Larger manufacturing firms are deriving more than 60% of their profits from outside their home region, which will help offset any detrimental effects of an economic slowdown or potential recession within the U.S. market, according to Manufacturing Insights' Worldwide Manufacturing 2008 Top 10 Predictions.
"In last year's predictions report, we discussed how the industry was entering the year with high expectations mitigated by high uncertainty," said Bob Parker, vice president of Research at Manufacturing Insights. "As we enter 2008, it seems that uncertainty has overtaken expectations as the industry girds against the prospects of a recession."
Several factors are creating uncertainty, including the subprime lending crisis, high oil prices and continued geopolitical instability and conflict. However, there are several reasons to believe that the pall of uncertainty will not entirely eclipse expectations for business success in manufacturing, says Manufacturing Insights, an IDC company. They point out that a recession in the U.S. no longer guarantees worldwide trouble, and many of the largest manufacturing firms in the U.S. now earn more than half of their revenue and profit from outside the home market. In addition, a weak dollar means that goods manufactured in the U.S. are price competitive in foreign markets.
"The hope is that continued global growth will lift the performance of large manufacturing firms in the U.S., Western Europe, and Japan," continued Parker. "This growth will allow these companies, and the smaller ones that depend on them, to expand the employment base and restore consumer confidence and spending. The most likely source of pain in the manufacturing segment will be in the midmarket, especially for those companies in mature economies that depend on local markets. For the larger firms, expectations don't have to be completely muted as long as management is willing to understand that their business models must match the new economic realities."
The top predictions presented include:
- Large manufacturing firms will move toward a globally integrated business model;
- IT organizations will accelerate spending on collaborative decision environments and incubate multi-enterprise business networks;
- IT spending in the supply chain area will focus on fulfillment execution;
- Product management software investments will be geared to integrating processes, not automating tasks;
- Manufacturing firms will tackle the challenges of aging/emerging workforces with investment in organic knowledge management and;
- Machine to Machine technology will emerge as a key enabler to enhanced service delivery.