Industry investing heavily in custom solutions

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Industry investing heavily in custom solutions

  • Exports to remain the catalyst for growing revenues and output in 2015
  • Temporary margin gains as a result of lower costs of raw materials and energy
  • Improved flexibility and competitive edge through Quick Response Manufacturing (QRM)

Export-based companies boosted by weak euro

Exports will remain an important driving force behind the industrial sector’s growth in 2015. Export-based companies – the machine industry, the metal sector and the chemical industry – will benefit most, so ABN AMRO concludes in its Vision on Industry 2015. It expects that machinery companies will benefit in 2015 as the weak euro and low oil prices bring the costs of energy down. The relative drop in oil prices will particularly help the chemical industry in 2015: not only does it mean lower energy costs, the total costs of raw materials will also be lower. The growth in non-Dutch operations helped the metal sector to achieve a slight growth again in 2014, after two years of contraction. Although domestic revenues were disappointing last year, ABN AMRO expects that the domestic demand will recover in 2015, chiefly as a result of the recovery in the construction industry and on the housing market.

Focus on shorter delivery times and improved efficiency

The technological advances offer the potential to change industrial processes dramatically. In the machine industry this has already led to the development of high-grade machines that interface to optimise production processes. In the high-tech sector demand for advanced technology and custom products is also on the rise. This means more complex production processes, ABN AMRO stresses. In response, more and more companies are relying on Quick Response Manufacturing (QRM) to reduce delivery times, improve efficiency and cut costs. QRM adds flexibility to the production process, which in turn makes companies more competitive.

Interdependence leading to consolidation

Creating new and innovative products requires that the links in the industrial supply chain be integrated, which in turn adds to the need for supply chain partnerships. The high-tech sector is characterised by a high level of interdependence between manufacturers and suppliers. For example, manufacturers are seeking to place ever larger orders with fewer suppliers, to improve their cost-effectiveness and reduce their risks. ABN AMRO believes that this will lead to consolidation among suppliers. In the machine industry too companies are venturing onto the M&A market, in search of companies or new partners to support their own output or offer access to new geographic markets. ‘The increased interdependency means more consolidation in the sector. Working together to create new products will require partnerships across the entire spectrum, resulting in closer dealings between supply chain partners,’ explains David Kemps, Sector Banker Industry at ABN AMRO. ‘The complexity of the products and the production processes is also forcing companies to work together ever more closely with buyers to define product specifications together. Both these developments may boost innovation and cause products to be introduced onto the market faster.’

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