As if the pandemic itself weren’t enough, manufacturers have also had to face the challenges of headline-generating supply chain disruptions, a shortage of semiconductors, rising costs for a dizzying range of commodities, and unpredictably fluctuating energy prices. Add a growing recognition that they can no longer green-wash their contributions to the climate emergency, and manufacturing leaders have a lot to contend with.
Looking forward to 2022, they can expect more of the same. To survive, meet customers’ new expectations, and grow, manufacturers can’t fall back into old ways of thinking and acting. Instead, they must be innovative: Celebrate and operationalize the employee creativity that got them through the worst of Covid-19, invest in new products and new markets that drive differentiation, and step up to meaningfully reduce consumption and educate customers on the consequences of their choices.
As a result, Forrester predicts that in 2022:
Only 10% of manufacturers will successfully operationalize Covid-19-era creativity.
Last year, we observed the Covid-19-era acceleration of emerging technologies becoming sustained adaptive innovation. In 2022, we predict that as Covid-19 pressures reduce, only the industry’s leaders will maintain the sharp focus necessary to continue differentiating with creative processes, organization, products, and business models.
Examples like Bosch and Mercedes-Benz (building collaborative teams that leverage AI-fueled digital twins to build creative designs) show what’s possible. AI will play an increasingly important role, even generating creative outcomes and products. For example, generative adversarial networks (GANs) can quickly create synthetic data that’s almost indistinguishable from reality, supporting use cases such as the simulation of road conditions for new autonomous vehicles.
Global R&D investment for high-value manufacturing will grow 15%.
Continuing uncertainty will drive major economies to prioritize supply chain sovereignty, particularly for high-value technologies such as semiconductors, advanced energy, pharmaceuticals, and biotechnology. The US has introduced the Endless Frontier Act, hoping to invest hundreds of billions of dollars. The European Union has identified industries of strategic interest, now aiming to become the second-largest source of Li-ion battery cells by 2024, despite having a market share of just 3% in 2018.
China is proposing significant tax deductions on the R&D expense of its manufacturing firms. Each country or region is keen to secure its position, and incentives are available to attract or retain the right companies. Manufacturers will re-evaluate their geographic footprints to maximize opportunities, and re-examine their supply chains to optimize operations, and reform their product development with fundamental innovations.
Ten large global manufacturers will reduce spend on carbon offsets and emit less.
Asset-intensive industries like manufacturing are big contributors to global emissions: The steel industry alone is responsible for 7% to 9% of global CO2 emissions. In 2022, we expect the balance to finally shift from buying carbon offsets (compensating for damage already done) to the far harder task of minimizing that damage in the first place. Volvo took its first delivery of “green steel” (produced without coal) in August, and beginning in 2022, Mercedes-Benz will use the same supplier, targeting a carbon-neutral vehicle line-up by 2039.
China will no longer invest in coal-powered plants overseas. Projects like Gigastack, Hybrit, and Oyster show how energy-intensive industrial processes can be powered by hydrogen produced with renewable energy, and several of these should reach production scale during 2022. None of this will be easy, quick, or cheap (ArcelorMittal’s CEO suggests that green steel could be 60% more expensive), but industry is finally beginning to absorb the pain of moving in the right direction.
Activist investors will challenge a global manufacturer’s custom product inefficiency.
As governments and multinationals line up to make bold climate pledges at the 2021 United Nations Climate Change Conference (COP26), activist investors (or customers) will spot a discrepancy they can no longer let lie. On the one hand, manufacturers are pushing to reduce waste and emissions throughout their supply chains, and on the other, the industry’s enthusiasm for ever-more-customized products and the aspirational “lot size of one” continues to grow. But, optimized processes, operating at scale, are invariably more efficient (and greener), than repeatedly making the same product in smaller batches.
Shifting from build-to-order to configure-to-order, or judicious use of 3D printing in key places, will help. But fundamentally, it may not be possible for the marketing messages that trumpet green credentials and those that offer customization to address a buyer’s every whim to both be true: Manufacturers must decide which they — and their customers — care about most.
Manufacturers will push back on their suppliers’ enthusiasm for “servitizing” everything.
Both buyer and seller benefit from as-a-service models where they pay (or charge) for outcomes rather than products — when those models are done right. But, despite the plethora of everything-as-a-service offerings flooding the market, buyers recognize that not every supplier relationship really needs to be a service sold on subscription: Sometimes, just buying a ton of widgets is the right approach. The fight-back has begun as buyers gain the confidence to decline the most outlandish subscription offers.
As we enter 2022, there must be a much clearer shared understanding of the purpose and value of the relationship between B2B buyers and sellers. If sellers continue down the path of trying to servitize everything, there’s a very real risk that their prospective buyers will dismiss the whole idea, missing the nuggets of real opportunity in the flood of non-differentiating attempts to lock buyers into perpetual subscriptions for products they could — and should — have just bought outright.
Source: Forrester Research, USA.