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EY: Top 10 advanced manufacturing analyst themes

EY releases its fourth quarterly review of the top themes discussed with leaders of advanced manufacturing (AM) companies.

Speaking with 33 leaders in advanced manufacturing (AM), EY has released its fourth quarterly review of the top themes in the industry. In the review EY discovered that manufacturers are optimistic on end-market recovery, with plans to increase their spend on digital transformation and product innovation.

“Digital technologies have emerged as a powerful tool for helping manufacturers maintain continuity in the face of major challenges such as pandemics. Specifically, digital can help in four key ways: capturing workers’ knowledge, enabling better access to expert knowledge, speeding up decision-making and optimizing processes,” said Craig Lyjak, EY Global Smart Factory Leader.

In this top 10 we take a look at the key takeaways from the themes discussed in the review for the industry.

10. Enterprise resilience and compliance

  • Many advanced manufacturing organisations are establishing initiatives to target efficiencies in production processes, renewable energy and recycling in order to meet sustainability targets.
  • In order to meet regulatory safety standards, commercial aerospace organisations are working with regulators to make design modifications.

9. Changes in production rates

  • Many companies have announced plans to augment capacities in new and existing facilities, particularly those with high exposure to pandemic supplies and growing end markets.
  • Production rates remain a challenge for those in commercial construction, luxury vehicles and commercial aerospace. For Aerospace in particular, gradual increases are expected by 2022.

8. Working capital and cash flow management

  • In Q4 those inventory and debt reductions have helped advanced manufacturing companies to improve their cash flow and working capital levels.
  • In order to maintain optimum inventory levels and reduce days sales outstanding (DSO) in 2021, organisations are implementing data analytics in the supply chain.

7. Customer acquisition and connectivity

  • Advanced manufacturing companies are experiencing an increase in new orders, particularly from defence, healthcare, electronics, and food and beverages.
  • In order to meet demands, many companies are expanding their salesforce, field technicians and distribution channels, as well as investing in enterprise wide CRM systems.

6. Product design and innovation

  • A particular focus area for companies has been digitalisation of existing products, as well as launching connected products.
  • Industrial organisations are connecting to IoT platforms, and supporting the launch of 5G and modern network technologies.
  • There is also an increased focus on more energy efficient and sustainable products.

5. Financial and capital strategy

  • Enhancing their technological capabilities, advanced manufacturing companies are making multi billion dollar acquisitions
  • Remaining high on the agenda for advanced manufacturing companies is debt reduction and restructuring.
  • Those in the industrial product and defence industries continue to take part in buybacks and dividends.

4. Competitive position

  • Advanced Manufacturing companies are holding onto their market share by investing in product development.
  • Striving to strengthen customer relationships, manufacturers are investing in digital transformation, introducing connected products.
  • Defence companies are pursuing space exploration as a new market.

3. Business reorganisation or restructuring

  • Manufacturers continue to consolidate their facilities and office footprints, as well as low their headcount.
  • To improve accountability and ownership, and generate material cost saving, organisations have been decentralising business units through supply chain programs.
  • Organisations are looking to research and development (R&D), acquisitions and initiatives in smart infrastructure, sustainability and electric mobility.

2. Change in financial outlook

  • Most organisations have cautious positive outlooks.
  • Capex-driven sectors are experiencing positive demand, which is expected to reach pre-COVID-19 levels earlier than previously believed.

1. Developments in end market

  • Companies are experiencing early recovery signs following COVID-19 in electric mobility, renewable energy, water filtration, semiconductors and medical devices.
  • Asia and Latin America are experiencing higher growth in automotive and consumer electronics.
  • Demand from oil and gas, and commercial aerospace customers remains low.