Global Manufacturing Outlook 2015 - Neue Strategien zur Steigerung von Wachstum und Innovation, Überblick



Beschreibung

Aktuelle Trends und Entwicklungen in der Industrie – das untersucht der Global Manufacturing Outlook GMO . Die 6. Auflage der jährlichen KPMG-Studie ist gerade erschienen. Schwerpunkt in diesem Jahr: neue Strategien zur Steigerung von Wachstum und Innovation.

 

Die sechste Ausgabe des "Global Manufacturing Outlook" (GMO) zeigt erneut wichtige Trends für die Entwicklung und die Herausforderungen der Branche auf. Zusammenfassend hat die Befragung von internationalen Führungskräften ergeben, dass Hersteller weltweit verstärkt Maßnahmen zur Steigerung von Wachstum und Innovation ergreifen. 

Zentrale Ergebnisse der diesjährigen Befragung von Unternehmensentscheidern der Branche sind u.a.:

Für den Global Manufacturing Outlook wurden Führungskräfte aus sechs Industriebranchen befragt (Aerospace and Defense, Automotive, Conglomerates, Consumer Products, Engineering and Industrial Products, Metals). Fünfzig Prozent der befragten Führungskräfte haben Positionen auf Vorstandsebene, ein Drittel repräsentiert Unternehmen mit einem Jahresumsatz von mehr als fünf Milliarden US-Dollar. Geografisch verteilen sich die Befragten gleichmäßig auf Amerika, Europa und Asien.

 


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Global

Manufacturing

Outlook

Preparing for battle:

Manufacturers get ready

for transformation

kpmg.com/gmo

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With disruptive forces of change so pervasive around the world, it would be

easy to believe that the manufacturing sector is in the midst of a massive

transformation. Dig a little deeper, however, and it quickly becomes apparent

that – while the enablers of transformation are all around us – few manufacturers

are truly transforming. Instead, most are tweaking and adjusting their business

models and operating structures in preparation for the battle they know

must come.
The reality is that a major transformation is coming to the manufacturing sector,

led by the forces of technology, innovation and new innovators. As a result,

we see the pace of innovation accelerating and new disruptive innovators

revolutionizing new product development, manufacturing processes, automation

and business models. This, in turn, will drive the need for more agile, transparent

and demand-driven supply chains and integrated business planning models.
It would seem that many manufacturers are being a bit too cautious given

the enormous opportunities and risks that are already emerging in this pre-

transformation era. As in years past, perennial priorities around growth, cost and

supply chain efficiency are still on everyone’s agenda. But steps to implement

‘next generation’ strategies remain modest.
We believe that manufacturers will need to make bigger bets on research and

development (R&D), with broader, more inclusive innovation models and tech-

savvy partners to help them capitalize on breakthrough innovation opportunities.

At the same time, manufacturers will need to invest in technology and talent or

risk losing the innovation battle.
KPMG International’s Global Manufacturing Outlook (GMO) report explores

the steps that manufacturers around the world are taking to prepare their

organizations for the innovation and technology-driven transformation that is

to come. The insights and take-aways contained within this report will help

manufacturers better understand their competitive position and prepare their

organizations for long-term growth and competitive advantage.

Foreword

Jeff Dobbs

Global Sector Chair

Industrial Manufacturing

ii

© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

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Contents

Executive summary

02

Getting fit for battle

04

Smart investments into smart targets

10

Tightening the supply chain

16

KPMG’s Global Industrial Manufacturing country perspectives  22

KPMG’s Global Industrial Manufacturing sector perspectives  26

Five key take-aways

28

About the survey

29

KPMG’s Industrial Manufacturing major country leadership  30

How KPMG Industrial Manufacturing can help

32

Global Industrial Manufacturing thought leadership

33

© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

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Executive

summary

2

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Today’s manufacturers understand that the world’s economy is undergoing a period of massive
change and uncertainty. And, until the opportunities become clearer, most seem to be focused on
building up their war chests and keeping their powder dry.

Incremental changes are being made in cost structures, supply chains and business models as
companies ‘tweak’ their operations rather than transform them. At the same time, those focused
on innovation-led growth are increasing their investment into R&D and adopting new manufacturing
technologies to drive greater efficiency and innovation.

However, KPMG International’s Global Manufacturing Outlook (GMO) report also shows that
manufacturers are painfully aware of the many short-term challenges they face. Increasing
competition, volatile energy and input costs, new technologies and supply chain visibility are all
creating immediate challenges for organizations that – at the same time – are fighting to prepare for
the launch of the ‘next wave’ of innovations.

Key highlights of this year’s GMO report include:

Manufacturers are increasingly innovation-led and focused on improving R&D efficiency and value. Half of all

manufacturers say their strategic focus is innovation-led. Thirty-two percent cite the development of new products and R&D
as a top strategic priority. Thirty percent say the biggest challenge for their organization is R&D inefficiency.

Sales growth and cost reductions continue to top the agenda as manufacturers prepare for increased

competition. Fifty-five percent of respondents cite sales growth as a top priority and 41 percent say they are focused
on reducing the cost structure. Almost 40 percent say that their biggest challenge stems from intense competition and
pressure on prices.

Manufacturers are increasingly looking for breakthrough innovations and are increasing investment into R&D.

Forty-one percent of respondents say their primary strategy for innovation is to pursue breakthrough advances. Seventy-
four percent of respondents say they will spend upwards of 4 percent of revenues on R&D over the next two years.

Manufacturers are entering into partnerships and adopting new technologies in order to improve speed-to-market

and lower innovation costs. More than three-quarters of all respondents say that partnerships will form the basis of
innovation for their company. Almost half say they are adopting new manufacturing technologies to drive innovation.

Reducing costs and preparing for new product launches are high priorities for manufacturing supply chain

organizations. Lowering costs and working capital levels is cited by 46 percent as a top supply chain priority. Twenty-nine
percent say they will restructure to support growth and 32 percent say they are reconsidering their global footprint based
on growth expectations.

Concerns about supplier performance and capacity remain high but visibility into supplier organizations remains

surprisingly low. Behind the need for greater flexibility, supplier performance and supplier capacity is cited as the second
and third biggest supply chain challenges globally. Yet just 14 percent of respondents claim to have complete supplier
visibility into Tier 1, 2, and beyond.

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Getting

fit for battle

“Industrial

manufacturers are

facing potential

disruptive forces

from many

directions – new

technologies are

emerging, their

competitors are

ramping up their

speed of innovation

and the technology

innovation cycle is

shortening.”

Todd Dubner ,

Principal, Strategy

practice, Industrial

Manufacturing,

KPMG in the US

Organizations across all manufacturing
sectors clearly believe they will need
to become more innovative if they aim
to grow in the long term. Almost a third
of respondents in this year’s GMO
report say that the development of
new products will be one of their top
strategic priorities over the next 2 years.
And exactly half of all respondents say
that their organization’s strategic focus
is now ‘innovation-led’.

“Industrial manufacturers are facing
potential disruptive forces from
many directions – new technologies
are emerging, their competitors are
ramping up their speed of innovation

and the technology innovation cycle
is shortening,” notes Todd Dubner,
Principal, Strategy practice, Industrial
Manufacturing, KPMG in the US. “Given
all of this rapid change, it’s not surprising
that manufacturers believe they need to
be ‘innovation-led’ in order to win in the
new environment.”

Clearly, manufacturers understand that
an innovation-led strategy takes time to
start paying dividends. But many also
recognize that they will need to make
good use of that time if they hope to
properly prepare their organizations for
the growth opportunities ahead of them.

The past few years have been anything but easy for industrial
manufacturers. Constant disruptions, rising pricing pressures, volatile
input costs, intense competition and continuous innovation have all
forced manufacturers to rethink their business models and long-term
growth plans.

Yet, while many manufacturers seem to understand that the surest
path to long-term growth is through smart innovation, it is also clear
that reaping the rewards of those investments takes time, patience
and – importantly – the right business models.

Not surprisingly, today’s manufacturers are preparing themselves for
the competition to come; getting their organizations into top shape,
empowered with the right technology, talent and capabilities to
fight – and win – against the coming competition for growth.

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Note: Respondents selected top three options.

Source: Forbes survey, January 2015.

Top strategic priorities

Reducing cost structure

Reducing cost structure

28%

41%

Greater speed-to-market

Greater speed-to-market

51%

18%

Increasing cash flow from operations

Increasing cash flow from operations

51%

21%

Sales growth

Sales growth

62%

55%

Development of new products

Development of new products

41%

32%

Reducing operational complexity

Reducing operational complexity

17%

31%

Improving risk controls

Improving risk controls

23%

21%

2014

2015

“Manufacturers must evaluate the
rapidly changing innovation ecosystem
and develop a strategy for how they
fit into it. Everything should be on the
table, from re-evaluating your internal
innovation organization design, access to
partnerships with new niche disruptive
innovators, utilization of open innovation
communities or a reallocation of R&D
investments to new and bolder product
development ideas,” notes Jeff Dobbs,
Global Sector Chair of KPMG’s Industrial

Manufacturing Sector. “You can’t just
sit back and wait for your current
strategy for innovation to start driving
growth; you must begin transforming
that strategy if you expect to remain
competitive in the new world order of
manufacturing.”

This year’s GMO data suggests
that manufacturers are looking to
achieve both top-line and bottom-
line improvements from their

5

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existing models. More than half of all
respondents say that sales growth is
one of their top strategic priorities for
the next 12 to 24 months, led largely by
Automotive respondents (64 percent of
whom cite sales growth as a top priority).

At the same time, manufacturers seem
more focused than ever on improving
the bottom line. Indeed ‘reducing the
cost structure’ ranks as the second most
important short-term strategic priority
this year, up significantly from its sixth
place ranking in 2014. Forty-one percent
of respondents this year say they will
focus on reducing their cost structure
over the next 2 years. Interestingly,
speed-to-market fell as a strategic priority
versus 2014 when it was ranked as the
second highest priority overall.

The 2015 GMO data also suggests that
respondents may be losing focus on
managing risk in the new environment.
“As models shift and new approaches
and partnerships take form, we expect

to see risk return to the manufacturing
agenda; those that are unprepared could
suffer significant disruption over the next
5 to 10 years,” notes Stephen Cooper,
Head of Industrial Manufacturing and
Automotive, KPMG in the UK. “The fact
is that the risk environment is changing.
Innovation will drive a new kind of risk
and will exacerbate existing risks such
as those related to geopolitical change,
currency exchanges, commodity prices
and demand volatility.”

This year’s GMO data suggests that,
for many, the initial skirmishes in
the war for growth are already well
underway. Indeed – for the past 3
years – manufacturers cite competition
and pricing pressures as their greatest
short-term challenge to growth. More
than a quarter also admit they are
facing significant challenges keeping
their business model competitive, up
significantly to third place from its fifth
place ranking in 2014.

21%

23%

32%

30%

30%

25%

39%

39%

39%

28%

22%

Note: Respondents selected top three options.

Source: Forbes survey, January 2015.

Top 5 biggest challenges

Efficiency in research and development/product development

Efficiency in research and development/product development

Managing geopolitical risk

Managing geopolitical risk

Intense competition and pressure on prices

Intense competition and pressure on prices

Keeping the business model competitive

Keeping the business model competitive

IT systems keeping pace with demand from the business

IT systems keeping pace with demand from the business

2014

2015

This year’s

GMO data

suggests that

manufacturers are

looking to achieve

both top-line

and bottom-line

improvements

from their existing

models.

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Interestingly, only

12 percent say

they will allocate

significant

portions of their

total technology

budget towards

customer-facing

technology.

“Innovation doesn’t stop at the product
level – today’s manufacturers need to
be equally innovative in the way they
adapt their business models,” says Todd
Dubner. “But innovating the business
model is not easy and will require
executives to combine proprietary
insights on the emerging needs of their
customers with signals on emerging
trends from the broader marketplace.”

In the short term, the 2015 GMO data
implies that most manufacturers are
focusing their technology spend on
improving engineering, manufacturing
and supply chain systems.

Forty-seven percent of respondents say
they will allocate a significant portion
(more than 20 percent) of their total
technology spend on systems intended
to improve the pace and value of
innovation (engineering, manufacturing

and supply chain) next year. About a
quarter of respondents say they will
allocate an equal amount on sales force
systems. Interestingly, only 12 percent
say they will allocate significant portions
of their total technology budget towards
customer-facing technology.

In part, this lack of focus on customer-
facing and sales force technology is
not entirely surprising. “Few industrial
manufacturing organizations have a
high degree of comfort using customer-
facing technologies and – combined
with an overall shortage of skills and
capabilities in this area – are therefore
loath to invest in new technologies until
they can create the right environment
to turn those investments into value,”
adds Damian Morgan, Managing
Director, Strategy practice, Industrial
Manufacturing, KPMG in the US.

What are respondents allocating 20 percent or more of their total technology spend on?

23%

47%

19%

6%

10%

12%

Sales force

management

systems

Human resource systems

Engineering/manfacturing/

supply chain systems

Financial

systems

Customer-facing

technology

Source: Forbes survey, January 2015.

Enterprise

Resource

Planning

(ERP) systems

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Improving the business model to reduce costs

As this year’s GMO report clearly
shows, manufacturers are
keenly focused on reducing their
cost structure. In many cases,
manufacturers are looking for ways to
not only cut costs, but also to improve
business flexibility and performance.

For one Tier 1 Aerospace and Defense
components manufacturer, the need
to transform their operating model was
quickly becoming clear. With operations
spread across almost 50 separate
business units and clear opportunities
for cost savings through consolidation,
combined procurement and improved
operations, the organization recognized
that its current operating model was
impacting its ability to grow.

“While the executive team valued
the decentralized and entrepreneurial
business model they had created,

they had begun to question whether –
as a corporation – they were creating
enough value over and above the
sum of the individual operating units,”
notes Tom Mayor, Principal, Strategy
practice, Industrial Manufacturing,
KPMG in the US.

Working closely with KPMG, the
organization elected to take a ‘strategy
to results’ approach that would
provide quick wins and incremental
improvements in phases, while
ultimately driving towards a larger
transformation of business models and
processes.

Organizational engagement and
preparation was key and required the
project team to create individual team
charters, communications plans and
processes to support a bottom-up
detailing of the opportunities. At the

same time, the team focused on
helping the manufacturer’s leadership
understand the opportunities and
challenges involved in transformation in
order to secure high-level support and
buy-in.

While the transformation journey is
still in progress, the organization is
already reaping significant benefits.
More than USD400 million worth of
potential cost-saving opportunities
was identified in the initial phase alone,
with the potential for much greater
ongoing savings as the business
model transforms.

“Today, the organization uses our
objective-driven change approach
to build bottom-up detail, define
actionable plans and realize those
benefits,” adds Tom Mayor.

Case study

What is surprising, however, is that – while
most respondents say that sales growth
is one of their top strategic priorities
for this year – very few are focusing on
improving the effectiveness of their sales
force in order to create opportunities for
incremental sales growth.

Take, for example, after-market sales;
many sectors are starting to find that
the real growth potential for their
organizations will come not from
the sale of their products, but rather
from the high-margin services and
maintenance that they can provide
after the sale has been made. Yet just
12 percent of respondents say that

growing after-market sales is a top
priority for their organization over the
next 2 years.

“This lack of focus on the after-market is
indicative of the need for manufacturers
to focus their innovation attention on
adapting their business models to take
advantage of new revenue streams and
growth opportunities,” adds Damian
Morgan. “Product innovation is hard, but
business model innovation can be even
harder and there are few proven models
to borrow from; making the right changes
at the right time will take insight and a
disciplined and determined approach to
addressing the risks and opportunities.”

8

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In a world of mounting pricing pressures,
increased competition and disruptive
technologies, today’s manufacturers
know that they will need to innovate

in order to survive. This year’s
GMO data clearly shows that most
expect to dramatically increase their
R&D investments as a result.

Smart investments

into smart targets

Everybody wants the next breakthrough innovation, but nobody
wants to ‘bet the farm’ when so much is in flux. As a result,
manufacturers are shifting their innovation focus towards making
smart investments into a handful of technologies and working with
new partners to drive new ideas and efficiencies.

Finding the right investments and the right models will not be easy;
sustaining innovation will be even harder. This year’s GMO data
suggests that manufacturers can likely expect to see increasing
competition for innovation and greater pressure on their innovation
models as new technologies and new approaches emerge.

Spending on R&D/innovation continues to increase

41%

24%

33%

35%

17%

33%

2%

4%

Last two years

Next two years

0

1%

2

3%

4

5%

Greater than 6%

Note: Percentages may not add up to 100 percent due to rounding.

Source: Forbes survey, January 2015.

As a percentage of revenue

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Almost three out of every five
respondents say that they spent more
than 4 percent of their revenues on R&D
in the past 2 years. Almost a quarter of
respondents say they spent more than
6 percent of revenues on R&D in the
same time period.

While these numbers already indicate a
high level of investment into R&D, this
year’s GMO data shows that investment is
about to explode as competition increases.
Almost three-quarters of our respondents
say that – over the next 2 years – they will
spend more than 4 percent of revenues on
R&D and 41 percent say they will spend
more than 6 percent of revenues going
forward.

“Innovation waits for no one; those
who fail to embrace the new reality of
the innovation cycle will quickly be left
behind,” says Jeff Dobbs. “Investing more
is certainly helpful, but manufacturers
need to also focus on continuously
improving and adapting their innovation
models if they hope to survive.”

Not surprisingly, a growing number
of manufacturers are pinning their
hopes on finding the next breakthrough
innovation. In fact, since 2013, KPMG
International’s GMO data has shown
increases of about 5 percentage points
per annum, suggesting that – should
these trends continue – manufacturers
may soon be almost as equally focused
on breakthrough innovation as they are
on achieving incremental innovation.

“Everyone has a different definition of
what ‘breakthrough’ means – for some

it’s the creation of an entirely new product
or service, for others it may simply
mean a radical simplification of parts
on the manufacturing line,” notes Eric
Damotte, KPMG’s Global Head of Metals.
“The reality is that most manufacturers
are actually focused on achieving very
large – but still incremental – innovations
rather than investing into absolutely new
product segments.”

Yet, while a growing number of
respondents say they are looking for
breakthroughs, data suggests that
few are willing to take on higher-cost
and higher-risk bets such as expanding
into new channels or new product
segments. Indeed, when asked
how they will drive new growth and
innovation, respondents are much more
likely to cite strategies such as adopting
new manufacturing technologies and
increasing R&D spend than they are to
suggest they will enter into new product
segments or expand into new channels.

“Manufacturers are looking for
opportunities that either address
an unmet customer need or that
help improve their manufacturing
processes, productivity and efficiency,”
says Brian Heckler, Partner, Advisory
National Advisory Leader Industrial
Manufacturing, KPMG in the US. “In
this environment, we believe that the
convergence of traditional products with
new technologies – such as 3D printing
and nanotechnology – will be adopted
much faster, and will be much more
disruptive than most people expect now.”

“Innovation

waits for no one;

those who fail

to embrace the

new reality of the

innovation cycle

will quickly be left

behind.”

Jeff Dobbs ,

Global Sector Chair,

Industrial Manufacturing

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Focus areas to drive new growth and innovation

36%

48%

28%

Entering new
product segments

Expanding after-market
and service offerings

Channel expansion
(how you reach your market)

Divesting non-core
businesses

8%

Adopting new business
and operating models

30%

34%

Adopting new manufacturing
technologies

Increasing R&D spend

New partnerships
to drive innovation

44%

33%

Entering new
geographic markets

33%

Note: Respondents selected top three options.

Source: Forbes survey, January 2015.

Most manufacturers also understand that
investing into breakthrough technologies
is often a long-term bet. More than
two-thirds of respondents say they are
more focused on long-term (5 to 10
years) innovation strategies rather than
short-term ones. Of those that say they
are more focused on breakthroughs,
82 percent say they are taking a long-term
strategy for innovation.

However, while many are taking a
long-term view of innovation, the vast
majority of manufacturers also say they
expect to start seeing benefits from
their product innovation pipeline within
the next 5 years. Only 20 percent of
respondents say they will wait more
than 5 years for product innovations to
start flowing; just 5 percent say they
expect to wait 7 years or more.

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In part due to the speed of the innovation
cycle – but also as a means to reduce
the risk and cost of innovation – most
manufacturers are now exploring and
striking new partnerships with suppliers,
customers and technology firms.

Collaboration for innovation takes many
forms. Some are partnering with their
suppliers and vendors to develop new
innovations at the parts-level, while
others are joining up with non-traditional
players and technology vendors to
identify, develop and commercialize
new innovations.

“Original Equipment Manufacturers
(OEMs) and major manufacturers are
increasingly looking to their suppliers
as sources of incremental innovation,
working closely with them to harness
the competitive advantages of the value
chain,” adds Doug Gates, KPMG’s Global
Head of Aerospace and Defense. “But
the reality is that the changing dynamics
of relationships in the innovation model
will likely further accelerate the pace
of change as manufacturers fight to
continuously improve and adapt their
approach to innovation.”

“The pace of innovation is picking
up rapidly; whereas in the past,
organizations were willing to wait 10 to
15 years to develop and commercialize
a new disruptive technology, today’s
stakeholders expect new innovations
constantly,” notes Dieter Becker, Global
Sector Chair, Automotive, KPMG
International. “In the Automotive sector,

for example, organizations need to be
moving forward on developing new
breakthroughs such as driverless cars
and electric vehicles while also focusing
on the smaller and more incremental
innovations they need to continuously
add more features to their current
vehicle lineups.”

Motivation for collaborating on innovation

25%

21%

17%

9%

Speed-to-market

Lowering cost

Access to new

technology

Emergence of non-traditional

suppliers (e.g. operating

systems/user interface)

Reducing risk

25%

Note: Percentages may not add up to 100 percent due to rounding.

Source: Forbes survey, January 2015.

Collaboration

for innovation

takes many

forms. Some are

partnering with

their suppliers

and vendors to

develop new

innovations at the

parts-level, while

others are joining

up with non-

traditional players

and technology

vendors to

identify,

develop and

commercialize

new innovations.

13

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Indeed, more than three-quarters of
respondents agree that partnerships,
rather than in-house efforts, will
characterize the future of innovation
for their organization. Eighty-one
percent say that they are adopting more
collaborative business models with
suppliers and customers to improve the
value of their innovation investments.

“The bottom line is that you can’t simply
throw money at researchers and expect
to beat the competition; it takes real

focus and a clear understanding of what
your organization wants to achieve,”
notes Ken Seel, KPMG’s Global Head
of Conglomerates. “We believe that
being an innovation-led organization
requires manufacturers to develop a set
of capabilities that provide broad market
ecosystem sensing, new insights into
unmet customer needs, the ability to
rapidly commercialize new ideas and the
processes to integrate new ideas back
into the product development process.”

Delphi: Safe, green and
connected

For automotive supplier Delphi
Automotive PLC, growth potential is
largely focused within  “three mega-
trends: safety, sustainability and
connectivity,” says Jeffrey Owens,
Chief Technology Officer. The first
two legs of that stool – safety and
sustainability – are relatively non-
negotiable, largely driven by global
regulations.

Connectivity, however, is an area of
clear competitive advantage that is
being driven by consumers. “Unlike
green sustainability regulations,
connectivity is not about fulfilling
demands for better mileage and
efficiency; it’s increasingly about
being able to connect drivers

digitally to their vehicles. Delphi’s
ability to drive future sales growth,
therefore, will be further influenced
by additional content, which is why
we invest in our innovation pipeline,
in our technology development and
in our R&D,” Owens says.

Today’s automobiles are already
the most sophisticated piece of
electronics equipment that most
people own; newer-model cars often
include more than 50 computers
and close to 100 million lines of
software code on premium vehicles.
And as demand for improved
safety, economy and entertainment
increase, Delphi recognizes that
innovation will be critical to growth.
“We want to be sure we’re ready
with the latest solutions and able to

deliver them globally as new content
comes on the market,” said Owens.

Delphi’s innovation strategy includes
both in-house innovation and
partnerships. For instance, Delphi
has entered into joint ventures
and partnerships with a number of
technology companies, notably in
the software and semiconductor
industries, a space that moves
incredibly fast. Indeed, for Owens
and Delphi, the challenge is less
about defending their market against
new competitors and more about
speed-to-market. “We need to be on
top of semiconductor development
and software content integration or
risk missing an innovation cycle,”
Owens cautions.

Corporate perspective of a

Chief  Technology Officer

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Tightening

the supply chain

If manufacturers hope to both grow and drive new innovations to
market, they need to continue to focus on improving their agility and
integrating their supply chain strategies.

Achieving the appropriate level of supplier visibility is key, along
with investment into greater technology enablement. The bigger
challenge, however, will come from creating the right supply chain
strategy to meet future product requirements and demand without
driving up costs.

With most organizations keenly focused
on cutting costs in the short term and
investing in growth for the long term, it
is perhaps not surprising that cost and
growth-related priorities are rising to the
top of the supply chain agenda.

But while almost half of all respondents
cite lowering costs and working
capital levels as one of their top three
strategic supply chain priorities, many
manufacturers are starting to feel that
they have squeezed all of the efficiency
they can from their existing operations.

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Supply chain strategic priorities

46%

29%

32%

26%

Lowering costs

and working

capital levels

Lowering costs

and working

capital levels

Restructuring to

support growth

Increasing cooperation

and transparency across

supply chain nodes

21%

8%

Segmenting and tailoring

supply chain assets and

processes based on specific

product needs/demand profiles

Reconsidering global footprint

based on global changes in market

demand/growth rates, productivity-

adjusted labor rates, energy costs, etc.

Managing supply or

compliance risks

SKU simplification and

consolidation to combat

cost of complexity

32%

Note: Respondents selected top two options.

Source: Forbes survey, January 2015.

“What we are increasingly finding is that
supply chain executives are enhancing
their priorities from traditional cost-
cutting to growth, capacity and
improving demand signal alignment
initiatives,” notes Erich L. Gampenrieder,
Head of KPMG’s Global Supply Chain
Center of Excellence. “The reality is that
growth and new product launches tend
to turn supply chains into increasingly
complex operations and that can
often become a drag on agility and
competitiveness.”

While cost-cutting will clearly remain
a priority for supply chain managers
for the foreseeable future, many are
starting to refocus their attention

towards developing the right strategy
and models to support growth.

“Manufacturers have spent years trying
to squeeze more juice from the lemon
and many are now at the point where
further cuts will only lead to diminished
flexibility and reduced customer
satisfaction,” adds Erich Gampenrieder.
“Instead, many organizations are now
looking at their available cash to see how
they might merge, acquire or consolidate
their supply chain and customer service
assets to drive – by product segment
and/or technology area – improved
service levels that are in balance with the
cost to serve customers.”

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Almost a third of this year’s GMO
respondents say they are reconsidering
their global footprint based on growth
and market demand. An equal number
say they are starting to segment and
tailor their supply chain assets based,
in part, on demand profiles. Twenty-
nine percent of respondents say that
restructuring to support growth is one
of the top strategic priorities for their
organization’s supply chain.

“We are having a lot of discussions with
manufacturers about what parts of the
supply chain they need to own and what
parts can be delivered more flexibly
through renting capacity or outsourcing,”
adds Tom Mayor. “For some of the faster-
moving technologies, manufacturers may
prefer to push the technology risk onto a
third party manufacturer who might be
better placed to carry that risk across the
scale of the industry as opposed to being
owned by a single player.”

Top supply chain challenges

42%

30%

Flexibility and responsiveness

to changes in demand

or product mix

27%

25%

19%

14%

14%

Ensuring sufficient supplier

capacity to meet demand

Effectively supporting

new product launches

Lack of competitive

cost structure

Lack of skilled talent to manage

supply chain execution/planning

Supplier performance in terms

of risk, reliability and quality

38%

35%

35%

5%

Aligning operations

to real-time fluctuations

in customer demand

Excess inventory

Inadequate IT systems for

supply chain visibility,

planning and execution

Lack of information and

material visibility across

the extended supply

Inefficient supply

chain tax structure

Note: Respondents selected top three options.

Source: Forbes survey, January 2015.

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While new models are being developed
and tested, many manufacturers say
they are also starting to face significant
challenges as they recalibrate their
supply chain for growth. Indeed, a
lack of flexibility and responsiveness
to changes in demand or product mix
is the most frequent challenge facing
manufacturers’ supply chains. Ranked
third are concerns regarding the supply
chain’s ability to effectively support
new product launches.

“Manufacturers will need to start
focusing their data and analytics
capabilities towards analyzing,
understanding and improving
their supply chain operations,”
says S.V. Sukumar, Partner,
Management Consulting, Head of
Strategy and Operations Practice,
Advisory Services, KPMG in India.
“Along with improved analytics, we
believe that greater collaboration
across the supply chain, improved
visibility and enhanced integration can
help manufacturers overcome some of
these challenges.”

Somewhat surprisingly, few
manufacturers suggest that they
struggle with creating the right tax
structure for their supply chain.
“Given all of the changes now going
on across the sector and around the
world, manufacturers should be more
focused on tax than ever before,” says
Joerg Strater, Global Head of Tax for
Industrial Manufacturing, KPMG in
Germany. “The evolution of multilateral
tax regimes and renewed focus on
tax from the G8 and The Organisation
for Economic Co-operation and
Development (OECD) are bringing tax
back to the forefront; those who ignore
this fact do so at their own risk.”

Supplier management seems to be a
key challenge for many manufacturers.
Yet, while many are clearly concerned
about supplier performance and

supplier capacity, this year’s GMO
data suggests that few have adequate
visibility into their Tier 2 suppliers
to make informed decisions about
individual supplier performance
and capacity.

“Rapid and unpredictable geopolitical
risks can significantly influence the
business environment in general and
supply networks in particular,” notes
Alexey Nazarov, Head of Strategy
and Operations, KPMG in Russia and
the Commonwealth of Independent
States (CIS). “The lesson from recent
shifts is that manufacturers need to
improve their supplier visibility and
diversify their supplier and customer
base which, in turn, should help reduce
geopolitical risk and create a more
sustainable platform for future growth.”

Less than one-in-six respondents
in this year’s survey claimed to
have complete supplier visibility
into Tier 1, 2, and beyond. Thirty-
seven percent admitted they only
have limited Tier 1 visibility, while
5 percent indicated that they have no
visibility into their suppliers at all.

What is surprising, however, is that
few manufacturers seem to see their
lack of visibility as a problem. Indeed,
respondents rank ‘lack of information
and material visibility’ as only their
ninth biggest supply chain challenge,
tied with concerns regarding the
adequacy of their technology systems
to deliver supply chain visibility.

This year’s GMO data indicates that –
in part – organizations are struggling
to identify a clear payback on the
investment required to achieve deeper
visibility. However, our experience
suggests that most organizations
feel that they have almost achieved
the right balance between visibility,
complexity and cost to manage their
own unique supply chain risks without
over-investing in technology.

“The evolution

of multilateral

tax regimes and

renewed focus on

tax from the G8

and the OECD are

bringing tax back

to the forefront;

those who ignore

this fact do so at

their own risk.”

Joerg Strater ,

Global Head of

Tax for Industrial

Manufacturing

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34%

24%

31%

Integrated business

planning

Global demand

planning

Supply chain

risk

Customer-facing

technology

Procurement

systems

Where are manufacturers allocating 20 percent or more of their supply chain technology spend?

Source: Forbes survey, January 2015.

21%

19%

Where organizations are investing
significant portions of their supply
chain technology budget, however, is
into technologies that can offer lower
costs, better planning and improved
enterprise collaboration. For example,
more than a third of respondents say
they will place significant investment
into improving their procurement
systems and 31 percent of respondents
say they will allocate significant supply
chain technology spend on Integrated
Business Planning (IBP) systems.

“While many organizations seemingly
suggest that they are investing heavily
into new procurement systems,
much of this spend is likely being
allocated towards ‘add-on’ technology
investments aimed at improving
the efficiency and flexibility of the
supply chain rather than wholesale
enterprise resource planning (ERP)
system implementations or updates,”
notes Erich Gampenrieder. “Most

organizations have a solid technology
backbone but now need to tweak the
platform to unlock improved flexibility
and collaboration.”

Although 19 percent of respondents
said they would allocate significant
supply chain technology spend
towards customer-facing technology,
it is somewhat worrying, however,
12 percent of respondents indicate that
they have no plans to invest in customer-
facing supply chain technology. “Given
innovation-led sales growth is a top
agenda item for our participants, it is
quite surprising that we don’t see more
IT focus on understanding, sensing and
enhancing the customer experience
of today’s increasingly connected
consumer,” says Tom Mayor. “Sensing
and truly understanding unmet needs
faster than the competition will be key
to winning the battle as the pace of
connected product innovation continues
to accelerate.”

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Creating a customer-centric supply chain

When a leading consumer goods
manufacturer wanted to improve their
‘on-time delivery in full’, executives
knew they needed to enhance their
supply chain operations in order
to better respond to demand and
improve their ability to make faster
fact-based decisions with their
extended business partners.

Working with teams from KPMG in the
US, the organization set out to develop a
customer-centric supply chain powered
by a ‘Supply Chain Control Tower’ that
brings together the organization’s
financial planning, replenishment, global
trade and risk information to provide a
single global view across the end-to-end
supply chain.

Achieving this would require
significant change and improvements
across the supply chain. From
redefining their operational metrics

through creating new end-to-end
planning processes that more
effectively translate demand changes
at the shelf into manufacturing supply
plans, the organization was laser-
focused on achieving their objective
of creating a more customer-centric
supply chain.

The first phase of the program,
which started in 2014, involved four
separate work-streams – functional
design, technology architecture and
integration, master data management,
and organizational change
management – which were integrated
under a fifth work-stream for overall
program management.

“A key area of focus was on
organizational change management,
including leadership alignment and
foundational training on leading
practices for demand-driven supply

chains and supply chain control
tower concepts” noted Rob Barrett,
Managing Director, Operations
Advisory, KPMG in the US. “Creating
a more customer-centric supply chain
isn’t just about buying technology
or simply sharing data, it’s about
transforming how you measure,
manage and execute the supply chain
in a way that is truly aligned with
customer needs and expectations.
It’s also about eliminating
information latency and improving an
organization’s ability to make rapid,
fact-based decisions and trade-offs.”

Once the multi-year project is
complete, the manufacturer expects
to enjoy a 10 percent improvement
in ‘on-time delivery in full’, reduced
excess and obsolete inventory (by an
estimated USD75 million per year) and
an approximately 35 percent drop in
operating costs.

Case study

KONE: Global collaboration

When product safety and reliability
simply can’t be compromised,
the demands on a supply chain
are high. “We want reliability and
consistency; your mobile phone
lasts two years, and then you throw
it away. You can’t do that with an
elevator,” says Heikki Leppänen,
EVP of New Equipment Business
at Finnish elevator and escalator
manufacturer KONE.

KONE is at the center of a value-
chain that involves hundreds
of suppliers in its supply chain
that furnish the company with
raw materials, manufacturing
components and modules, provide

transportation services and install
its products. Rising demand in
emerging economies, especially in
Asia and the Middle East, has put
pressure on the organization’s global
supply chain, often requiring the
organization to create a fine balance
between quality and speed. “Safety
is a preeminent issue. That means
sometimes — through testing and
validating — slowing down things
that are moving quickly. We want
things to be correct, every day, in
every area,” says Leppänen.

KONE’s aim is to “create better
supplier networks all the time,”
says Leppänen. “That won’t happen
without collaboration and hard

work.” To this end KONE cooperates
with its first-, second- and third-
tier suppliers to drive continuous
supply chain improvements. In some
cases, the company has entered
into collaborative research and
development projects with
its suppliers.

Leppänen also stresses the
important role that information
technology plays in KONE’s supply
chain logistics, allowing the company
to optimize its global supplier base
to reflect changes in capacity, cost
levels or exchange rates. Constant
improvement is key. “It is a global
solution, and it’s developing all the
time,” sums up Leppänen.

Corporate perspective of an

EVP of New Equipment

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KPMG’s Global Industrial Manufacturing country perspectives

Germany

It is not surprising that German – and other European export-led economies – are focused strongly on
growth and cost reduction. Weaknesses in the Eurozone have forced European manufacturers to shift
their focus overseas (particularly to markets where local currencies are tied to the US dollar) while, at the
same time, increased competition in new markets is driving manufacturers to become ever-more cost
efficient in both their production and their administrative cost structures.

Manufacturers across Europe often talk about the shift towards an ‘Industry 4.0’ where data is exchanged
in real-time between manufacturing assets, suppliers and customers in order to drive increased
efficiency, productivity and innovation. But combining old-school manufacturing techniques with the
rapid technology innovation of today will not be simple. New business models, new processes and new
partnerships will certainly be required.

Given the comparative weight of the Automotive sector on the German economy, it is clear that much
depends on what priorities and models are adopted by original equipment manufacturers (OEMs). The
reality is that cost-cutting and growth targets across the supply chain are largely influenced by demands
from the OEM. But so, too, are innovation budgets.

Harald von
Heynitz
Head of Industrial
Manufacturing,
KPMG in Germany

Brazil

Brazil may be experiencing some difficult times, but it’s not time to give up on the country just yet.
Nobody can argue that the past year has been difficult for Brazil’s economy. Corruption scandals, massive
cost-overruns preparing for FIFA and the Olympics and poor economic management all came to a head
at the end of 2014, creating significant uncertainty and sapping confidence from both consumers and
manufacturers.

The impact has been significant. The Automotive sector – which at the start of last year accounted
for almost a fifth of the total industrial output in Brazil – has reduced production by between 20 and
30 percent. Parts and component manufacturers have all but halted production as a result. Similar
situations are at work in the Oil & Gas and Construction sectors, both of which have direct impacts
on Brazil’s manufacturers.

For Brazilians, the general consensus is that 2015 will be a year focused on survival but that growth will
pick up again in 2016. The reality is that there are still a number of strong fundamentals to Brazil’s market.
Those that view this period of disruption as a ‘buying opportunity’ should be well-placed once growth
roars back to the Brazilian economy.

Charles Krieck
Partner in Charge,
Audit,
KPMG in Brazil

China

As always, the China marketplace continues to evolve rapidly. Indeed, with China now entering into
a ‘new normal’, characterized by slower growth and less reliance on investment, many of China’s
manufacturers are now looking to innovation and expansion to achieve their growth targets.

China’s government is already taking significant steps to encourage entrepreneurship and innovation as a
way to spur economic growth. The new “Mass Entrepreneurship and Innovation” campaign, for example,
is expected to propel innovation within the already fast-developing small-to-medium enterprise (SME)
segment. Those operating in China will likely gain some competitive advantage by developing the right
in-house functions to monitor developing innovations in the SME segment.

China’s manufacturers are also increasingly looking overseas for growth which, in turn, is accelerating
change within the domestic manufacturing industry as well. In fact, recent activity suggests that Chinese
manufacturers’ overseas acquisition strategies may be less about conquering new markets abroad in the near
term, and more about gaining access to new technologies, know-how and processes that can be integrated
back into the business to improve competitiveness in the domestic market over the medium to long term.

The bottom line is that China’s manufacturers are looking for new opportunities to grow and compete.
Given the scale and pace of change in China, we expect to see new innovations emerge that will push
manufacturers well beyond the ‘imitator’ space and into the ‘creator’ space.

David Frey
Head of Strategy
and Operations,
KPMG in China

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Takahiro Irie
Partner,
Management
Consultant,
Advisory,
KPMG in Japan

India

The fact that manufacturers in India are highly focused on innovation is not surprising. As domestic
competition increases and prices start to come under pressure, many in India recognize that they will
need to innovate in order to protect their margins and attract premium prices for their products. This, in
turn, is driving India’s manufacturers to quickly start embracing high-tech and advanced manufacturing
technologies.

However, it is clear that – in India and in the rest of the world – manufacturers could be gaining much more
value from data and analytics (D&A), particularly on the supply chain side. Indeed, we believe that those
manufacturers able to leverage their customer-facing D&A experience and capabilities to improve their
supply chain operations will ultimately win in the marketplace.

India is clearly changing. And new consumer pressures, new market reforms, new competitors and new
innovations are starting to help elevate the market from being a ‘low-cost’ manufacturing destination into
a ‘high-value’ and ‘high-quality’ destination instead. While this will clearly provide significant dividends for
India’s manufacturing ecosystem, it will also mean that manufacturers will need to keep a close eye on
their costs if they hope to remain competitive in one of the world’s fastest-growing marketplaces.

S.V. Sukumar
Head of Strategy
and Operations,
Advisory Services,
KPMG in India

Japan

There have been significant changes in the business environment for the entire manufacturing industry in
Japan, influenced by trends such as depopulation, population ageing, advancement of the global optimal
production, industrial restructuring by digitization, expansion into foreign markets and the response to
energy and environmental issues.

Against this background, we see three areas that require medium to long-term responses from
manufacturers in Japan.

1. Responses to current issues: We expect to see increasing responses to some of these issues

through activities such as the corporate tax rate reduction, the correction of the yen appreciation, the
promotion of EPAs (Economic Partnership Agreements), a more formal response to rising energy
costs, responses to environmental regulation and the easing of labor regulations (though more will be
required to resolve the shortage of manpower, the fostering of a working population, and the utilization
of alumni). We expect to see a new, more virtuous economic cycle characterized by wage increases
and commercial relations adjustment (pricing shift).

2. New initiatives for the future: Business reorganization and the development of collaborative

relationships will be driven by accelerating business reorganization, promotion of joint development by
identifying corporation areas, determining global benchmarks and the reinforcement of supply chains –
including overseas bases. New markets will also be created in areas such as ‘next-generation’ vehicles,
airplanes, space, robots, advanced materials (special steel, fine chemical products, carbon fibers and
cellulose nano-fiber, for example), regeneration, medical care and biomedical products. Regulatory
reform such as the Special System for Corporate Field Tests and the System to Eliminate Regulatory
Gray Zones will be key, as will increased support for R&D and the advancement of open innovation.
A general improvement in the overseas business environment will catalyze a new drive to secure
new leaders, to find support for infrastructure export overseas and to respond to the changes in Asian
production structure.

3. Responses to the transformation by digitization: Japanese manufacturers will need to look ahead

to understand their response to new technologies, such as: the Internet of Things (IoT), Industry 4.0
and the coming realization of the ’robot-revolution’.

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United Kingdom

UK manufacturers are keenly aware that innovation will be the key to future growth. Yet, they also know
that timelines are shrinking; the lead-time from concept to commercialization is dropping dramatically for
those manufacturers hoping to remain competitive in today’s technology-driven business environment.

The UK has always been viewed as a leader in manufacturing innovation and there are clear signs that
this will continue to be the case: encouraging tax rates, stable markets and growing investment into new
technologies – such as graphene – continue to provide competitive advantages for UK manufacturers.

However, in innovation and manufacturing, including supply chain and business model transformation –
tightening access to talent could limit UK manufacturers’ ability to evolve, grow and adopt new
technologies. While there is additional effort being made to increase the number of apprenticeships,
which can only be good, more must be done to attract young people to become engineers. Their ongoing
retention within the manufacturing sector is ever more challenging while the recruitment of other smart
and innovative people is necessary to drive forward the manufacturing models of tomorrow.

These are exciting times for the UK and manufacturing is evolving rapidly, such as in the Automotive
industry where ‘connected cars’ alone offers the UK huge opportunity to develop and commercialize new
technologies. This type of activity, in turn, will attract new talent, new investment and new technologies to
the wider UK manufacturing sector.

Stephen Cooper
Partner, Head
of Industrial
Manufacturing
and Automotive,
KPMG in the UK

United States

As the US dollar strengthens, many manufacturers in the US are starting to refocus on improving their
cost structures in order to remain competitive in the global markets. As a result, we have seen increasing
focus on creating greater efficiency, particularly in supply and operations planning.

Some of this activity is evident in the recent uptick in the ‘near-shoring’ of assets and suppliers to
locations either within, or in close proximity to, the US market. This, too, has reinvigorated the focus on
improving supply chain flexibility and visibility and reducing risk.

Likely the biggest long-term trend for the US market, however, is the increasing convergence between
technology and products which, in turn, is impacting everything from the way products are designed and
launched through to how sales and services are conducted.

Business models are also rapidly changing; consider, for example, how the ability to monitor and/or control
performance, identify issues and deliver wireless updates to previously ‘dumb’ products – from cars through
to refrigerators – will impact warranty claims, after-market sales models or maintenance contracts.

Clearly, US manufacturers benefit from a strong ecosystem for innovation. In fact, the challenge for US
manufacturers may be less about discovering the next big innovations and more about understanding
their impact and value.

Brian Heckler
Partner, National
Advisory Leader
Industrial
Manufacturing,
KPMG in the US

Russia

As Russia’s experience over the past few years clearly demonstrates, geopolitical risk and uncertainty can
have significant impacts on growth and profitability. The ongoing cycle of sanctions and counter-sanctions
is now widely viewed as a ‘black swan’ event for many sectors in Russia, resulting in loss of market
positions, profits and the postponement of key projects and initiatives.

That being said, there are clear indications that some sectors were better prepared for market disruption,
in part due to consistent government policy in certain areas and strong efforts from the business
community. The devaluation of the ruble also provided local producers with a temporary cost advantage
compared to foreign competitors.

It is hoped that recent governmental policy encouraging diversification towards Asia and several programs
of localization may help support a new paradigm shift towards deeper production localization and market
diversification. This, combined with a lower ruble and supportive government policies should also
encourage a greater interest in value-added production in Russia.

Alexey Nazarov
Head of Strategy
and Operations,
KPMG in Russia
and the CIS

KPMG’s Global Industrial Manufacturing country perspectives

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Aerospace and Defense

With the mature defense markets of the US and Europe continuing to stagnate, defense contractors
and suppliers are under growing pressure to make good on their promises to deliver growth in new and
emerging markets.

Yet, growth for growth’s sake is not a strong strategy for success; defense organizations must first
think about where their best opportunities for growth lie and then focus on ensuring they have the right
portfolio to achieve those goals. As a result, we expect to see further consolidation in the industry –
particularly in the US – as organizations spin-off or divest of non-core or non-profitable businesses.

Ultimately, the focus for defense contractors over the next year will remain firmly on rightsizing the
product and business portfolio in order to prepare their organizations to take advantage of future growth
opportunities, wherever they may emerge.

For their part, the commercial aerospace organizations – led by Boeing and Airbus – continue to enjoy strong
books of business and long product backlogs. Even so, the sector continues to innovate, particularly in the
area of all-composite bodies and the development of increasingly efficient components and parts.

Doug Gates
Global Head of
Aerospace and
Defense

Automotive

The winds of change are sweeping through the Automotive industry, with growing demand for new
services from ever-more sophisticated customers. But increasingly strict regulatory standards call for a
strong focus on powertrain optimization, rationalization and standardization.

That is why the Automotive sector will need to achieve a balance between its traditional product and
technology-driven past and a future consisting of more and more tech-savvy and lifestyle-oriented
consumers, who are helping to create a completely new mobility culture.

To stay ahead, traditional Automotive players will need to check their blind spots and move forward on
developing new breakthroughs such as connectivity solutions and self-driving vehicles. They need to
reinvent their business models and capture the real value of connectivity by using the power of data to
get inside customers’ heads, understand what drives their behavior and adapt business models to ever-
smaller target groups of like-minded individuals.

Dieter Becker
Global Sector
Chair of Automotive

KPMG’s Global Industrial Manufacturing sector perspectives

Conglomerates

In today’s fast-changing and disruptive business environment, conglomerates can no longer survive
by being ‘all things to all people’. To win in the competitive marketplace and to achieve the best
returns for their investments, conglomerates will need to start bringing focus to their portfolio.

This will require conglomerates to think carefully about where they have a competitive advantage
and where they want to compete.  This focus will be critical for conglomerates in this period of pre-
transformation and change.

It will allow organizations to better allocate their R&D investments towards real growth opportunities;
it will allow leadership to focus on strengthening the core business; and it will deliver greater capital
resources with which to improve the business.

Ken Seel
Global Head of
Conglomerates

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KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

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Metals

Facing heightened pressure as a result of overcapacity and sagging iron ore prices, metals manufacturers
are now entering a period of intense competition. Everyone is looking for new growth opportunities and –
at the same time – are keenly focused on reducing their costs.

This ultra-competitive metals environment is impacting the sector. In China, pressure on margins and
overcapacity has already translated into record export levels and will eventually result in significant
domestic consolidation. Outside of China, however, much of the competition will revolve around metals
organizations’ ability to understand and meet customer demand.

As a result, we are seeing increasing focus on the development of new products – such as ultra-light
alloys – and the adoption of new manufacturing technologies that could help respond to an emerging
need in the market and stricter environmental regulations. At the same time, metals organizations are
focusing on enhancing their supply chain operations in order to not only reduce working capital levels, but
also to become more flexible and responsive to customer demand.

Even so, expectations for significant mergers and acquisitions activity outside of China are low.
Instead, we expect to see a growing focus on the development of partnerships with other players and
collaborative efforts with both customers and suppliers to drive new growth and innovation opportunities.

Eric Damotte
Global Head of
Metals

Life Sciences – Medical Devices

More than any other sector, Life Sciences has a special stake in innovation, as the nature of the business
requires companies to elevate their performance in order to offer better life-enhancing and life-saving
technologies.

At the same time, Life Sciences companies are at a crossroads. In the face of enormous pressures across
the healthcare ecosystem, traditional business and operating models are being reviewed, and often
replaced by new strategies designed to accommodate the rapidly evolving and globalized marketplace.

What is clear from this year’s GMO is that medical device and diagnostics (MD&D) manufacturers are
investing heavily in R&D, and are shifting their innovation strategies from incremental innovation toward
achieving breakthrough innovation. This level of investment and distinct drive for breakthrough innovation
is in contrast to the other manufacturers polled in other sectors.

The results clearly indicate the MD&D sector’s willingness to boost speed-to-market by deepening
collaboration and tightening integration with suppliers, and it’s likely they will lead manufacturing in
innovation in the years to come.

Chris Stirling
Global Sector
Chair, Life
Sciences

High Growth Markets

Many of the manufacturers in this year’s GMO survey will be – quite rightly – looking at the High
Growth Markets (HGMs) for their next growth opportunity. Already, we are seeing increased inflows
to HGMs and this trend is expected to pick up over the coming years.

In particular, manufacturers seem increasingly interested in Africa and the Association of South
East Asian Nations (ASEAN) region. This is not entirely surprising. Indeed, with increasing stability
across the African continent, growing consumer confidence and purchasing power and improved
infrastructure, we are seeing increased investor confidence in Africa, particularly in areas such as
manufacturing, healthcare and energy.

In ASEAN, heightened interest is being driven by the formation of the ASEAN Economic Community,
which should drive increased growth based on the community’s vast natural resources and large
consumer market base.

However, as manufacturers increasingly look to partner with local companies to drive localization,
innovation and improved supply chain management, culture will become critically important. Those
hoping to succeed in the HGMs should not underestimate the value of understanding, embracing
and working within the local culture of their target markets.

Mark Barnes
Global Head of
High Growth
Markets

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KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

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1

2
3
4

5

The manufacturing sector is in a mode of early transformation. Growth and

innovation, cost structures and supply chain efficiency are all at the top of

the agenda, but steps to implement ‘next generation’ strategies remain

modest.

The pace of innovation will continue to accelerate as new disruptive

forces and innovators revolutionize product development, manufacturing

processes, automation and business models. Failure to participate in this

rapid rate of innovation will threaten manufacturers’ competitiveness.

New products, business models and disruptors will drive manufacturers

to develop more agile, transparent and demand-driven supply chains and

integrated business planning models. But supply chain visibility remains

low and significant opportunity exists for greater collaboration.

Manufacturers are making bigger bets on R&D initiatives, attracting talent

and creating broader, more inclusive innovation models and collaborating

with tech-savvy partners to capitalize on new opportunities. Manufacturers

must continue to invest in technology and talent to win the innovation battle.

Great opportunities will emerge for the winners as the sector moves

towards large-scale transformation and – in the short run – more can be done

to improve the sales growth opportunities already available, such as after-

market sales, improved customer-facing technology and channel expansion.

Five key take-aways

for manufacturers

KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

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© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

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About

the survey

The Global Manufacturing Outlook 2015 is based on a survey of 386 senior executives,
conducted by Forbes on behalf of KPMG International, completed in early 2015.
Respondents represented six industries: Aerospace and Defense, Automotive,
Conglomerates, Medical Devices, Engineering and Industrial Products and Metals.

Fifty-five percent of respondents held C-level positions and two-thirds represented
organizations with more than USD5 billion in annual revenue. Respondents were
distributed between the Americas, Europe and Asia.

Americas
Europe,

Middle East and Africa
Asia-Pacific

40%

32%

28%

CEO/President/Managing

director/Executive director
CFO/Treasurer/Controller
COO
CIO/Technology director
VP/Director of Supply Chain/

Procurement/Operations
SVP/VP/Director
Other C-level executive
Head of business unit
Board member

12%

9%

4%

21%

14%

20%

8%

1%

10%

$1 billion to $4.99 billion
$5 billion to $9.99 billion
$10 billion to $24.99 billion
More than $25 billion

31%

22%

35%

12%

Aerospace and Defense
Automotive
Conglomerates
Engineering and Industrial

Products (including

industrial electronics)
Metals
Medical Devices

18%

22%

12%

14%

31% 3%

Note: Percentages may not add up to 100 percent due to rounding.
Source: Forbes survey, January 2015.

Where are you personally located?

What is your primary sector within the manufacturing industry?

Which of the following best describes your title?

What are your organization’s global annual revenues in US dollars?

KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

29

© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

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KPMG’s Industrial Manufacturing major country leadership

Global/US

Jeff Dobbs

Global Sector Chair,
Industrial Manufacturing

+1 313 230 3460

jdobbs@kpmg.com

UK

Stephen Cooper

Partner, UK Head of

Industrial Manufacturing and

Automotive

KPMG in the UK

+44 20 73118838

stephen.cooper@kpmg.co.uk

Canada

Don Matthew

Partner, Canadian Lead
Industrial Manufacturing
KPMG in Canada

+1 604 455 4002

dmatthew@kpmg.ca

Sweden

Björn Hallin

KPMG Partner/Head of
Industrial Markets
KPMG in Sweden

+46 8 723 96 26

bjorn.hallin@kpmg.se

Netherlands

Tom Van der Heijden

Partner
KPMG in the Netherlands

+31206 567520

VanderHeijden.Tom@kpmg.nl

France

Philippe Grandclerc

Partner
KPMG in France

+33155686952

pgrandclerc@kpmg.fr

Spain

Manuel Parra

Partner/Head of
Industrial Manufacturing
KPMG in Spain

+34914563400

mparra@kpmg.es

Brazil

Charles Krieck

Partner in Charge, Audit
KPMG in Brazil

+551121833102

ckrieck@kpmg.com.br

30

KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

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China

Alex Shum

Head of Industrial
Manufacturing
KPMG in China

+862122122508

alex.shum@kpmg.com

Australia

Malcolm Ramsay

Sector Leader
Industrial Manufacturing
KPMG in Australia

+61 423 760 875
+61 2 9335 8228

malramsay@kpmg.com.au

South Africa

Gavin Maile

Industrial Manufacturing Sector
Leader
KPMG in South Africa

+27116477165
gavin.maile@kpmg.co.za

Germany

Harald von Heynitz

Head of Industrial Manufacturing
KPMG in Germany

+49 89 9282 1201
hheynitz@kpmg.com

India

S.V. Sukumar

Partner, Management
Consulting
Head of Strategy and
Operations practice
KPMG in India

+91 9821156943

sukumarsv@kpmg.com

Japan

Osamu Matsushita

Head of Industrial
Manufacturing
KPMG in Japan

+81352188768

Osamu.Matsushita@jp.kpmg.com

Switzerland

Bryan DeBlanc

Partner
KPMG in Switzerland

+41 58 249 2944

bryandeblanc@kpmg.com

Russia

Alexey Nazarov

Head of Strategy and
Operations
KPMG in Russia and the CIS

+74959374444 x15101

anazarov@kpmg.ru

Italy

Roberto Giovannini

Head of Consumer and
Industrial Markets,  Advisory
KPMG in Italy

+390514392611

rgiovannini@kpmg.it

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KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

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How KPMG

Industrial Manufacturing can help

KPMG’s dedicated Global Industrial Manufacturing network of professionals, based in
member firms around the world, works with some of the largest and most successful
manufacturing companies.

Over 9,100 professionals in our Global Manufacturing Group, including 670 partners,
bring together KPMG’s Audit, Tax and Advisory practices to deliver broad-ranging
approaches to clients’ activities within the industry.

With our global industry knowledge and involvement in key industry events, we
believe we are truly the advisors of choice to the Industrial Manufacturing industry.

Our services focus on helping member firms’ clients address major issues and
market priorities facing the Industrial Manufacturing industry, including:

KPMG’s Global Industrial Manufacturing teams offer proactive, forward-thinking
services to member firm clients, helping them take advantage of the sector’s growth
potential and overcome the main issues and challenges within the sector.

Business model
transformation

High growth market
strategies

Market entry and
expansion

M&A and transaction
services

Corporate finance and
valuations

Private equity
investment

Supply chain and
distribution solutions

Procurement
transformation

Improving operational
efficiencies

Finance
transformation

Internal improvement
and sourcing advisory

R&D management
strategies

Enterprise risk
management

IT advisory solutions

Governance, reporting
and regulatory
services

Debt advice and
securitization

Global tax and transfer
pricing services

Sustainability and the
environment

The growth

agenda

Cost and

competitiveness

Risk, governance

and regulatory

matters

KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

32

© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

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Global Aerospace and Defense Outlook (June 2015)

This report examines how aerospace and defense organizations are focusing on
improving their visibility into their profitability and costs, building new partnerships
and focusing on new opportunities to leverage their existing products and services.

Global Metals Outlook (2015)

This annual Metals Outlook examines how metals organizations are focusing
on improving their understanding of their cost and profit levers, entering into
partnerships and driving innovation in order to create a platform for profitable
growth. Based on a recent industry-wide survey of 83 metals company executives,
this report will stand out as a critical resource for metals executives and decision-
makers around the world.

Industrial Manufacturing Mega Trends

This report analyses 10 key trends in Industrial Manufacturing, provides added
value with KPMG perspectives, approaches, solutions and KPMG Services.

Global Industrial Manufacturing

thought leadership

KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation

33

© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

background image

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accu-
rate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2015 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International.
KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does
KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

Designed by Evalueserve. KPMG Global Manufacturing Outlook: Preparing for battle: Manufacturers get ready for transformation
Publication number: 132408-G. Publication date: June 2015

kpmg.com/socialmedia

KPMG’s Global Industrial Manufacturing steering group:

Additional contributors:

Jeff Dobbs

Global Sector Chair, Industrial Manufacturing
+1 313 230 3460
jdobbs@kpmg.com

Mark Barnes

Global Head of High Growth Markets
+1 212 872 3199
mbarnes1@kpmg.com

Eric Damotte

Global Head of Metals
+349 1456 3406
edamotte@kpmg.es

Harald von Heynitz

Head of Industrial Manufacturing
KPMG in Germany
+49 89 9282 1201
hheynitz@kpmg.com

David Frey

Head of Strategy and Operations Consulting
KPMG in China
+86 108 508 7039
david.frey@kpmg.com

Doug Gates

Global Head of Aerospace and Defense
+1 404 222 3609
dkgates@kpmg.com

Osamu Matsushita

Head of Industrial Manufacturing
KPMG in Japan
+81 352 188 768
osamu.matsushita@jp.kpmg.com

Ken Seel

Global Head of Conglomerates
KPMG in the US
+1 203 406 8526
kseel@kpmg.com

Joerg Strater

Global Head of Tax for Industrial
Manufacturing
+49 211 475 8381
jstrater@kpmg.com

Rob Barrett

Managing Director, Operations Advisory
KPMG in the US
+1 480 459 3535
rhbarrett@kpmg.com

Dieter Becker

Global Sector Chair of Automotive
KPMG in Germany
+ 49 89 9282 6720
dieterbecker@kpmg.com

Stephen Cooper

Partner, Head of Industrial Manufacturing
and Automotive
KPMG in the UK
+ 44 20 73118838
stephen.cooper@kpmg.co.uk

Todd Dubner

Principal, Strategy practice
Industrial Manufacturing
KPMG in the US
+1 917 691 2322
tdubner@kpmg.com

Erich Gampenrieder

Head of KPMG’s Global Supply Chain
Center of Excellence
+ 49 89 9282 1700
egampenrieder@kpmg.com

Brian Heckler

Partner,
National Advisory Leader
Industrial Manufacturing
KPMG in the US
+1 312 665 2693
bheckler@kpmg.com

Takahiro Irie

Partner, Management Consulting
KMPG in Japan
+81 80 8091 4193
takahiro.irie@jp.kpmg.com

Tom Mayor

Principal, Strategy practice
Industrial Manufacturing
KPMG in the US
+1 216 875 8061
tmayor@kpmg.com

Charles Krieck

Partner in Charge, Audit
KPMG in Brazil
+55 112 183 3102
ckrieck@kpmg.com.br

Damian Morgan

Managing Director, Strategy practice
Industrial Manufacturing
KPMG in the US
+1 312 665 2445
dmorgan@kpmg.com

Alexey Nazarov

Head of Strategy and Operations
KPMG in Russia and the CIS
+74959374444 x15101
anazarov@kpmg.ru

Chris Stirling

Global Sector Chair, Life Sciences
KPMG in the UK
+44 20 73118512
christopher.stirling@kpmg.co.uk

S.V. Sukumar

Partner, Management Consulting
Head Strategy & Operations practice
KPMG in India
+91 9821156943
sukumarsv@kpmg.com

Michele Hendricks

Global Executive for Industrial
Manufacturing
+1 203 406 8071
mhhendricks@kpmg.com

Leona Mickelson

Senior Marketing Manager
Global Industrial Manufacturing
KPMG in Canada
+1 416 777 8822
lmickelson@kpmg.ca

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