"The Future of Manufacturing: Scenarios for Investment in Manufacturing through 2050," forecasts the next 35 years of global manufacturing.

September 7, 2014

“The report indicates which strategies manufacturers should follow in different types of economies to improve competitiveness, and in which industries the chance for growth are the highest,” says Valentijn de Leeuw, one of the authors of the report, who adds, “The report provides support for manufacturer’s long term strategic planning. The list of factors we developed, that shape the future and the scenarios used, can complement company input to strategic planning. The broader the input, the more solid the scenario’s developed.”

World regions and countries are classified in terms of the competitiveness of their economies. ‘Efficiency-driven’ economies, the ones typically known as “emerging” or “developing” that need to become more efficient to compensate for increasing resource costs, include Latin America, the Middle East, and South-Eastern Europe, and are expected to experience the highest growth.

‘Innovation-driven’ economies, that need to innovate to stay the most competitive, often called “developed”, include Europe, North America, and Developed Asia. They are forecasted to continue to grow and remain very important regions for investment, particularly because manufacturing gaining a high priority again as a source of social and economic development.

‘Factor-driven’ economies with abundant natural resources and low wages, and include Africa and Emerging Asia, will see investment in industrial production continue to grow slowly. “Our forecasts show an important acceleration and growth after 2030, but these economies will remain relatively small on a world scale until 2050.”

The report considers 17 different industry sectors in five industry groups: ‘Regional Processing’ (fabricated metals, printing and publishing, food and beverage, cement and glass, utilities), ‘Energy- and Resource-Intensive’ (oil and gas, refining, mining and metals, pulp and paper), ‘Global Innovation for Local Markets’ (automotive, electronic and electrical, chemicals, rubber and plastics), ‘Technology Innovators’ (machinery, semiconductors, pharmaceuticals), and ‘Labor-Intensive’ (textiles).

‘Regional Processing’ is expected to remain the most important investment area, followed by the ‘Energy- and Resource-Intensive’ group. The ‘Global Innovation for Local Markets’ group will grow slowly and steadily, but will be overtaken in investment by the ‘Technology Innovators’ group by 2025.

Innovation-driven economies will restructure and modernize their industries. These economies will invent and produce the technologies that will enable its industry to remain competitive. One of the more intriguing findings in the report is that ‘Innovation-driven’ economies will experience a second wave of investment in automation. Technology-enabled re-shoring of small-scale production for example for mass customization, will require to instrument, automate, and connect new categories of devices to enable the industrial Internet of Things (IoT). The industrial IoT refers to the emerging practice of connecting intelligent physical entities, such as sensors, devices, machines, assets, and products, to each other, to internet services, and to applications.

Data, which play into this platform, are required to reduce time-to-market, shorten manufacturing improvement cycles, and bring supply chains closer to real time. Industrial facilities generate a tremendous amount of both manufacturing and asset data, often on a continuous basis. Data from a single or multiple plants must often be aggregated and integrated with supply chain and business data, analyzed, and exploited to enable what the ARC calls “information-driven manufacturing.”

“Big data analytics is taking off now in these ‘Innovation-driven’ economies,” says de Leeuw, adding, “and I expect ‘Efficiency-driven’ economies to follow this trend within five to ten years, outside of the global companies who are already beginning now.”

The ARC industrial IoT team, together with industrial partners, researches business cases for industrial IoT. De Leeuw speculates that industrial IoT scenario’s integrating manufacturing and supply chains will be able to “increase visibility, speed, and accuracy of fulfillment, which could be worth several percent of turnover.”

The report continues to forecast expected shifts in processes, technologies, manufacturing, markets, and market responses, and their subsequent impact across each of the designated economies as listed below:

Changes in Processes and Technologies

  • Biotechnology for “greening” chemicals production;
  • Biological feedstock generation;
  • Biomass utilization and re-utilization in energy generation;
  • Shift to hybrid and electrical vehicles;
  • Electrolytic carbon capture;
  • Shift from carbon-based generation to wind, hydro, and solar energy generation.

Changes in Manufacturing

  • Emergence of information-driven manufacturing enabled by Big Data; predictive analytics and advanced visualization; simulation technologies; and connected devices, machines, systems, and software applications (industrial Internet of Things).
  • Increasing emphasis on both physical and cyber-security on both physical and cyber-security.

Expected Changes in Markets and Market Responses

  • Growth of autonomous, solar-powered household appliances for low-income markets in factor-driven economies;
  • Increasing need of the rapidly growing middle class in efficiency-driven economies for comfort, technology, leisure, and health products;
  • Increasing need for healthcare and wellness, as well as highly customized, “personalized” products in innovation-driven economies.

Overall, it appears that those leading the charge in manufacturing will continue to remain ahead, but their lead over those in less developed economies will be reduced within the next 15 to 20 years, as regions and industries develop. To read the report in its entirety, go to http://www.siemens.com/future-of-manufacturing/. For more information on the methodology used and the estimations for investment according to other scenarios (resource abundance, demand pull, and innovation driven), refer to the ARC Strategy Report under the same title.

About the ARC Advisory Group
Founded in 1986, ARC Advisory Group is the leading technology research and advisory firm for industry and infrastructure. Their coverage of technology and trends extends from business systems to product and asset lifecycle management, supply chain management, operations management, energy optimization, industrial internet of things (IoT) and automation systems. Their analysts and consultants have the industry knowledge and the first-hand experience to help their clients find the best answers to the complex business issues facing organizations today. They help clients evaluate and select the best technology solutions to match their needs.

For more information, visit http://www.arcweb.com/pages/default.aspx.

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