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Original Equipment Manufacturer growth needs more agile, lean operations

Dropping demand and rising commodity and labor costs are forcing Industrials to adopt more responsive and cost-effective operating models.

Industrial equipment manufacturers are pursuing the development of leaner, more agile business models as a way to fuel growth in the slowing global OEM market. But to achieve optimal results, their models will need to include digitized operations, digitally enabled service offerings, and cost management that can aid speed to market.

Research shows that an overwhelming 96 percent of industrial equipment manufacturers view the creation of new business models as key to driving success in the changing equipment market. Many have already begun reshaping various areas of their organization. This shift is largely due to OEMs recognizing that a more responsive and cost-effective operating model is needed to compete and grow in an environment of dropping demand, rising commodity prices, soaring labor costs and tightening margins.

Building a model that increases agility while reducing costs will require companies to digitalize their operations and optimize engineering, manufacturing and supply chain processes to become leaner. The rise of the digital world is demanding new digital manufacturing services and to remain competitive, OEMs will need to expand their product portfolios to include such services while maximizing the Industrial Internet of Things (IIoT) market.

Recalibrating for success
There are four actions that Industrials could take to help them make the transition to a new operating model and succeed in the changing business environment:

  1. Reinvest cost savings derived from creating leaner engineering and manufacturing operations and supply chain processes. These should be invested into developing and sustaining a new, enterprise-wide operating model to drive growth.
  2. Establish a model that focuses on developing innovative digitally enabled products and services that meet customer demand. OEMs should adopt a variable cost structure that provides transparency regarding production cost changes of such products and services to increase agility and time to market.
  3. Explore the process benefits of employing a new business model powered by digital technology. To gain a competitive advantage, equipment suppliers will also need to accelerate time to market throughout the delivery process—from ideation and incubation to industrialization and product and services deployment.
  4. Employ a change management approach to help align the entire organization and talent strategy behind sustaining the new business model. To shape an enhanced operating structure and optimize a value chain dedicated to fuelling growth, OEM leaders, employees and stakeholders must be in line with the new direction.

A digital future
Undergoing this transformation will not be without challenges. But pursuing such a strategy will become increasingly critical to prevail in a sluggish market and compete in a radically changing competitive landscape driven more and more by customer demand for digitally enabled products and services. Industrial equipment manufacturers that can forge a leaner, faster, digitally enhanced business model will be much better prepared to succeed in this emerging industrial market.

Andy Howard

Andy Howard
Managing Director,
Accenture Automotive and Industrial Equipment