1 manufacturing trends 2009 and beyond
Post on 18-Dec-2015
217 views
TRANSCRIPT
1
www.frost.com
Manufacturing Trends
2009 and beyond
2
www.frost.com
Frost & Sullivan
The Growth Partnership Company
– Founded in 1961, 47 years of industry experience
– Over 1,700 Consultants/Analysts across 32 global locations
3
www.frost.com
A 360 degree view of Business
• Economic• Competitive• Customer• Technology• Integrated Industry• Best Practices
4
www.frost.com
AEROSPACE & DEFENSE
HEALTHCARE ICTAUTOMATION & ELECTRONICS
AUTOMOTIVE & TRANSPORTATION
CHEMICALS, MATERIALS &
FOOD
ENERGY & POWER SYSTEMS
ENVIRONMENTAL & BUILDING
TECHNOLOGIES
Cross Vertical Industry Expertise
5
www.frost.com
The Economy
Manufacturing Trends
Agenda Future Manufacturing
6
www.frost.com
Economic Outlook
7
www.frost.com
8
www.frost.com
Overview of the current global economy
The current global economic environment is indeed bleak: the ramifications are huge and widespread in terms of geographies and industry sectors.
Expected write-down of assets by banks:
$10 trillion
Enormous repercussions
Volvo order book (trucks-Europe):
3Q 2007: 41,970
3Q 2008: 115
Impact across industries
MSCI Emerging market index:
Impact across geographies
9
www.frost.com
SARS 2?SARS 2?
SEVERE AMERICAN RECESSION SYNDROMESEVERE AMERICAN RECESSION SYNDROME
10
www.frost.com
A recession is a significant decline in economic activity spread across the economy
• lasting more than a few months
•normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales
The R word
National Bureau of Economic Research National Bureau of Economic Research
11
www.frost.com
De-coupling – myth or reality?
The world IS much flatter than we would like to believe
12
www.frost.com
Europe, 34%
North America,
30%
Latin America & Carribean,
4%
Asia Pacific, 27%
Africa, 1%
Composition of World GDP, 2007
Global GDP is estimated at $ 40.57 trillion in 2007. Contribution of emerging countries has been increasing Emerging markets Increasingly contributing to growth United states and Euro Area still the major engines of global growth China, India and other emerging markets becoming equally important despite low global share
The World Economy
13
www.frost.com
Contribution to Global Growth
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06
Period
Valu
e
0.0
0.2
0.4
0.6
0.8
1.0
G3 non-oil imports (% change) Developing Asian exports (% change) Correlation
Correlation between Developing Asia Exports and G3 Imports
• Developing economies especially Brazil, Russia, India and China still derive a significant amount of their growth from the G3 Economies of USA, Europe and Japan
• The G3 economies effectively constitute close to 70% of the global economy and are the biggest destination markets for end products
• The G3 economies are also the biggest source of foreign direct investment and portfolio investments and debt market for raising capital.
• A slowdown in these economies at the same time will definitely drag growth in emerging and developing markets down.
14
www.frost.com
2008 2009
World 3.7 2.0
Europe 1.2 -0.5
USA 1.4 -0.7
China 9.7 8.5
India 9.3 7.5
ASEAN5 5.4 4.2
Projections 2009
15
www.frost.com
Low Projections 2009
3.5%3.5%
-1%-1%
5.1%5.1%
4%4%
3.7%3.7%
6.5%6.5%
16
www.frost.com
Potential scenarios for the global economy
There is disagreement about the extent of the impact of the recent events.
Scenario 1: Quick
recovery (1 year)
Scenario 2: Short
gloom (1-3 years)
Scenario 3: Prolonged
recession (5-10 years)
• Falling oil prices• Capital infusion• Lower interest rates• Concerted bail-outs
• Consumer sentiments take longer to recover as a result of recent wealth destruction
• Geo-political uncertainty • Faster contagion• Supply constraint
Possible Scenarios
Driving Factors
17
www.frost.com
Strategies for Growth in Economic Downturn
67%
58% 58%53%
48%
40%
30%27%
14% 13%11%
3% 2%
0%
10%
20%
30%
40%
50%
60%
70%
AgrressivelyLook forGrowth
Opportunities
StrategicPartnering
Expand NewMarkets
New ProductLaunch
Invest inTalent
ConserveCapital
Outsource Reduce staff
Status Quo
DecreaseR&D
Market Focus & Position
Mergers & Acquisitions
Change Supply Chain/
Distribution
CEO Survey: Strategy for Growth in an Economic Downturn
18
www.frost.com
ManufacturingTrends
19
www.frost.com
Impact on Manufacturing
FinancialCrisis
• A slowdown in the growth of Retail lending is expected to lead to lower purchases by consumers
• This in turn is expected to lead to lower output.
• Curtailing of working capital and also trade is expected to lead to lower production as producers do not wish to stock large inventories.
• A lack of trust between banks leads to a slowdown in global trade because letters of credit are not being issued.
• The collapse of the Baltic Dry Index indicates this.
• Tightening of Credit Markets leads to higher cost of working capital.
• This is due to the tightening up of corporate bond markets
• Higher Capital Cost is expected to Defer investment plans
• Globally, firms are staggering their capital investments already planned.
• Rising Capital costs is expected to adversely impact bottom lines.
Working Capital
Trade
Investment
Production
20
www.frost.com
Manufacturing in USA
0102030405060
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Period
Val
ue
-4.0
-3.0
-2.0
-1.0
0.0
Perc
enta
ge C
hang
e
PMI Index Growth in Non Farm Payrolls
Steps to Combat Crisis• Bailout Plan of $700 Billion• Fed window totaling $1 Trillion• Capital Infusion in Key Firms• Fed enters corporate Bond Market• Aggressive interest Rate Cuts
Current Scenario• Unemployment at 6.5% • Falling Non Farm Payroll growth• Retail Lending shows rapid decline• Companies are unable to raise working
capital
The Outlook for 2009 looks grim, with US unlikely to come out of slowdown, and consumers cutting back on spending. Liquidity is expected to continue to be an issue and a ballooning fiscal deficit can exert a downside pressure on the dollar in the latter half of 2009 and 2010.
• Capital Goods viz Oil & Gas and Power may remain unaffected, other sectors are likely to freeze expansion plans
• Manufacturers of final goods and raw materials may notice a sharp drop in sales.
Source: St Louis Fred
Industrial Output And Employment (2008)
21
www.frost.com
Euro Zone Manufacturing Outlook
-10
-5
0
5
10
April May June July August September
2008
Period
% C
hang
e
Total Industry Intermediate Goods Capital Goods Consumer Durables Consumer Non Durables
Exposure to Emerging Markets as % Of GDP
• Austria 85%• Switzerland 50%• Sweden 25%• UK 24% • Spain 23%• USA 4%
Steps to Combat Crisis• Finally a common approach is being attempted• UK has nationalized banks • Germany has unveiled a stimulus package
worth $700 Billion • Blanket guarantees of bank deposits by almost
all nations. • Rapid interest rate cuts following the steps of
the US Federal Reserve.
Current Scenario• Germany, Spain, UK, Portugal and Greece
are in an slowdown• Consumption is falling and so is production• Eastern Europe is facing a currency crisis,
leading to stress on western European Banks
• Credit tightening has curtailed consumption and trade
The Outlook for 2009 looks grim, with the largest European Economies slipping into a slowdown. Exposure to emerging markets could trigger a second wave of the crisis in Europe as the non performing loans increase. The economy is not expected to turn the corner before middle of 2010
Source: ECB
Industrial Output Eurozone(2008)
22
www.frost.com
Manufacturing In China
China is Structurally Vulnerable to External Environment
• Export Driven Economy• Dependent on Foreign Capital
inflows • High level of migration –
imperative to maintain high growth momentum
• US is main destination for China’s exports
15.417.8
15.7 16.0 16.0 14.7 12.8 11.48.2
02468
101214161820
Febr
uary
March
April
MayJ u
ne J uly
Augu
st
Sept
embe
r
Octobe
r
Month (Year 2008)
Gro
wth
Rat
e (%
)
Steps to Combat Crisis• Announced a $ 600 billion bailout. • Focus on developing infrastructure to create
jobs and revive economy • Government easing lending to stem fall in
house prices • Coordinated Interest rate cuts to boost
liquidity. • Exports slower due to lack of export credit
Current Scenario• Small and Medium manufactures struggling
with lack of credit• Falling real estate prices could adversely
impact the banking sector. • Retrenchment could lead to lower domestic
consumption • Export growth has been lower than
anticipated
China is poised for a hard landing at present, and is expected to recover by the middle of 2009, when consumption in China recovers. Export oriented growth leaves China highly vulnerable to external forces. Questions on efficacy of the stimulus package also remain.
Source: National Institute of Statistics
Industrial Output China (2008)
23
www.frost.com
Manufacturing in India
Rupee, Real Estate Key Issues• Real Estate boom for past few
years, with prices cooling off now• Rupee has depreciated
considerably against the dollar, leading to loss of corporate profits
• Small and medium enterprises hit by weak consumption environment.
4.80
1.42
7.37
5.53
4.37
6.22
5.47
9.52
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00
February
March
April
May
June
July
August
September
Month
s (
Year
2008)
Growth Rate % (YoY)
Steps to Combat Crisis• Central bank has cut interest rates • Ensuring the stability of the rupee against the
dollar to prevent a rapid depreciation of the rupee• Proposals being discussed to ease the norms for
foreign investments in local economy. • Small manufactures are requesting sops manage
rising costs.• Stimulus package announced but inadequate
Current Scenario• Fall in consumption off take especially
consumer durables• High inflation plaguing the economy for the
past 6 months. • Rapid movements in the rupee has
impacted corporate profits.• Overseas acquisitions have been plagued
credit crunch
India is set to record lower growth between 6.5 and 7.5 percent for the year 2008 and a even lower growth for 2009. Infrastructure development could be adversely affected by the current scenario.
Source: CSO
Industrial Output India (2008)
24
www.frost.com
Overview of the current global economy
Expected impact on certain sectors
BFSI
Airlines
Automotive
ICT
Government
Entertainment
Healthcare
Basic Foods
Education
Most Commodities Advisory ServicesMedia
25
www.frost.com
Future Manufacturing
26
www.frost.com
Manufacturing is IMPORTANT
Share of Manufacturing (Value Added in Const Prices)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
ECO - 4 ECO - 10 Asia World
27
www.frost.com
Manufacturing is IMPORTANT
Manufacturing R&D outpaces other sectors
R&D Investments 2006
Manufacturers are technology leaders
Manufacturing leads economic recovery – USA 2006
28
www.frost.com
Key business issues for manufacturing companies
Growth(new products, new
geographies, innovation)
Growth(new products, new
geographies, innovation)
Security(driven by regulations,
initiatives to maintain
business continuity)
Security(driven by regulations,
initiatives to maintain
business continuity)
Global Capability(source, make and sell
globally)
Global Capability(source, make and sell
globally)
Flexibility/ Scalability(Clients need to respond to
changing market dynamics)
Flexibility/ Scalability(Clients need to respond to
changing market dynamics)
Greener Manufacturing(Energy, Environment,
Social Corporate
Responsibility)
Greener Manufacturing(Energy, Environment,
Social Corporate
Responsibility)
Seamless: Systems
and infrastructure(to support complex global
manufacturing & supply
chains)
Seamless: Systems
and infrastructure(to support complex global
manufacturing & supply
chains)
Visibility(Minimum inventory,
accountability)
Visibility(Minimum inventory,
accountability)
Agility(Shorter time to market and
product life cycles)
Agility(Shorter time to market and
product life cycles)
Risk management (to minimize the impact of
fluctuating currencies,
supply chain disruption)
Risk management (to minimize the impact of
fluctuating currencies,
supply chain disruption)
29
www.frost.com
Key manufacturing trends
1. Emerging economies - the need for manufacturers to deliver on a global scale, but to execute locally
2. Digital convergence - need for manufacturing organizations to provide employees with access to business information any time at any place, and on any device.
3. Growing power of consumers - In the new business model, consumers are becoming active participants
4. Sustainability and the rising impact of the environment
5. The influence of complex regulations
6. Changing demographics
Source: Microsoft
30
www.frost.com
Future Manufacturing - Sustainable
Capitalizing on global markets
while preparing for increasing
environmental challenges
Understand your clients also have
challenges: meet their needs, and
capitalize on those solutions
Being aware that the competition may be making inroads, or just
“green washing”
Investing, producing, operating green in a
way that makes financial sense
SustainablSustainable Growthe Growth
SustainablSustainable Growthe Growth
Source: Frost & Sullivan
Separate the hype fromthe opportunities
31
www.frost.com
Future Manufacturing
Resource Intensive Knowledge Intensive
Mass Production Mass Customization
Growth through higher volumes Growth through Innovation
Focus on Local Capabilities Global Sourcing-Global Markets
Long Product Life Cycles Short Product Development Cycles
Global locations Globalized Networks
32
www.frost.com
Future Manufacturing: Innovation
• US$2000 price tag
• Clean slate approach to making a car – 34 patents!
• Outsourcing of assembly to small business
• Web 2.0 site to help consumers give feedback and design their own car
• Extensive use of advanced computing to design and develop the car
Tata Nano
33
www.frost.com
Future Manufacturing - IT enabled
Knowledge IPR handling,
semantics, creativity,re-use
DesignHolistic design environments,
co-design of product/process/service
Adaptability &reconfigurability
Mass customization,wireless shop floor
reconfiguration
HMI leveraging shop floor skills,
humans commandingmachines, robotics,
usability
Modeling product behavior,
supply chains, processes
Manufacturing
… towards the atomic levelNano-scale design & modelling,
heterogeneous technologyintegration
Networked products Lifecycle management,
‘wireless’ logistics
CognitionSensors/actuators & mechatronics
for machine self-calibration, -verification, -correction
34
www.frost.com
Global growth will ease to 3.7% in 2008
Exciting future Technology and Growth Sectors will include
• Biotech• Green Energy• Industrial Wireless• Bioplastics• Nanomaterials• Water• Security and Tracking• Advanced Transportation• Personalized Medicine• Pervasive Computing
New Sectors will drive growth
35
www.frost.com
Key Takeaways
36
www.frost.com
Key takeaways
Downturn will get worse before it gets better
Shifts in market position/share happen in an downturn environment
Status Quo is not an option. Positive thinking with positive action
Protect your strategic investments
Manufacturing is important. Invest in improvement.
37
www.frost.com
“Would you tell me, please, which way I ought to go from here?,” said
Alice.
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where,” said Alice.
“Then it doesn’t much matter which way you go,” said the Cat.~ A discussion between Alice and the Cheshire Cat from
Lewis Carroll's Alice in Wonderland.
Thank You
For any queries:Satish Lele