Executives of manufacturing firms expect growth to continue in 2012, and they expect that growth to enable new investments in innovation, according to two recent industry surveys.
More than half of the respondents to ThomasNet.com’s newest Industry Market Barometer survey reported company growth in 2011. And three out of four of the more than 3,700 industrial manufacturing and supply professionals surveyed expect this growth to continue in 2012.
This continuing growth is igniting a new wave of investments among manufacturers preparing to meet future demand. Eighty-three percent of manufacturers are spending on capital equipment, hardware, software and facilities to increase production capacity, according to the survey.
Growth in 2011 also means more financial wiggle room for companies wanting to try out new ideas in 2012. Many IMB respondents are more aggressively pursuing business in new industries (58 percent) and investing in new and/or innovative products or services (66 percent).
Another survey released this month by KPMG International also found an optimistic outlook among manufacturing executives. According to the company’s 2012 Global Manufacturing Outlook: Fostering Growth through Innovation, 75 percent of respondents are optimistic about their business outlook over the next 12 to 24 months.
According to the KPMG study, global manufacturing executives are cautiously optimistic in the wake of the recession and remain focused on cost management and operational efficiency initiatives. But like the IMB study, KPMG findings show that companies are increasingly turning to new product development and value-added service offerings to spur further growth.
Forty-four percent of U.S. executives and 36 percent of global executives surveyed in the KPMG study indicate their companies will increase investment in innovation and research and development; 72 percent of global respondents believe that ‘transformational innovation’ is either in full swing or will be so in 12 to 24 months.
Innovation won’t happen in isolation, according to KPMG findings. Just over 60 percent of global respondents said they will work with customers for customized product development and with suppliers for product design.
Jeff Dobbs, KPMG’s global head of Diversified Industrials, pointed out the benefits of this collaborative mindset. “Customer and supplier collaboration in the earliest stages of product development allows for cost- and risk-sharing and lets manufacturers focus on what they do best by leveraging the expertise of external partners, accelerating speed to market,” he said.
This stronger focus on innovation – coupled with dramatic technological advances – is having a significant impact on manufacturing business models, which are becoming more service-oriented. Shifts in value propositions, such as pricing models or augmenting products with value-added services, ranked third (49 percent) after cost structure and new sales targets as intended changes KPMG respondents plan to make.
The rise in value-added services is expected to boost profits. Nearly two-thirds of respondents predicted new or enhanced customer services will make a “significant” or “very significant” contribution to profits in the next 12 to 24 months.
“In an attempt to buffer down-cycles, manufacturers are expanding their product offerings to include value-added services,” Dobbs said. “While this may potentially add to their profit margins, it should also help them strengthen customer relationships and identify future sales opportunities.”
Internet technology will also play a dual role in improving customer service and identifying new opportunities.
According to ThomasNet’s IMB survey, 47 percent of respondents cited customer service as a key benefit of their company websites. Almost 45 percent say their web presence opened new sources of revenue.
IMB respondents reported plans to continue investing in their websites.
Among product and custom manufacturers in particular, 86 percent are investing in online marketing this year, and 52 percent are increasing those investments over last year.