Engineering and Manufacturing

Engineering and Manufacturing

In recent years, the Engineering and Manufacturing sector has been rocked by rising volatility. The price of key commodities, from iron ore to agricultural products, has seen violent swings and significant shifts in both supply and demand with currently extremely low price levels. For companies making the equipment that is used to extract, process, and transport these materials, this meant equally dramatic changes in fortune. As one of the most global of all industries, this sector is also particularly exposed to the rigors of nature, and to the threat of geopolitical disruption, from political instability and local protectionism to all-out war. Recent events such as the conflicts in Ukraine and Yemen have shown all too clearly how such problems can arise in unexpected areas as well as known trouble spots. Heavy engineering assets have long life spans, too. A commercial airliner or mining machine can operate for 20 to 40 years, requiring a regular flow of replacement parts and upgrades throughout its life. For manufacturers, the support of products in service can account for up to a third of revenues and a significant share of profits, while operators need the right parts in the right place at the right time to keep their expensive assets running. An airplane on the ground waiting unexpectedly for spare parts can cost its operator more than $100,000 per hour, for example.

Even when things are running relatively smoothly, companies operating globally face rising complexity. As regulatory regimes worldwide develop and mature at different rates and in different ways, companies must comply with trade and environmental regulations, industry standards and changing customer expectations.

Manufacturing companies are also looking to improve the responsiveness of their existing supply chains with an emphasis on flexibility by developing leaner and optimized inventory processes. Improving information flows is also a priority, with a focus on improved forecasting capabilities, extensive contingency planning and the use of risk intelligence tools.