The manufacturing industry today is in the middle of a seismic shift that has implications for every business element of the sector as digitization transforms the way the industry does business. To understand this change, it is worth taking a historical view. In recent research by TCS, we studied the patterns that defined the evolution of the manufacturing industry. We identified five defining moments, or ’waves’:
Wave 1 - During the early stages of industrial growth, mass manufacturing deployed by large scale assembly plants brought in economies of scale, making it possible to drive down costs and create new price points for buyers.
Wave 2 - Lean manufacturing was developed and deployed to great effect by Japanese manufacturers. This further reduced cost and time-to-market, improved quality and reliability, and improved the ability to manage a portfolio of products while providing the flexibility of a rapid change over. Thus, tiered supply chains were born.
Wave 3 - The globalization of networks and the maturity of tiered supply chains led to shifts in the sources of supply and demand. The global spread of larger manufacturers created new tiered suppliers in local markets. This encouraged suppliers to spread their networks as well.
Wave 4 - An increasing number of mergers and acquisitions among both manufacturers and suppliers led to the emergence of global multi-brand groups. As the levels of optimization in Wave 3 peaked, these groups had few other options but to collaborate with local players, interchange platforms for economies of scale and acquire other companies, either for their product portfolio, to gain access to newer markets or for supply chain risk management.
Wave 5 - Coming to the current era, this wave sees differentiation amongst players starting to narrow.
The search is on for a new source of competitive advantage. This, and the availability of new technologies is providing the impetus for a new wave - the digital wave. Digital capability is embedded into the core of the emerging future of the manufacturing industry.
Our experts in the manufacturing industry scanned the business and technology landscape to identify emerging paradigms that will have a lasting impact on the market performance, competitive advantage, and strategic differentiation of leading industry players in the discrete manufacturing. Mapping the technologies to business capability sets along the value chain reveals a continuum of opportunities. Not every manufacturing firm will be able to master the complete set of capabilities - a lot will depend on its ecosystem of operation, current competitive levers, and cultural context. Firms that are able to take an early lead over one or more of these areas, and continue to invest in widening the gap with their competitors, will secure sustainable market positions. Our study reveals that competitive advantage will emerge at the points of intersection of three dimensions -
- The capabilities enabled by the digital five forces, i.e., mobility and pervasive computing, Big Data analytics, cloud computing, robotics and artificial intelligence, and social media
- The six areas of impact - business models, products and services, business processes, customer segments, hannels, and workplaces
- The value chain elements - New Product Innovation, Supply Chain Management, Manufacturing, and Customer Experience Management (including Sales, Marketing, and After Sales)
To help plan the journey towards realizing the aspiration of being a 'digital enterprise', manufacturing firms must seek to decode the DNA of their lines of business along the value chain, and assess the 'digital impact' at the points of intersection of the six impact areas and the digital five forces. At this point, it's the standard principles of sustainable competitive advantage will drive the definition of the business patterns that can be woven to stay ahead of the competition and close to the customer, while keeping the organization aligned with the overall enterprise strategy.