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Global Manufacturers Balancing Innovation, Cost Management


Earlier this week, KPMG released the findings from its annual Global Manufacturing Outlook: Fostering Growth Through Innovation. The survey polled 241 senior manufacturing executives worldwide – including 50 from the US – about their business outlook. 

balancing cost management and innovationAccording to Jeff Dobbs, KPMG’s global head of Diversified Industrials, manufacturers are coming to terms with what they need to do stay competitive. Many of them focused on cutting costs throughout the recession. However, as economic growth has been stagnant for the last four years, they have come to realize that they cannot wait out the anemic recovery much longer. Executives are taking the initiative of expanding their operations to gain an edge over their competitors.

Manufacturers Globally Optimistic        

A shared optimism for expected high-growth margin emerged out of the survey, with 75% percent of respondents optimistic about their business outlook over the next 12 to 24 months.  The growth outlook for U.S. manufacturers was most promising, with 60% of executives stating that top-line growth would be a key factor in the coming months. “Manufacturers are not just preparing for growth but for ‘high-margin growth’,” said Mr. Dobbs.

Innovation and Collaboration Are Key

The prevailing climate of slow economic growth is driving global manufacturers to seek new approaches to innovation and collaboration – up and down the value chain.

A majority of respondents (72 percent) believe that transformational innovation is either in full swing or will be so in 12-24 months -  with 84 percent of US respondents saying innovation is (or will soon be) well under way.

To spur innovation, manufacturers are collaborating more than ever before. Innovation is not going to happen in isolation according to the survey findings, but increasingly in collaborative arrangements with suppliers, customers and partner companies over the next 12-24 months. Just over 60 percent of respondents globally said they will work with customers for customized product development and with suppliers for product design.

 “There’s a decisive shift by manufacturers towards collaboration in the earliest stages of product development,” Mr. Dobbs said. “This inclusive approach to innovation not only disperses potential risks, costs and rewards across the supply chain, but it also lets manufacturers focus on what they do best by leveraging the expertise of external partners and accelerating speed to market.”

Cost Containment Still a Must

“Manufacturers may be optimistic about the business environment over the next few years, but they are challenged with continued price volatility on cost inputs, risk in the supply chain, and uncertain demand,” said Mr. Dobbs. “As such, companies must continue to seek opportunities to optimize business operations and squeeze costs out of the process to maximize revenue and profits.”