Afghanistan
Major manufacturing players remains relatively upbeat about their respective sector outlooks, a new report finds. Key concerns remain however, around the development of key capital expenditure projects, as changing trends, from increased demand for flexibility and sustainability to a war for talent, take hold of the industries more widely.
The manufacturing industry faces a host of new challenges from new technologies and models, such as digitalisation, additive techniques and Industry 4.0; a scarcity in talent; and sometimes unpredictable changing, and radically different, consumer and client sentiment across global markets. Environmental and wider supply chain concerns too are becoming increasingly prominent factors to consider for the industry.
The global manufacturing industry is expected to have seen growth of 2.8% in 2016. Manufacturing production is likely to risen by 1.3% in industrialised countries and by 4.7% in developing economies. To meet the increasing demand, in the face of market uncertainties, manufacturers across a range of sectors face key strategic capital expenditure (capex) decisions that meet the various, and sometimes complex, market challenges. In a new report from Arcadis, titled ‘Industrial Capital Investment Survey 2017’, the firm interviewed 73 manufacturing industry executives to get a better picture of key current trends affecting their capex decision making.
The analysis by the firm finds that most industry executives are positive about current market trends. 36% of all respondents believes that the market will improve over the coming 12 months, hitting 50% in the engineering and manufacturing segments.
The automotive and heavy industries are less upbeat however, with no respondent from the sector expecting market conditions to improve, and 80% and 67% respectively expecting conditions to remain the same. FMCG respondents and building & metals respondents, too, are predominantly expecting the market to remains stable at 60% and 59% respectively.
Tjerk van der Meer, Global Sector Leader at Arcadis, remarks: “Overall, our survey presents a positive picture for the industrial manufacturing sectors. Many are taking a mature, future focused approach to their capital programs, however, companies cannot afford to rest on their laurels in the changing and price-constrained market. While progressive companies can embrace technology and data platforms to improve their capital delivery, all can learn from best practices across different sectors and in different countries.”
Flexibility
Flexibility in the face of dynamic market requirements, from changing sentiments to more diverse consumer tastes, places a host of strains on built assets to be sufficiently agile to make various products, or small-batch products, among others.
The survey shows that a small majority (52%) of respondents are able to meet current flexibility requirements, with chemicals out ahead at 78%, followed by automotive and FMCG, both at 60%. A number of industries face considerable shortfalls in agility however, particularly pharmaceuticals, and a segment of the FMCG market whereby 40% feel that they are not sufficiently flexible to meet the challenges facing their business.
Environmental impact
Reducing the environmental impact of the manufacturing process, which may include adding the cost of a host of externalities to the process itself, has become an increasing imperative for companies. Aside from social and regulatory pressures from customer bases, the reality of the effects of their actions on the wider environment are also becoming increasingly difficult to simply ignore.
In the face of mounting pressures to protect their reputations, as well as meet compliance rules, the consultancy firm asked respondents about the degree to which they are reducing their environmental impact through their capex strategy, from reducing risks to focusing on a circular economy. The report found that particularly the automotive industry, some of which has faced particularly poor press recently, is significantly focused on environmental impact, at 100% of respondents. Heavy industries respondents too, showed propensity to invest in more sustainable capex investments. FMCG follows, at 80% of respondents.
Talent management
The research also finds that the manufacturing industry is increasingly finding it difficult to attract the right people for its capital investment programmes. Around 42% of respondents said that the situation was more difficult, with particularly the automotive and chemical sectors, on 80% and 67% respectively, noting concern.
In the pharmaceutical and manufacturing sectors, a sense of no change was noted, at 71% and 50% respectively. While few respondents, 16% of the total, said that the talent situation has become easier – with mainly respondents in heavy industries and engineering reporting optimism.
Tjerk van der Meer states: “Despite the broadly positive outlook, which is great news, manufacturing companies are challenged to adapt their production capacity and facilities to meet clients’ need, due to shortages in available capital and skilled workers. As digital technologies come to the fore, we see a need to ensure that any investments into building new, or upgrading existing, production facilities are flexible and demonstrate a clear return on investment to succeed.”
