Ongoing supply chain disruptions, volatility in commodities markets and rising operating costs continue to add pressure to global businesses and the manufacturing sector. Euromonitor International has identified the top five trends to help companies adapt to the challenges, fortify supply chains and prepare for future growth.
Manufacturing companies aim to better prepare for supply chain disruptions
Supply chain reassessment is among the key priorities for companies facing supply disruptions, price volatility in commodities markets and an uncertain macroeconomic environment. According to Euromonitor International’s Voice of the Industry survey, almost 50% of manufacturing companies plan to invest in supply chain resilience and risk mitigation to better prepare for similar risks in the future. Improved and simplified supply chain management, digital tools and production localisation are expected to help make supply chains more resilient.
In terms of industries, companies operating in machinery, hi-tech goods and transport equipment are expected to drive changes. Production within these industries is highly concentrated, with the top five countries accounting for 65% of total production output in 2021. Changes in supply chains would help to diversify production and reduce operating risks related to production disruptions in the future.
Production Concentration in Manufacturing Industries, 2021
Source: Euromonitor International from national statistics
Investments in supply chain flexibility to provide new growth opportunities
Manufacturing companies also aim to make supply chains more flexible due to the global pandemic and rising geopolitical risks. According to Euromonitor’s Voice of the Industry survey, 42% of companies aim to expand the supplier and resource pool to give greater production flexibility and reduce operating risks in the future.
Improved operational flexibility would mainly benefit industries with long supply chains, such as automotive, hi-tech goods or chemical products. In addition, this could provide new growth opportunities for suppliers in Eastern Europe, Latin America and the Middle East. Suppliers in these regions could benefit from their lower operating costs and their relative proximity to Western European or North American markets.
Digital tools are key in supply chain transition
Digital transformation in manufacturing and production automation is forecast to accelerate further, as digital tools enable companies to better fortify their supply chains against future disruptions and enable more flexible production methods. According to Euromonitor’s Digital survey, over 50% of companies indicate they plan to increase spending on IoT technologies in the next five years, while 40% of companies plan investments in production automation and robotic tools. Both technologies are core pillars in Industry 4.0 transition and help companies to make supply chains more flexible or to localise production. Besides automation, around 60% of companies are eyeing investments in cloud computing services, due to the increasing need to analyse data, predict deliveries, and similar operations.
Planned Company Investments in the Next Five Years, 2021
Source: Euromonitor International’s Digital survey, November 2021
Sustainable sourcing strategies to help improve supply chain resilience
Manufacturing companies are expanding their focus on sustainability and paying more attention to local communities and the strength of the supplier network. Among the core sustainability priorities identified by companies are the reduction of environmental impact, supporting local communities, supporting employees and supporting suppliers and business partners.
To achieve these goals, companies are primarily focusing on reducing waste and improving sustainable sourcing. Around 75% of the companies surveyed in Euromonitor International’s Sustainability survey plan to increase their focus on waste reduction and sustainable sourcing in the next five years. Also, nearly 70% of companies aim to reduce energy consumption and invest in green technologies, while 64% plan to invest in supply resilience.
Overall, this signals change in the business environment and correlates with the anticipated changes in supply networks. Investments in local communities and more sustainable sourcing strategies can help to make supply chains more resilient in the long term. Moreover, companies can gain a competitive advantage by implementing sustainability initiatives, either through improved brand image, stronger relationships with suppliers, or improved employee loyalty and satisfaction.
Sustainability Initiatives in which Companies are Planning to Invest, 2022
Source: Euromonitor International’s Sustainability survey, 2022
Manufacturers expand into e-commerce to diversify sales risk
E-commerce is among the key priorities for manufacturing companies, with 50% of respondents in Euromonitor’s Voice of the Industry survey indicating they plan investments in e-commerce to better shield them from future disruptions. Moreover, around 44% of manufacturing companies plan to invest more in alternative logistics channels to better suit the shift to e-commerce. The interest in e-commerce increased during the pandemic, as it proved vital to also have a diversified sales network. E-commerce options allow companies to expand their geographical sales scope and provide more sales flexibility. In terms of industries, transport equipment, food and beverages and transportation are forecast to drive B2B e-commerce expansion.
For further insight, read our report, Global Industrial Trends.