Transcript Manufacturing

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Manufacturing
Trends
2009 and beyond
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Frost & Sullivan
The Growth Partnership Company
– Founded in 1961, 47 years of industry experience
– Over 1,700 Consultants/Analysts across 32 global locations
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A 360 degree view of Business
• Economic
• Competitive
• Customer
• Technology
• Integrated Industry
• Best Practices
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Cross Vertical Industry Expertise
AEROSPACE &
DEFENSE
AUTOMOTIVE &
TRANSPORTATION
CHEMICALS,
MATERIALS &
FOOD
ENERGY &
POWER SYSTEMS
ENVIRONMENTAL &
BUILDING
TECHNOLOGIES
HEALTHCARE
AUTOMATION &
ELECTRONICS
ICT
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The Economy
Manufacturing Trends
Agenda
Future Manufacturing
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Economic
Outlook
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Overview of the current global economy
The current global economic environment is indeed bleak: the ramifications
are huge and widespread in terms of geographies and industry sectors.
Enormous repercussions
Impact across
industries
Impact across
geographies
MSCI Emerging
market index:
Expected write-down of
assets by banks:
$10 trillion
Volvo order book
(trucks-Europe):
3Q 2007: 41,970
3Q 2008:
115
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SARS 2?
SEVERE AMERICAN RECESSION SYNDROME
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The R word
A recession is a significant decline in economic activity
spread across the economy
• lasting more than a few months
• normally visible in real GDP, real income, employment,
industrial production, and wholesale-retail sales
National Bureau of Economic Research
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De-coupling – myth or reality?
The world IS much flatter than we would like to believe
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The World Economy
Composition of World GDP, 2007
Asia Pacific,
27%
Latin America
& Carribean,
4%
Africa, 1%
Europe, 34%
North
America,
30%
 Global GDP is estimated at $ 40.57 trillion in 2007.
 Contribution of emerging countries has been
increasing
 Emerging markets Increasingly contributing to
growth
 United states and Euro Area still the major
engines of global growth
 China, India and other emerging markets becoming
equally important despite low global share
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Contribution to Global Growth
Correlation between Developing Asia Exports and G3
Imports
40.0
•
The G3 economies effectively
constitute close to 70% of the
global economy and are the
biggest destination markets for end
products
•
The G3 economies are also the
biggest source of foreign direct
investment and portfolio investments
and debt market for raising capital.
•
A slowdown in these economies at
the same time will definitely drag
growth in emerging and developing
markets down.
0.8
20.0
Value
Developing economies especially
Brazil, Russia, India and China still
derive a significant amount of their
growth from the G3 Economies of
USA, Europe and Japan
1.0
30.0
10.0
0.6
0.0
0.4
-10.0
-20.0
Jan-96
-30.0
•
0.2
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
0.0
Period
G3 non-oil imports (% change)
Developing Asian exports (% change)
Correlation
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Projections 2009
World
Europe
USA
China
India
ASEAN5
2008 2009
3.7
2.0
1.2
-0.5
1.4
-0.7
9.7
8.5
9.3
7.5
5.4
4.2
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Low Projections 2009
3.7%
4%
6.5%
3.5%
-1%
5.1%
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Potential scenarios for the global economy
There is disagreement about the extent of the impact of the recent events.
Possible
Scenarios
Driving Factors
Scenario 1:
Quick
recovery
(1 year)
•
•
•
•
Scenario 2:
Short
gloom (13 years)
• Consumer
sentiments take
longer to recover as
a result of recent
wealth destruction
Scenario 3:
Prolonged
recession
(5-10 years)
Falling oil prices
Capital infusion
Lower interest rates
Concerted bail-outs
• Geo-political uncertainty
• Faster contagion
• Supply constraint
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CEO Survey: Strategy for Growth in an
Economic Downturn
Strategies for Growth in Economic Downturn
70%
60%
50%
67%
58%
58%
53%
48%
40%
40%
30%
30%
27%
20%
14%
13%
11%
10%
3%
2%
0%
Agrressively Market Strategic Expand New
New
Focus & Partnering Markets
Look for
Product
Position
Growth
Launch
Opportunities
Invest in Mergers & Conserve
Talent Acquisitions Capital
Change Outsource Reduce
Supply
staff
Chain/
Distribution
Status
Quo
Decrease
R&D
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Manufacturing
Trends
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Impact on Manufacturing
Production
Trade
• A slowdown in the growth of
Retail lending is expected to lead
to lower purchases by consumers
• A lack of trust between banks
leads to a slowdown in global
trade because letters of credit are
not being issued.
• This in turn is expected to lead to
lower output.
• Curtailing of working capital and
also trade is expected to lead to
lower production as producers do
not wish to stock large
inventories.
Financial
Crisis
• The collapse of the Baltic Dry
Index indicates this.
Investment
Working Capital
• Higher Capital Cost is expected to
Defer investment plans
• Tightening of Credit Markets leads
to higher cost of working capital.
• Globally, firms are staggering their
capital investments already planned.
• This is due to the tightening up of
corporate bond markets
• Rising Capital costs is expected to
adversely impact bottom lines.
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Manufacturing in USA
60
50
40
30
20
10
0
0.0
-1.0
-2.0
-3.0
-4.0
Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct07 07 07 07 08 08 08 08 08 08 08 08 08 08
Period
Percentage Change
Value
Industrial Output And Employment (2008)
• Capital Goods viz Oil &
Gas and Power may
remain unaffected, other
sectors are likely to freeze
expansion plans
• Manufacturers of final
goods and raw materials
may notice a sharp drop in
sales.
Source: St Louis Fred
PMI Index
Growth in Non Farm Payrolls
Steps to Combat Crisis
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•
•
•
•
Bailout Plan of $700 Billion
Fed window totaling $1 Trillion
Capital Infusion in Key Firms
Fed enters corporate Bond Market
Aggressive interest Rate Cuts
Current Scenario
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•
•
•
Unemployment at 6.5%
Falling Non Farm Payroll growth
Retail Lending shows rapid decline
Companies are unable to raise working
capital
The Outlook for 2009 looks grim, with US unlikely to come out of slowdown, and
consumers cutting back on spending. Liquidity is expected to continue to be an issue
and a ballooning fiscal deficit can exert a downside pressure on the dollar in the latter
half of 2009 and 2010.
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Euro Zone Manufacturing Outlook
% Change
10
Industrial Output Eurozone(2008)
5
0
-5
April
May
June
July
August
September
2008
-10
Source: ECB
Period
Total Industry
Intermediate Goods
Capital Goods
Consumer Durables
Consumer Non Durables
Steps to Combat Crisis
•
•
•
•
•
Finally a common approach is being attempted
UK has nationalized banks
Germany has unveiled a stimulus package
worth $700 Billion
Blanket guarantees of bank deposits by almost
all nations.
Rapid interest rate cuts following the steps of
the US Federal Reserve.
Exposure to Emerging Markets as
% Of GDP
•
Austria 85%
•
Switzerland 50%
•
Sweden 25%
•
UK 24%
•
Spain 23%
•
USA 4%
Current Scenario
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•
•
•
Germany, Spain, UK, Portugal and Greece
are in an slowdown
Consumption is falling and so is production
Eastern Europe is facing a currency crisis,
leading to stress on western European
Banks
Credit tightening has curtailed consumption
and trade
The Outlook for 2009 looks grim, with the largest European Economies slipping into a
slowdown. Exposure to emerging markets could trigger a second wave of the crisis in
Europe as the non performing loans increase. The economy is not expected to turn the
corner before middle of 2010
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16
14
12
10
815.4
6
4
2
0
Industrial Output China (2008)
Source: National Institute of Statistics
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•
•
•
•
Month (Year 2008)
Steps to Combat Crisis
Announced a $ 600 billion bailout.
Focus on developing infrastructure to create
jobs and revive economy
Government easing lending to stem fall in
house prices
Coordinated Interest rate cuts to boost
liquidity.
Exports slower due to lack of export credit
11.4
be
r
8.2
O
ct
o
m
be
r
Au
gu
s
t
12.8
Se
pt
e
14.7
Ju
ly
ay
M
16.0
Ju
ne
16.0
15.7
Ap
ril
M
ar
ch
17.8
Fe
br
ua
ry
Growth Rate (%)
Manufacturing In China
China is Structurally Vulnerable
to External Environment
•
Export Driven Economy
•
Dependent on Foreign Capital
inflows
•
High level of migration –
imperative to maintain high
growth momentum
•
US is main destination for
China’s exports
Current Scenario
•
•
•
•
Small and Medium manufactures struggling
with lack of credit
Falling real estate prices could adversely
impact the banking sector.
Retrenchment could lead to lower domestic
consumption
Export growth has been lower than
anticipated
China is poised for a hard landing at present, and is expected to recover by the middle of
2009, when consumption in China recovers. Export oriented growth leaves China highly
vulnerable to external forces. Questions on efficacy of the stimulus package also remain.
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Manufacturing in India
Industrial Output India (2008)
September
Months (Year 2008)
August
4.80
1.42
7.37
July
5.53
June
4.37
May
6.22
April
5.47
March
9.52
February
0.00Source:
1.00CSO2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Rupee, Real Estate Key Issues
•
Real Estate boom for past few
years, with prices cooling off now
•
Rupee has depreciated
considerably against the dollar,
leading to loss of corporate profits
•
Small and medium enterprises hit
by weak consumption
environment.
10.00
Growth Rate % (YoY)
•
•
•
•
•
Steps to Combat Crisis
Central bank has cut interest rates
Ensuring the stability of the rupee against the
dollar to prevent a rapid depreciation of the rupee
Proposals being discussed to ease the norms for
foreign investments in local economy.
Small manufactures are requesting sops manage
rising costs.
Stimulus package announced but inadequate
Current Scenario
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•
•
•
Fall in consumption off take especially
consumer durables
High inflation plaguing the economy for the
past 6 months.
Rapid movements in the rupee has
impacted corporate profits.
Overseas acquisitions have been plagued
credit crunch
India is set to record lower growth between 6.5 and 7.5 percent for the year 2008 and a even
lower growth for 2009. Infrastructure development could be adversely affected by the
current scenario.
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Overview of the current global economy
Expected impact on certain sectors
BFSI
ICT
Healthcare
Airlines
Government
Basic Foods
Automotive
Entertainment
Education
Most Commodities
Media
Advisory Services
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Future
Manufacturing
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Manufacturing is IMPORTANT
Share of Manufacturing (Value Added in Const Prices)
ECO - 4
ECO - 10
Asia
World
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0.0%
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Manufacturing is IMPORTANT
R&D Investments 2006
Manufacturing R&D outpaces other sectors
Manufacturing leads economic recovery – USA 2006
Manufacturers are technology leaders
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Key business issues for manufacturing companies
Growth
Global Capability
Flexibility/ Scalability
(new products, new
(source, make and sell
(Clients need to respond to
geographies, innovation)
globally)
changing market dynamics)
Seamless: Systems
Agility
Visibility
and infrastructure
(Shorter time to market and
(Minimum inventory,
(to support complex global
product life cycles)
accountability)
manufacturing & supply
chains)
Security
Risk management
Greener Manufacturing
(driven by regulations,
(to minimize the impact of
(Energy, Environment,
initiatives to maintain
fluctuating currencies,
Social Corporate
business continuity)
supply chain disruption)
Responsibility)
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Key manufacturing trends
1. Emerging economies - the need for manufacturers to deliver on a global
scale, but to execute locally
2. Digital convergence - need for manufacturing organizations to provide
employees with access to business information any time at any place, and
on any device.
3. Growing power of consumers - In the new business model, consumers
are becoming active participants
4. Sustainability and the rising impact of the environment
5. The influence of complex regulations
6. Changing demographics
Source: Microsoft
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Future Manufacturing - Sustainable
Capitalizing on global
markets while
preparing for
increasing
environmental
challenges
Investing, producing,
operating green in a
way that makes
financial sense
Sustainabl
e Growth
Separate the hype from
the opportunities
Understand your
clients also have
challenges: meet
their needs, and
capitalize on
those solutions
Being aware that
the competition
may be making
inroads, or just
“green washing”
Source: Frost & Sullivan
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Future Manufacturing
Resource Intensive
Knowledge Intensive
Mass Production
Mass Customization
Growth through higher volumes
Growth through Innovation
Focus on Local Capabilities
Global Sourcing-Global Markets
Long Product Life Cycles
Short Product Development Cycles
Global locations
Globalized Networks
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Future Manufacturing: Innovation
• US$2000 price tag
Tata Nano
• Clean slate approach to making a car – 34 patents!
• Outsourcing of assembly to small business
• Web 2.0 site to help consumers give feedback and design their own car
• Extensive use of advanced computing to design and develop the car
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Future Manufacturing - IT enabled
HMI
leveraging shop floor skills,
humans commanding
machines, robotics,
usability
Adaptability &
reconfigurability
Mass customization,
wireless shop floor
reconfiguration
Modeling
product behavior,
supply chains,
processes
Networked products
Lifecycle management,
‘wireless’ logistics
Manufacturing
Knowledge
IPR handling,
semantics, creativity,
re-use
… towards the atomic level
Nano-scale design & modelling,
heterogeneous technology
integration
Cognition
Sensors/actuators & mechatronics
for machine self-calibration,
-verification, -correction
Design
Holistic design environments,
co-design of
product/process/service
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New Sectors will drive growth
Exciting future Technology and
Growth Sectors will include
Global growth will ease to 3.7% in 2008
•
•
•
•
•
•
•
•
•
•
Biotech
Green Energy
Industrial Wireless
Bioplastics
Nanomaterials
Water
Security and Tracking
Advanced Transportation
Personalized Medicine
Pervasive Computing
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Key
Takeaways
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Key takeaways
 Downturn will get worse before it gets better
 Shifts in market position/share happen in an downturn
environment
 Status Quo is not an option. Positive thinking with
positive action
 Protect your strategic investments
 Manufacturing is important. Invest in improvement.
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“Would you tell me, please, which way I ought to
go from here?,” said Alice.
“That depends a good deal on where you want to
get to,” said the Cat.
“I don’t much care where,” said Alice.
“Then it doesn’t much matter which way you
go,” said the Cat.
~ A discussion between Alice and the Cheshire Cat from
Lewis Carroll's Alice in Wonderland.
Thank You
For any queries:
Satish Lele
[email protected]
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