As another year comes to a close, we’re reflecting on some of the major manufacturing news stories that defined the industry in 2018.
Manufacturing news took center stage in the mainstream media, as the last 12 months saw an unpredictable global political climate and new technology innovations spur the industry to establish new ways of doing business. Check out our takes on some of the biggest stories of the year, and how we think manufacturers can set themselves up to win in 2019 and beyond:
U.S. Tax Reform, Tariffs and the Trade War
Manufacturers around the globe have been keeping a close eye on the Trump presidency. The Tax Cuts and Jobs Act of 2017 came into effect in early 2018 and was designed to ease tax burdens on manufacturers and create jobs in the industry. The major tax breaks manufacturers experienced reinvigorated a somewhat stagnant industry. Companies like Novelis broke ground on a new, $300 million manufacturing facility and cited tax reform as the catalyst to do so, and manufacturing job openings recently reached an all-time high.
However, a series of trade tariffs – and much of the uncertainty that comes with them – painted an unclear future for many global brands. In a Nov. 2018 letter to U.S. Trade Representative Robert Lighthizer, 33 manufacturing associations stated that tariffs on steel and aluminum “caused significant harm to American manufacturers, consumers and workers” and that the unprecedented taxes have “raised costs significantly.”
The ups and downs of the global trade landscape are leading many original equipment manufacturers (OEMs) to invest in technology that helps stabilize and better forecast results. Terex, for example, cited their investment in Syncron PriceTM as necessary for “a world where trade policies can change seemingly overnight and new tariffs can affect the cost of products almost instantly.”
Right to Repair
Right to Repair legislation requires manufacturers to “sell repair parts to consumers and independent repair shops” and “make diagnostic and service manuals available to the public.” Recently, farmers in Nebraska started hacking their equipment with firmware developed in Eastern Europe and available on invite-only, paid online forums – all to repair their own equipment and avoid long wait times to see a service technician or traveling hundreds of miles to the nearest dealer to have their equipment repaired.
Consumers may no longer need to leverage the black market to make repairs, however. In October, the Library of Congress and U.S. Copyright Office proposed new rules “that will give consumers and independent repair experts wide latitude to legally hack embedded software on their devices in order to repair or maintain them.” The exemption applies to “smartphones, tractors, cars, smart home appliances, and many other devices.” And in the EU, member States are beginning to meet for a series of votes on proposals that would force manufacturers to build household appliances that are easier to repair and more durable.
British manufacturers are entering 2019 anticipating their slowest year of growth in three years amid uncertainties over Brexit negotiations. The UK is scheduled to leave the European Union March 29, and some of the largest UK-based auto manufacturers are estimating they could lose £100m ($128m) per day if things proceed as scheduled.
Many manufacturers are stockpiling goods and raw materials as they fear these items will either dry up or rise in price once the UK leaves the EU. The past year brought a lot of uncertainty around the future of trade and cross-border relationships, with some European governments going as far as advising businesses not to use British parts in goods for export, as that would violate the requirement of a certain percentage of parts to originate in the EU.
Prime Minister Theresa May recently pushed back a parliamentary vote on her proposal to leave the EU, a move that analysts indicated “raised the chances that Britain could leave the EU with no deal, an option that risks widespread economic disruption on both sides of the British channel.” If no deal is reached, British manufacturers could face “the possibility of tariffs, worker shortages and long frontier delays.”
Manufacturing comprises 10 percent of the UK’s economy and all eyes will be on long-term trade solutions post-Brexit.
AI, Machine Learning, Predictive Analytics and other Emerging Tech
Artificial Intelligence (AI), machine learning, predictive analytics and other emerging technologies have been industry buzzwords for several years now. However, there’s good reason, as these technologies are here to stay – and in a big way.
More than half of OEMs plan to make AI and machine learning a major investment, while 90 percent intend to invest in predictive analytics within the next 12 months. Some of the world’s most recognized brand names like Facebook, Google, IBM and Microsoft are investing heavily in the research and development of AI. And, research from Capgemini indicates that the onslaught of these emerging technologies will require manufacturers “to add non-physical skills (such as data and software competencies) to its traditional physical skills base” and that they must “reboot current approaches to legacy product innovation and development using a consistent source of information running across the product lifecycle.”
Subscription-based Business Models and the Shift to Servitization
Subscription e-commerce has grown by more than 100 percent year-over-year for the past five years. It’s clear that major consumer brands with subscription services like Amazon, Netflix, Spotify, Blue Apron and Dollar Shave Club have completely shifted the way customers buy and consume products.
In 2018, automotive subscriptions gained prominence, with new platforms emerging from both OEMs and third-party providers. Just like any other subscription service, automotive subscriptions give drivers the chance to choose a vehicle of their choice for any duration of time without the worries of maintenance or other added costs, all for a flat monthly rate.
The subscription economy is now seeping into other industries as well, namely durable goods manufacturing. Industrial goods, heavy equipment, trucking and others are facing customers that want and expect to buy the outcome products deliver as opposed to products themselves. This shift in the way customers interact with large OEMs is referred to as servitization, and it will only grow in prominence in the coming years.
For an in-depth look at how we think these major manufacturing news stories will impact manufacturers and how they can prepare for 2019 and beyond, check out 2019 After-sales Service Predictions: Powering the Journey to Servitization Through Maximized Product Uptime.