Key takeaways for engineering executives from the Oxford Economics report on manufacturing transformation. How will manufacturing transformation reshape the race for competitive advantage? PTC commissioned Oxford Economics, foremost experts in industry research, to look ahead. In this report you’ll find the study’s key takeaways for engineering executives.

1. Manufacturing Transformation for Engineering Executives
Transform to Innovate
Key takeaways for engineering executives from the Oxford Economics report on manufacturing transformation
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2. Manufacturing Transformation for Engineering Executives
How will manufacturing transformation reshape
the race for competitive advantage? PTC
commissioned Oxford Economics, foremost
experts in industry research, to look ahead. In
this report you’ll find the study’s key takeaways
for engineering executives.
Oxford Economics
Oxford Economics was founded in 1981 as a joint venture with Oxford
University. Since then, they have become one of the world’s foremost
independent global research firms.
Headquartered in Oxford, England, with offices throughout the world,
Oxford Economic employs more than 80 professional macroeconomic
and industry economists—one of the largest teams of economists in
the private sector.
Get more information at oxfordeconomics.com
PTC
PTC’s technology solutions help customers transform the way they
create and service products across the entire product lifecycle—from
conception and design to sourcing and service—to create sustained
competitive advantage.
Founded in 1985, PTC employs approximately 6,000 professionals,
including 1,300 dedicated service professionals, serving more
than 27,000 businesses in rapidly-evolving, globally distributed
manufacturing industries worldwide.
Get more information at PTC.com
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3. Manufacturing Transformation for Engineering Executives
Survey Profile
The complete findings can be found in the Manufacturing
Transformation report. Click here to download.
Oxford Economics surveyed more than 300 manufacturing executives
early in 2013. The survey covered major industries and world markets.
Respondents represented a range of titles and business functions, from
companies large and small.
What is your firm’s industry segment?
Medical Devices
Industrial
Equipment
China
Japan
Germany
16%
17
United States
Aerospace and Defense
17% 16%
%
In which country is your company headquartered?
South Korea
Automotive
Taiwan
France
17%
17%
Electronics / HighTech
Denmark
Norway
Sweden
Consumer / Retail / Apparel
Finland
0
59%
15%
20%
21%
Product / Engineering
35%
25%
29%
25%
Small: $250m – $750m
Strategy
I report to
a C-level
executive
Service
Large: $1.26b – $5b
Operations
0
3
30%
Annual revenue
IT
2
25%
Very large: over $5b
Supply Chain / Manufacturing
41%
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10%
Which best describes your business function?
What best describes your role?
I am a
C-level
executive
5%
4
5
6
7
8
Finance
5%
9
10
10
%
11
15
20
%
12
13
Medium: $751m – $1.25b
25
%
%
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4. Manufacturing Transformation for Engineering Executives
Survey Findings
What executives told us points to manufacturing industries and companies
in transition. Their answers helped fulfill the survey’s objectives to:
In Depth
To provide additional context for
the research study’s findings,
Oxford Economics interviewed
executives from selected
manufacturers in depth. You’ll see
mini case studies on some of these
companies, plus others, inside:
ANALYZE
how external market forces are transforming manufacturing
strategies and competitive positioning.
MEASURE
John Deere
Emerson Climate Systems
the impact of strategy and planning, service, and manufacturing
operations on business performance.
Ingersoll Rand
Herman Miller
PROVIDE INSIGHT
Piaggio Group
into how manufacturing firms will drive growth, innovation, and
customer satisfaction in the future.
Rolls-Royce
Boston Scientific
Flip through this e-book’s pages for the survey’s findings most relevant to
engineering executives.
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5. Manufacturing Transformation for Engineering Executives
External market shifts
A New Era
Shifting market realities are reshaping the competitive landscape for
manufacturers today.
66%
Economic realignment
51%
Technology change
It’s a new era of big opportunities—and big challenges. At left you’ll see
the macro trends most affecting today’s global manufacturing leaders.
Engineering executives generally share these concerns—but with some
notable differences from other manufacturing executives.
61%
Technology change
Engineering executives (51%) are significantly less concerned about new
technology than executives overall (61%). They may be further ahead in how
to best take advantage of Big Data, social and mobile media, the cloud, the
Internet of Things, and more.
65%
Talent shortages/labor costs
60%
Talent shortages / labor costs
Engineering executives (65%) are somewhat more worried than executives
overall (60%) about finding the right people for the right jobs. They’re
seeing more of a skills gap.
60
%
Supplier/partner relationships
Global competition
52%
Global competition
Engineering executives (52%) feel competitive pressure, domestically and
from abroad, less severely than manufacturing executives overall (59%).
Could it be they’ve been in the thick of global competition for longer, and are
a bit more adapted to the heat?
59%
36%
Increased regulations
Changing customer
behavior
0%
10%
20%
Increased regulations
46%
45%
30%
40%
50%
Engineering executives
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3
Regulatory requirements are of less concern to engineering executives
(36%) than executives overall (46%). Compliance pressures may be greater
where manufacturers interact more immediately with their customers,
such as in marketing, sales, and service.
4
60%
70%
80%
90% 100%
All executives
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6. Manufacturing Transformation for Engineering Executives
Limits Of Optimization
Key Insights
There’s room to save more. But most view optimized manufacturing
operations as the price of entry.
Just over half of survey respondents say they’ve wrung out just about all
the savings they can from manufacturing and supply chain optimization.
Aerospace (41%) and consumer and retail manufacturers (44%) are behind
the curve, as are very large firms (48%).
Nearly two-thirds of manufacturers now see operational optimization as
the market entry price. This will exceed 70% in three years. Micro trends—
occurring within manufacturers’ own walls—show where the continued
focus on operational efficiencies is likely to be sharpest.
Who will realize the biggest savings from operational optimization over the
next three years? Survey says: automotive (72%) and industrial equipment
(70%) manufacturers. Aerospace and consumer and retail manufacturers
will continue to play catch-up.
Optimization and cost reduction trends
Optimizing manufacturing operations has become the price of entry.
C-level executives (57%) believe their companies have achieved greater cost
savings from optimization than their direct reports (48%).
65%
Profit pressures will drive European firms to increase their emphasis on
cost savings by 39% over the next three years. That’s compared to 16% in the
U.S. and 25% in Asia. manufacturing operations has become the price of entry.
Optimizing
71%
Case in Point: John Deere
Most savings from manufacturing and supply chain optimization have been realized.
52
%
10%
20%
30%
40%
50%
52
60%
70%
80%
90%
100%
65
% of respondents
Today
71%
For John Deere, continued leadership
in tractors focuses on the drive
train. Innovative designs aim to
exceed customer expectations on all and supply chain optimization have been realize
Most savings from manufacturing
performance parameters. A further
challenge has come from Deere
%
management’s commitment to shrink
lead times for building a drive train
from 40–50 days to one week. Efficient
%
machining of drive-train castings
and gears has become a Deere core
competency—and a competitive edge.
65%
0%
65%
In 3 Years
Source: Manufacturing Transformation,
Oxford Economics, June 2013
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
% of respondents
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Today
3 Years
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7. Manufacturing Transformation for Engineering Executives
Transformation Required
“The third industrial revolution:
The digitization of manufacturing will
transform how products are made.”
The third industrial revolution is upon us. Manufacturers must transform
to compete.
Nearly seven in 10 manufacturing executives expect their companies to
undergo a major transformation over the next three years. Technology,
globalization, and innovation are the driving forces. Here are transformation
strategies they’re pursuing:
– The Economist, April 21, 2012
Design anywhere, build anywhere, service anywhere will grow 125%—to
58% of surveyed companies—in three years. Aerospace (67%) and emerging
markets (72%) will be early adopters.
Case in Point: Emerson Climate
Systems
“Servitization” will come of age. By 2016, the use of performance-based
service contracts will leap to 65%. Use of remote diagnostics will rise to 56%.
One result: Engineering teams will increasingly “design for service.”
Over generations of new product launches
and upgrades, Emerson steadily improved
the core compressors in their Copeland
Scroll line of refrigeration units. Design
teams noted that the sensors measuring
the units’ electrical usage were also
collecting data valuable to customers
for optimizing their own business
operations. Sensor-based diagnostics
now competitively differentiate Emerson’s
product offerings. The smart product rules.
The supply chain will become more critical as a strategic asset.
Manufacturers leveraging their supply chains will nearly double to 57% in
three years.
Smart products will see 38% growth—to 53% of surveyed manufacturers.
Not surprisingly, high-tech manufacturers lead, as 71% expect to adopt
smart products by 2016. Very large firms (60%) are moving quickly in this
direction too.
3D printing and additive manufacturing will grow in use. While still early for
these technologies, manufacturers adopting them will increase by 123%—to
27%—in three years. In automotive, adoption will reach 40%.
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Source: Manufacturing Transformation,
Oxford Economics, June 2013
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8. Manufacturing Transformation for Engineering Executives
Keys To Success
Manufacturing executives identified three keys to successful
transformation initiatives:
1
Strategy & Planning
2
Product as Service
3
Survey findings on the next few pages, comprising the heart of this ebook,
expand upon these specific concerns—particularly from the engineering
executive’s perspective.
Innovation Everywhere
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9. Manufacturing Transformation for Engineering Executives
Strategy & Planning—for a Competitive Edge
Most important for improving competitive positioning
51%
Strategy and planning have eclipsed execution as manufacturers’ top
competitive driver.
Strategy and planning
for products
41%
Product innovation is paramount. Strategizing and planning for products
ranks highest in importance across manufacturing industries—especially
among engineering executives.
35%
Strategy and planning
for manufacturing
35%
Manufacturing execution
30%
Conversely, engineering executives are less likely to believe that
competitive advantage will come primarily from service execution and
supply chain strategy.
26%
33%
Case in Point: Ingersoll Rand
Strategy and planning
for service
38%
18%
Service execution
27%
16%
Supply chain execution
14%
13%
23%
Ingersoll Rand’s heating, ventilating, and air conditioning products—
sold under the Trane brand name—have long been known for
excellence. But the company aims for more. They know that what
customers care most about is a comfortable climate. Product strategy
and planning thus focus on providing the best customer experience
over the product’s full lifecycle. Diagnostic data obtained from service
helps ensure this.
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Strategy and planning
for supply chain
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% of respondents
Engineering executives
13
14
15
Other executives
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10. Manufacturing Transformation for Engineering Executives
Strategy & Planning—for Coordination & Collaboration
Key Insights
To get and stay ahead, manufacturers will increasingly coordinate on
strategy and planning enterprise-wide.
Manufacturers will increasingly use the product and service performance
insights gained from service execution, not only to improve service planning,
but also to help drive critical decisions in product development and
manufacturing and supply chain management.
Coordination and collaboration across business functions
Today
Between supply chain/
manufacturing and service
In 3 years
Today
Feedback from service
improves service planning
In 3 years
Case in Point: Herman Miller
Today
Between engineering and
supply chain/manufacturing
In 3 years
Today
Between engineering
and service
In 3 years
Today
Feedback from service improves
product development and quality
In 3 years
Today
Herman Miller, the US-based office furniture manufacturer, developed
their innovative “desking” design—equipping extended tabletops
with small screens to separate the adjoining workspaces—through
their overseas R&D operations. The company is now migrating this
popular new concept to North America. Cross-team coordination and
collaboration will be key to the product’s successful rollout.
Feedback from service improves
supply chain/manufacturing
In 3 years
0%
Engineering executives told Oxford Economics how much the feedback
from service can influence their products’ designs. This ranges from small
enhancements to major innovations—such as designing for service and the
use of remote diagnostics to create smart products.
20%
40%
60%
80%
100%
% of respondents
Other executives
Engineering executives
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Source: Manufacturing Transformation, Oxford Economics, June 2013
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11. Manufacturing Transformation for Engineering Executives
Strategy & Planning—for Going Global
Case in Point: Piaggio Group
Manufacturers will strategize and plan for globalization more than they
already have.
Piaggio is a world leader in motorcycles,
commercial vehicles, and scooters.
Among their regional brands are Gilera,
Derbi, Aprilia, and more—including
the Piaggio name itself. The company’s
globally distributed development
teams and partner networks support
these brands. Their challenge: to link
every part, process, and person in the
exchange of information needed to speed
innovation across the enterprise. Piaggio
relies on process lifecycle management
(PLM) technology to manage the
complexity and stay ahead.
Manufacturing executives expect the globalization of product development
to double in three years. In fact, all aspects of product lifecycle management
will further globalize.
Engineering executives are right in line with others on globalization. Only
systems engineering, as a means to integrate smarter and more complex
products, will grow faster for them.
Engineering executives
Growth in methods to coordinate strategy and planning
Global product development
72%
Systems engineering
Global product platform
Global portfolio management
0%
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5
40%
6
7
8
76%
65%
36%
20%
2
Other executives
9
10
11
60%
12
13
14
15
80%
100%
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12. Manufacturing Transformation for Engineering Executives
Product as Service
Key Insight
Service isn’t an afterthought to design. In fact, it’s central to a product’s
success.
Valuable data on product performance, collected through the delivery of
service, will increasingly drive product design changes and enhancements.
And new products will increasingly be designed, right from the outset, with
service delivery in mind.
For most manufacturers today, service has become a critical competitive
differentiator and a major driver of profits. This trend will accelerate—and
further impact the product’s design and engineering—in the future.
Total: Today 64%
U.S. 62%
67%
71% Three Years from Now
Europe 75%
82%
Asia 59%
Case in Point: Rolls-Royce
Rolls-Royce is among many
manufacturers now viewing
“the product as a service” as
core to their value proposition.
The company no longer just
sells airplane engines—they
sell the hours their TotalCare
service plan helps keep
an engine up and running.
Roll-Royce thus guarantees
the engine’s performance
by taking responsibility for
its operations. This makes
product reliability and
uptime top concerns for both
customer and manufacturer.
66%
Companies enhance services as a key way to differentiate their products.
Growth
59%
Performance-based
service contracts
25%
Service as a profit center
42%
Remote diagnostics
34%
Bring service in-house
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of respondents
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Today
6
7
8
9
10
In 3 years
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13. Manufacturing Transformation for Engineering Executives
Innovation Everywhere
Key Insights
Transformation will drive innovation across the enterprise, for every
function.
The highest-margin firms will focus even more heavily on innovation:
product innovation (81%), supply chain innovation (18%), and service
innovation (75%).
Manufacturers will not only strive to “make better things”—they’ll also need
to “make things better.” Innovation will happen everywhere—especially
in product strategy and engineering, but in supply chain and service
optimization too.
Manufacturers overall will focus more on innovation in product strategy and
engineering processes (76%) than innovation in service and the supply chain
(68% each).
Reverse innovation is growing fast. Firms will increasingly design products
in emerging markets and bring them to developed regions (35% today to 50%
in three years).
Greater focus on innovation
Product strategy and engineering innovation
64%
76%
Case in Point: Boston Scientific
Supply chain innovation
Boston Scientific has maintained
a small company-like spirit of
“open innovation” even as it has
grown steadily larger. The medical
equipment manufacturer recently
launched a web-based innovation
portal allowing inventors inside and
outside of the company to propose
new products and enhancements.
Ideas are reviewed and tested against
expected outcomes and opportunities
for commercialization. The portal
captures, and helps systematize, the
creative process of innovation that
can happen anywhere, anytime.
60%
68%
Service innovation
58%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: Manufacturing Transformation,
% of respondents
Today
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In 3 years
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14. Manufacturing Transformation for Engineering Executives
Value Drivers
What’s driving manufacturing executives
What transformation initiatives promise to create the most value for
manufacturers?
Growth
Today
In 3 years
How will these change in the future?
3.4%
7.6%
Today
In 3 years
7.1%
Today
In 3 years
Reducing product development costs, while always the goal, will rank
significantly lower in importance, compared to other value drivers, by 2016.
-20%
Today
In 3 years
Accelerating product innovation is already the most important value driver
for engineering executives. In three years, it will rise from second most
important to most important for other manufacturing executives as well.
21.4%
Today
In 3 years
Notable Shifts
-17.4%
Today
In 3 years
The differences between the top value drivers today and three years from
now show manufacturing executives’ shifting priorities. The changing
rankings also help confirm the three keys—strategy and planning, product
as service, and innovation everywhere—to successful transformation.
0%
0%
10%
-1.1%
-15.3%
6.8
%
-5.4%
0
%
20%
30%
40%
50%
Accelerating product innovation
Improving product quality
Reducing product costs
Improving global
product development
Streamlining product risk
mitigation/regulatory compliance
Reducing product
development costs
60%
% of respondents
Engineering executives
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15. Manufacturing Transformation for Engineering Executives
The pressing needs to transform and innovate
will spare no manufacturers.
1—Map market trends to strategy and planning.
The new reality: Global economic headwinds over the past decade (cited
by 66% of survey respondents) have combined with ongoing technological
change (cited by 61%) to create a systemic rather than cyclical change in
manufacturing competition.
Changing markets, technologies, and
competition assure challenges for all. How,
then, should engineering executives shape
their priorities going forward? Findings from
the Oxford Economics research suggest this
basic process…
2—Align and coordinate strategy and planning activities.
Engineering leaders increasingly strategize from a company-wide
perspective. Plans align across engineering, service, supply chain, and
manufacturing functions. Success demands a closed loop—within the
organization and between the manufacturer and their partners.
3—Rely more on service data to drive product quality.
Manufacturers use feedback from service execution not only to increase
the customer value they provide through service, but also to help improve
product performance. Within three years, over half of surveyed executives
will be harnessing service data in this way.
4—Understand and tap the sources of innovation.
Leading manufacturers source innovations from emerging markets, then
bring them to the more developed world (50% within three years). Expanding
use of smart products (60% of very large firms, 70% of high-tech firms, by
2016) adds insight into customer needs.
Want to know more?
Download a more detailed summary of the Oxford Economics research
findings.
http://www.ptc.com/topics/manufacturing-transformation/oxford-research/
© 2013, PTC Inc. (PTC). All rights reserved. Information described herein is furnished for informational use only, is subject
to change without notice, and should not be taken as a guarantee, commitment, condition or offer by PTC. PTC, the PTC logo,
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