In 2016,
industrial products firms facing market pressures will likely
seek to evolve their position in the industry, among other strategic
initiatives, according to Joe Zale, a principal at Deloitte Consulting
LLP.
Where do you see the opportunities for growth in your sector?
Zale: The Internet of Things, whereby sensor technologies are embedded
into products, presents both a huge opportunity and a conundrum for
industrial products manufacturers. These technologies can support better
manufacturing plant productivity by allowing firms to more actively
monitor and optimize plant, asset, and supply chain performance. For
example, more advanced practitioners are directly linking RFID sensors,
which can track parts performance and wear and tear, with order
fulfillment systems that automatically coordinate ordering, delivery,
and technician visits. Some companies are employing sensors that monitor
consumable products and send information directly to ERP systems to
automatically trigger reordering and billing.
This proliferation of smarter products, combined with enhanced
communication infrastructure, is providing industrials with greater
volume, velocity, and variety of information. Firms are using insights
gleaned from this data to not only increase aftermarket productivity and
enhance operations, but also to improve product lifecycle management
and, in some instances, commercial arrangements. For example, firms that
provide equipment used in production processes are increasingly
packaging their offerings to include performance commitments. According
to these commitments, if performance stays within an agreed-upon range,
the provider will receive a performance bonus, while performance outside
the range generates penalties for the provider. The use and application
of analytics increases product manufacturers’ confidence in both
committing to these arrangements and in delivering offerings in a
cost-effective manner.
What issues should businesses consider as they plan for growth?
Until recently, industrial products firms focused on attracting,
recruiting, retaining, and training hardware engineers. Advanced
technologies are creating demand for employees who understand
traditional hardware and are also familiar with software and
programming. Several large industrials have already established software
divisions and are dedicating themselves to hiring for different skills
sets than in the past.
Another challenge facing industrials is uncertainty in the energy
sector. Oil and gas prices have fallen to historic lows in real
terms,which has slowed the growth that had been generated by the steady
expansion of offshore oil shale drilling. Similarly, in the broader
energy segment, utility markets are facing longer-term disruption: Power
generation and storage are becoming more decentralized, and customers
have an increased number of options and can more directly influence
demand swings. These trends present opportunities for industrials to
gain access to assets at depressed rates and new markets, but firms will
also need to sharpen their decision-making and ensure they are properly
considering any associated risks.
What is the next big thing? What markets do you see emerging in the sector?
Supply chain management has been, and will continue to be, a key
challenge for industrial products organizations. While many firms have
gone to great lengths over the past several years to increase supply
chain efficiency, a consequence has been increased complexity. The time
has come for firms to step back and reconsider operations and assess if
the savings they are achieving on materials and labor justify the
coordination and oversight costs. Expect industrial products firms to
consolidate in an effort to control their supply chain, and to better
balance simplicity and production costs.
Due to changes in global markets, I anticipate we will see new customer
markets emerge, but they won’t be the usual “new market” suspects. It’s
safe to say the bloom is off the rose for China, as the country’s
economy is transitioning from unsustainable double-digit growth driven
by investments and exports to a much more balanced economy based on
domestic consumption. For years, China has built up excess capacity in
core infrastructure sectors, such as steel and construction materials,
which are major end-market consumers of industrial products. As a
result, China’s slowing economic growth is having an adverse effect on
the industrial products sector. Similarly, Brazil is fraught with
challenges that will influence the market outlook for U.S. industrial
products firms. Private consumption in Brazil contracted for the first
time in a decade and is expected to do so again in 2016, as high
inflation, tightening credit availability, a deteriorating labor market,
and corruption issues slow infrastructure investment.
As a result of these challenges, sources of industrial growth in the
near term are more likely to come from Southeast Asia, India, the Middle
East, and Eastern Europe.
Challenges and uncertainties in the industrial products sector create
potential opportunities for these firms to evolve and change their
position and role.
iSweek（
http://www.isweek.com/）-
Industry sourcing &
Wholesale industrial products
