Manufacturers are embracing smart and connected products by 2020, Capgemini finds
A recent report released by the French professional services company, Capgemini, estimates that the connected products market will reach $519bn-$685bn by 2020.
The report, released by Capgemini’s Digital Transformation Institute, found that manufacturers estimate that 50% of their products will be smart and connected by 2020.
The “Digital engineering: The new growth engine for discrete manufacturers” report claims to evaluate manufactruers on two factors.
“This research examines how manufacturers are balancing two priorities: using digital to get legacy products to market quicker while investing in new smart products to capitalize on the servitization opportunity (deriving revenues from services),” the report claims.
From the manufacturers surveyed, 18% have intentions to stop manufacturing physical products altogether.
However, two-in-three manufacturers acknowledge that they are torn between sustaining and growing their core business while finding new sources of revenue growth from connected products.
In regards to innovation and engineering transformation, only 21% would be considered at an advanced stage.
Almost one third of the manufactures remaining at the pilot stage of the transformation.
“Digital technologies are reshaping the manufacturing landscape. Product-based business models are being disrupted by service-based business model, new skills are needed in a world of smart products, and innovation success depends on the effectiveness of a company’s open ecosystem,” the report reads.
IMF: Variants Can Still Hurt Manufacturing Recovery
After a year of on-and-off manufacturing in the US, UK, and the eurozone, demand for goods surged early last week. Factories set growth records in April and May, suppliers started to recover, and US crude hit its highest price point since pre-COVID. As vaccination efforts immunise much of the US and UK populations, manufacturers are now able to fully ramp up their supply chains. In fact, GDP growth could approach double-digits by 2022.
Now, the ISM productivity measure has surpassed the 50-point mark that separates industry expansion from contraction. Since U.S. president Biden passed his US$1.9tn stimulus package and the UK purchasing managers index (PMI) increased to 65.6, both sides of the Atlantic are facing a much-welcomed manufacturing recovery.
Lingering Concerns Over COVID
Even as Spain, France, Italy, and Germany race to catch up, and mining companies pushed the FTSE 100 index of list shares to a monthly high of 7,129, some say that UK and US markets still suffer from a lack of confidence in raw material supplies. Yes, the Dow Jones has made up its 19,173-point crash of March 2020, and MSCI’s global stock index is at an all-time high.
Yet manufacturers around the world realise that these wins will be short-lived until pandemic supply chain bottlenecks are solved. If we keep the status quo, consumers will pay the price. In April, inflation in Germany reached 2.4%, and across the EU’s 19 member countries, overall prices have increased at an unusual pace. Some ask: Is this true recovery?
IMF: Current Boom Could Falter
Even as Elon Musk tweeted about chip shortages forcing Tesla to raise its prices, UK mining demand skyrocketed; housing markets lifted; and the pound sterling gained value. The International Monetary Fund (IMF), however, cautioned that manufacturing recovery won’t last long if COVID mutates into forms our vaccinations can’t touch. Kristalina Georgieva, Washington’s IMF director, noted that fewer than 1% of African citizens have been vaccinated: “Worldwide access to vaccines offers the best hope for stopping the coronavirus pandemic, saving lives, and securing a broad-based economic recovery”.
Across the globe, manufacturing companies are keeping a watchful eye on new developments in the spread of COVID. Though US FDA officials don’t think we’ll have to “start at square one” with new vaccines, the March 2021 World Economic Outlook states that “high uncertainty” surrounds the projected 6% global growth. Continued manufacturing success will in large part depend on “the path of the pandemic, the effectiveness of policy support, and the evolution of financial conditions”.
Mathias Cormann, secretary-general of the Organisation for Economic Co-Operation and Development (OECD) concurred—without global immunisation, the estimated economic boom expected by 2025 could go kaput. “We need to...pursue an all-out effort to reach the entire world population”, Australia’s finance minister added. US$50bn to end COVID across the world, they imply, is a small investment to restart our economies.