the painful lessons of recovering from 2001 and 2008 as leading to caution now displayed by manufacturing leaders. We’ve had a bit of an economic jolt. Where is it headed? The uncertainty leads to caution.

They reach an interesting conclusion, “Manufacturing may be facing some headwinds, but it’s undeniably in the midst of a technological renaissance that is transforming the look, systems, and processes of the modern factory. Despite the risks — and despite recent history — industrial manufacturing companies cannot afford to ignore these advances. By embracing them now, they can improve productivity in their own plants, compete against rivals, and maintain an edge with customers who are seeking their own gains from innovation.”

It is time, they say, to envision and prepare for a data-driven factory of the future.

They reveal four technology categories that are already driving much of the change. I’ll summarize. Check out the report for more depth. Most of these are not surprising, but they certainly must be factored in the thinking of manufacturing leaders.

Industrial Manufacturing Technologies

  • Internet of Things (IoT): The connected factory is an idea that has been evolving for the past few years. Increasingly, it means expanding the power of the Web to link machines, sensors, computers, and humans in order to enable new levels of information monitoring, collection, processing, and analysis.

    But for industrial manufacturing companies, the next generation of IoT technology should go well beyond real-time monitoring to connected information platforms that leverage data and advanced analytics to deliver higher-quality, more durable, and more reliable products.

    Before investing in IoT, however, industrial manufacturing companies must determine precisely what data is most valuable to collect, as well as gauge the efficacy of the analytical structures that will be used to assess the data. In addition, next-generation equipment will require a next-generation mix of workers, which should include employees who can design and build IoT products as well as data scientists who can analyze output.

  • Robotics: In many cases, robots are employed to complement rather than replace workers. This concept, known as “cobotics,” teams operators and machines in order to make complex parts of the assembly process faster, easier, and safer.Cobotics is rapidly gaining momentum, and successful implementations to date have focused largely on specific ergonomically challenging tasks within the aerospace and automotive industries. But these applications will expand as automation developers introduce more sophisticated sensors and more adaptable, highly functional robotic equipment that will let humans and machines interact deftly on the factory floor.
  • Augmented reality: Recent advances in computer vision, computer science, information technology, and engineering have enabled manufacturers to deliver real-time information and guidance at the point of use.
  • 3D printing: Also known as additive manufacturing, 3D printing technology produces solid objects from digital designs by building up multiple layers of plastic, resin, or other materials in a precisely determined shape.

The authors conclude with recommendations of how to consider necessary investments in these emerging technologies.

Manufacturers Bracing for Slower Growth Environment

Just in from PwC–results of its latest manufacturers survey. And it sort of fits with this week’s stock market news–not all that optimistic right now.

Sentiment regarding the direction of the domestic economy moderated further among U.S. industrial manufacturers, according to the Q4 2015 Manufacturing Barometer, released by PwC US today. A number of factors ranging from concerns about the global economy, particularly China, to the impact of the strong dollar and weak energy prices, have prompted manufacturers to reign in growth forecasts, while taking a more measured approach to hiring and capital spending outlays.

During the fourth quarter of 2015, optimism regarding the direction of the domestic economy over the next 12 months dropped to 46 percent from the prior quarter’s 60 percent, and 22 points below a year ago (68 percent). This represented the lowest level of optimism since 37 percent was recorded in the third quarter of 2012. Looking at the world stage, only 27 percent of industrial manufacturers expressed optimism regarding the global economy over the next 12 months, 11 points below a year ago (38 percent).

As a result of the decreased economic sentiment, the projected average revenue growth rate over the next 12 months among panelists declined to 3.6 percent, representing a significant deceleration from the prior quarter’s 5.3 percent. The benchmark represented the lowest revenue growth rate since three percent was recorded in the first quarter of 2011. Despite the lower rate, 70 percent of panelists still expect positive revenue growth for their own companies in the year ahead, with the majority (65 percent) forecasting single-digit growth.

“Sentiment among U.S. industrial manufacturers decelerated in the fourth quarter, primarily reflecting the uncertain outlook for the global environment,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader. “The overall economic picture has become more complex as management teams navigate slower growth in China, coupled with a stronger dollar and weak energy prices. Nearly one-third of annual revenue among survey panelists is derived internationally, reflecting the significant exposure of domestic industrial manufacturers to the world economy. Turning more cautious, they are prudently dialing back on the overall level of capital spending and hiring as they prepare to transition to a more challenging business climate. However, a healthy majority still anticipate revenue growth, albeit at a more moderate pace, in the year ahead.”

Barriers to Growth and Challenges

Looking at perceived barriers to growth, monetary exchange rate has become the leading headwind over the next 12 months, up 11 points sequentially to 49 percent in the fourth quarter. A year ago, it was 15 percent, 34 points lower. Other barriers included lack of demand (39 percent), oil/energy prices (32 percent), decreasing profitability (29 percent) and legislative/regulatory pressure (22 percent). In addition, competition from foreign markets rose to 22 percent, up 10 points from the previous quarter.

PwC also surveyed respondents on the most prominent challenges in preparing for the year ahead. At the top of the list was the condition of the world economy, which was cited by 80 percent of respondents, while 67 percent rated it as a top-three issue. This was significantly higher than the last time this special survey was conducted in 2011. At that time, only 64 percent cited the condition of the world economy and only 18 percent listed this challenge among the top-three. Conversely, 71 percent of panelists flagged higher costs of goods and services as a major challenge, down from 92 percent in 2011. Additional major challenges cited by panelists included greater opportunities for new product and service introductions (67 percent), increased price flexibility (62 percent) and strength of the US dollar (53 percent).

Hiring

As a result of the pullback in growth forecasts, manufacturers have continued to take a more conservative approach to hiring. In total, 42 percent plan to add employees to their workforce over the next 12 months, up from the low of 37 percent in the third-quarter of 2015, but down from 60 percent reported a year ago. The total net workforce growth projection was flat this quarter, below last year’s 1.1 percent, indicating continued cutbacks in hiring among these manufacturing firms.

Among the 42 percent of panelists planning to hire within the next 12 months, the most sought-after employees will be blue collar/skilled labor (29 percent) and professionals/technicians (27 percent). Among professionals/technicians, hiring of technology/engineering employees led the way, while hiring in the blue collar category was split between skilled/specialized workers and semi-skilled workers.

“Industrial manufacturers are continuing to seek avenues to improve productivity, while favoring professionals with strong technical skills,” Bono added. “In a slower growth environment, management teams appreciate the benefits of staying lean while ensuring they have the right talent to harness continued advances in engineering, technology and supply chain management.”

Spending

The tempered global outlook has also served to moderate the total level of capital spending plans among U.S. industrial manufacturers. They are continuing to spend, but they are spending less. Overall, 49 percent plan major new investments of capital during the next 12 months, up from the prior quarter’s 37 percent, and above last year’s 43 percent. However, the mean investment as a percentage of total sales dropped to 1.9 percent, sharply down from last quarter’s 5.6 percent and the 3.3 percent a year ago.

Conversely, 86 percent of respondents plan to increase operational spending over the next 12 months, up four points from both the previous quarter and the comparable period last year. Leading categories were new product or service introductions (44 percent), research and development (41 percent), business acquisitions (34 percent) and information technology (36 percent). “Given the prospects for a less robust economic climate, management teams continue to focus on investing in what they do best, while fostering innovation in an effort to strengthen their competitive positions,” Bono added.

PwC Industrial Manufacturing Trends 2016

Global Industrial Manufacturing M&A Activity Shows Strength

Merger and acquisition (M&A) activity in the industrial manufacturing industry showed continued strength in the third quarter of 2015, with more than 50 deals worth more than $50 million for the sixth quarter in a row, according to Assembling Value, a quarterly analysis of global deal activity in the industrial manufacturing industry by PwC US. While growing uncertainty about the future prospects for the global economy has created serious underlying fears about the years ahead, manufacturing executives continue to re-evaluate their business portfolios, add scale to better leverage core capabilities, and divest or spin-off non-core operations.

According to PwC, there were 55 transactions (worth more than $50 million) in the third quarter for a total deal value of $20.9 billion. Both value and volume declined from the previous quarter which recorded 66 deals totaling $28.2 billion. However, deal activity year-to-date remained healthy with 180 deals raising $69.6 billion. Four megadeals (transactions worth more than $1 billion) were announced for a total deal value of $9.8 billion or 47 percent of the quarter’s total deal value.

“The continued interest in deal making in the third quarter has been especially notable given weakening global manufacturing activity and increased uncertainty regarding the economic outlook,” said Bobby Bono, U.S. industrial manufacturing leader for PwC. “Manufacturing executives in our latest Manufacturing Barometer reported a drop in optimism towards the world economy’s prospects as the economic slowdown in China, along with weak global demand and a strong dollar, continued to weigh heavily on the growth of the manufacturing sector. As we enter the final quarter of the year, we expect the level of deal activity to remain stable as mixed global economic results steer manufacturing executives toward further portfolio reshuffling.”

Similar to previous quarters, strategic buyers continued to align product portfolios with high-growth markets, such as automotive, aerospace, and electric through acquisitions. Strategic investors represented 66 percent of deal activity in the quarter. With plenty of cash at their disposal, both strategic and financial buyers have been active in deals involving diverse end markets, particularly in Asia and areas of Europe on the verge of recovery.

Bono added: “Strategic acquirers remain concerned about the broad economic environment and are taking a cautious approach to their deal strategies. While they continue to execute on sizable transactions, they are continuously evaluating their portfolios and taking advantage of opportunities to divest non-core assets. Divestitures continue to be a viable exit option, representing 27 percent of deal activity this quarter.”

On a regional basis, the U.S. share of global activity remained among its lowest levels in a decade as local activity in Asia continued to dominate deal making. Acquirers from Asia and Oceania accounted for 62 percent of total deal activity in the quarter, while targets in the region represented 56 percent of all deals. The majority (75 percent) of deals in the third quarter were local market deals; however, the strength of the dollar could lead to an increase in U.S. outbound deals in the coming months.

PwC’s industrial manufacturing M&A analysis is a quarterly report of announced global transactions with value greater than $50 million analyzed by PwC using transaction data from Thomson Reuters.

PwC Industrial Manufacturing Trends 2016

Manufacturers Turn Cautious on Global Economic Outlook

Many years ago I read a book about the stock market. It poked fun at the news reports that would go—there is a wave of selling. Hmm, for every seller there is a buyer. Someone bought all the shares being sold.

I bring that up just as a note about economics (and maybe life in general). Some things are good and bad simultaneously.

Take the strength of the dollar. American nationalists think that a strong dollar means a strong nation, or that we “won” some contest. However, for manufacturers and other suppliers looking to sell overseas a strong dollar makes our products more expensive and therefore less competitive.

The latest PwC US Manufacturing Barometer just came my way. It states, “Sentiment regarding the direction of the global economy took a sharp turn downward among U.S. industrial manufacturers, according to the Q3 2015 Manufacturing Barometer, released by PwC US today.  Global concerns also served to moderate optimism regarding the domestic outlook, while slowing plans to hire more workers.  At the same time, capital and operational spending forecasts among U.S. companies remained healthy.”

Details:

During the third quarter of 2015, optimism regarding the direction of the global economy dropped to 23 percent from 38 percent in the previous quarter and 30 percent in the third quarter of 2014.  In addition, pessimism rose to an equal level with optimism (23 percent), reflecting an uncertain outlook for international commerce.  Further, 40 percent of respondents indicated they believed the world economy was declining, showing greater concern than in the previous quarter (25% in Q2).

Conversely, optimism regarding the U.S. economic outlook remained positive but dropped to 60 percent in the third quarter of 2015 from 69 percent in the second quarter.  Despite the renewed sense of caution regarding the global stage, company revenue forecasts for the next 12 months rose to a moderately high 5.3 percent in the third quarter, compared to a forecast of 4.9 percent in the second quarter.

“U.S. industrial manufacturers became increasingly cautious on the outlook for the global environment as they assessed the impact of the slowdown in China and the strengthening dollar,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader.  “Despite the downward turn in overseas sentiment, overall domestic growth prospects remained healthy and manufacturers continue to focus on further strengthening core products and services.  They are keeping their cash at home and directing investment toward enhancing their value propositions in an effort to remain competitive and drive future revenues.”

As a result of the decline in global sentiment, U.S. industrial manufacturers scaled back hiring plans in the third quarter, with only 37 percent planning to add employees to their workforce over the next 12 months, down 15 points from the 52 percent level indicated in both the second-quarter and year ago comparable period.  The total net workforce growth projection in the third quarter was minus 0.2 percent, indicating further cutbacks in hiring among industrial manufacturing firms.

Among the minority of panelists planning to hire within the next 12 months, the most sought-after employees will be blue collar/skilled labor (23 percent) and professionals/technicians (25 percent). Limited white collar support, middle management and sales/marketing hiring is planned.  “The drop in hiring plans may indicate an expectation for slower growth in the near future,” Bono added.  “Management teams will likely intensify avenues to improve productivity across their organizations, while continuing to search for professionals with strong technical skills.”

Despite the tempered global outlook, 37 percent of U.S. industrial manufacturers surveyed plan major new investments of capital during the next 12 months, up slightly from the second quarter and same period last year.  In addition, the mean investment as a percentage of total sales was a moderately high 5.6 percent, well above 3.3 percent in the second quarter and on par with 5.7 percent in last year’s third quarter.  Operational spending plans remained healthy as well with 82 percent indicating plans to increase operational spending, up from 75 percent in the second quarter and 69 percent last year.  Leading increased expenditures were new product or service introductions (48 percent), research and development (37 percent), business acquisitions (23 percent) and information technology (22 percent).

“In the face of global uncertainty and the impact of a strengthening U.S. currency, management teams continue to focus investment on developing new products and driving innovation in an effort to sustain and build market share,” Bono added.  “Companies are doubling down on what they do best and aggressively building their competitive moats.  At the same time, they are continuing to pull back from overseas expansion, with only five percent indicating plans to open facilities abroad.”

Looking at perceived barriers to entry, monetary exchange rate became the leading headwind to growth over the next 12 months, as indicated by 38 percent of respondents.  A year ago, it was only 14 percent (24 points lower).  Typical barriers to growth—lack of demand (32 percent) and legislative/regulatory pressures (25 percent)—were lower as monetary exchange rate took center stage.

PwC also surveyed respondents on investment in information technology, and found that 80 percent of manufacturers report having a multiyear plan (3-5 years) that addresses business capabilities and processes as well as IT systems.   Industrial manufacturing companies’ IT investments are made primarily to reduce costs (84 percent) and support growth (72 percent).  Overall, 90 percent are planning to invest in IT technologies over the next 12-18 months, with upgrading infrastructure the leader at 82 percent.

About the Manufacturing Barometer

PwC’s Manufacturing Barometer is a quarterly survey based on interviews with 60 senior executives of large, multinational U.S. industrial manufacturing companies about their current business performance, the state of the economy and their expectations for growth over the next 12 months. This survey summarizes the results for Q3 2015 and was conducted from June 24, 2015 to September 28, 2015.