**PRELIMINARY**

2012 Top 10 Operations

Technology Predictions
Orlando, September 21st, 2011
 • A division of IDC
• Develops industry research,
benchmarking projects and
Business advisory services on business
Process
Information process best practices and on
Technology the use of IT in manufacturing
• Helps manufacturers
Business improving their capabilities in
Process key business process areas
• Helps IT vendors to assess the
The
market opportunities and better
Dynamic
Enterprise focus offering toward end-
users’ needs
Operations Technology Strategies
Research Program
• The Operations Technology Strategies research service provides deep industry
and business advice, technology guidelines and benchmark for the plant floor
– Assists end-users shaping their plant IT strategies, and align plant floor technology
investments with business goals
– Supports IT vendors in better understanding the industry and technology trends in the
areas of Operations Management

 Leading Analyst  Regional Analysts

– Pierfrancesco Manenti – Sanjeev Pal
(Worldwide) (US)
– Lorenzo Veronesi
(EMEA)
– William Lee
(APAC)
Why Predictions?
• Goal: Identify trends that impact
manufacturing business and
information technology decisions.
Preview the MI research agenda.

• Bias: We focus on the transformation

of major manufacturing processes and
how IT enables that transformation.

• Process: Drawn from IDC and

Manufacturing Insights studies, survey
results, industry contacts, and our own
industry experience.

• Time frame: Predictions are focused

on 2012, but will have a long range
impact.

Copyright 2011 MESA North American Conference

How can you contribute to the
Predictions process?
• The Predictions process:
– AUG/SEP: First draft of Predictions
– OCT/NOV: Review with relevant industry associations
and professionals
• Today: MESA International 2011 North American
Conference
• Nov. 10th: 2011 MESA European Conference
– DEC: Final 2012 Top 10 Optech Predictions will be
published
• Please express your opinion!!
– We will ask you to raise your hand to vote the most
relevant Predictions
Are we back in recession? Again?
Manufacturing 2007 2008 2009 2010 2011
PMI Index
(Aug)
(December
reading)
Euro Zone 52.6 33.9 51.6 57.1 49.7
US 48.7 32.9 54.9 58.5 50.6
China 55.1 41.2 56.6 54.4 50.9
Sources: ISM, Markit Economics, CFLP (August 2011)
Worldwide Manufacturing GPI Index 1Q02 – 2Q11
160 6
Index (1Q 2002=100)

140 5
120
100 4

(%)
80 3
60 2
40
20 1
0 0
1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11
Revenue Net profits
Source: IDC Manufacturing Insights, GPI index, 2011
Increasing complexity in doing
business in manufacturing
Changes in operations complexity • Increased global
in the past five years competition,
100%
90% • Economic uncertainty and
80% demand volatility
70% 52.8% • Global manufacturing and
60% increased supply chain
50% complexity
40% • Frequent supply chain
30% 35.0% disruptions – did we lean too
20% much?
10% • Product proliferation
12.2%
0% • Quality and compliance
Significantly or more complex • Complexity in IT
About the same
infrastructures
Less complex

Copyright 2011 MESA North American Conference

In this context, what are the attributes
for effective manufacturers today?
• Customer centric –
focused on customer
fulfilment needs and open
to market trends and
opportunities
• Agile – capable to quickly
change tactical directions Impacting …
and reconfigure
themselves to adapt to
changes
• Robust – capable to
manage the increasing
complexity in doing
business in manufacturing
The importance of manufacturing
operations to drive sustainable growth
• A volatile worldwide economy
has increased the importance
of manufacturing operations
• Manufacturers are returning
back to basics, to their
manufacturing roots
– The execution of manufacturing
operation processes is where
customer orders are fulfilled
– Uncoordinated manufacturing
operations are the actual
bottleneck of supply networks
– Managing production operations
effectively is of paramount
importance for successful
businesses
• Governments better understand that
an economy purely based on service
industries alone can’t survive in the
longer run
• Germany implemented substantial
reforms to build the most competitive
industrial sector of any advanced
economy
– Germany recovered faster from the
downturn
– The country posted 3.6% GDP annual
growth in 2010
– Expectations are for growth to continue
at much higher than the eurozone
average
• Most important lesson learned from
the last downturn: the importance of a
competitive manufacturing sector as a
key driver for sustainable growth
 #1 Manufacturers Will Focus their Operational
Strategies on Capabilities rather than Capacity

The “productivity-vise”: productivity Capability vs.

gains, when outpacing market growth, Capacity: Ensuring the
created idle capacity which put capability of fulfilling
downward pressure on prices and customer needs rather
Manufacturing

resulted in the need to improve than making sure

productivity even further production capacities
Maturity

are fulfilled

Fulfillment

Efficiency
Quality
Volume
Pre-
Industrial

Time
#2 “Design Anywhere, Build Anywhere, Sell
Anywhere” Will Require the Global Plant Floor
Trend towards mass configuration
ATO/ETO

Global
Plant Floor
Product dynamics

MTO
MTS

Single Large Plant Multiple Outsourced Multiple Small Plants

Plants proximate to demand
Trend towards multi-plant
Production dynamics
#3 Manufacturers Will Create Real-Time Intelligent
Value Chains

• Need for integrated decision-making

environments
– Operate over an intelligent value chain, in
real-time: Instrumented, Interconnected,
Intelligent
– While data collection may not be an issue
for many manufacturers, the real problem is
their lack of understanding of what that data
represents
– Manufacturers will embrace a combination
of collaboration technology and analytic
applications that are specific to multiplant
information management
• The role of IT
– Emergence of Enterprise Manufacturing
Intelligence (EMI) going beyond just
scorecards
– Rising interest in enabling technologies:
cloud, SOA, collaborative environments,
etc.
 #4 Manufacturers Will Have to Adopt a Modern
Operational ERP Platform

A separate, enterprise-wide, real-time, operational

platform that is as important as the corporate
financial ERP platform

Best-of-breed Operational
Applications ERP Platform
Fulfilment Execution System
(FES) Supporting a customer
Alignment

• Closed-loop management of driven approach to

Business

inbound material, production manufacturing

capacity, and order fulfilment operations
• The technology component for management in
FES investment will have to globally integrated
Bespoke
reconcile what is frequently a organizations.
Financial ERP
Systems
mash of applications across silos
of process domains

IT Efficiency
Your opinion required: please raise
your hands
• #1 Manufacturers Will Focus their Operational
Strategies on Capabilities rather than Capacity
• #2 “Design Anywhere, Build Anywhere, Sell
Anywhere” Will Require the Global Plant Floor
• #3 Manufacturers Will Create Real-Time Intelligent
Value Chains
• #4 Manufacturers Will Have to Adopt a Modern
Operational ERP Platform
#5 Consumer Mobile Handheld Devices Will
Emerge as a Viable Option on the Plant Floor
• Need for a new generation of workers with
a higher awareness of the company
production objectives as well as of
underlying production processes
• True empowerment of plant workers
– Access to additional information at
station/machine side (e.g. PLM visual aids)
– Capability to collect/register data at the
same place (e.g. production/process
parameters, testing data, non-compliance
registration & resolution)
• Growing adoption of smart, portable
devices on the plant floor
– Ruggedized portable PCs (running
Windows, touch-screen, WiFi connected)
– Tablet devices (including iPad and other
similar devices)
– New generation smart-phones (including
iPhone and similar ones).
#6 Security on the Plant Floor will Attract
Significant Investments
• Security issue in the plant floor is enormously
rising in importance
– In a recent global survey, almost 30% of respondents
indicated their top security executive reports directly
to the CEO
– Over 36% believe that security risk on the plant floor
will increase over the next two years
– 50% have already or are planning to change the
priority assigned to their security efforts over the next
12 months
• Why?
– New malware targeting the plant floor (Stuxnet)
– Integration of plant level applications (SCADA, PLC,
based on open architectures !) with other business
applications
– Mobility in the plant floor
• Manufacturers will start applying on the plant
floor the same enterprise information security
architecture already in place for back-office
security.
• ... But plant floor systems are the critical
infrastructure of a manufacturing enterprise and
cannot be isolated without stopping production
• Need to set up plant specific security initiatives
#7 Manufacturers Will Extend and Integrate PLM
on the Plant Floor
• It’s time to really exploit the “lifecycle”
management features also on the plant floor
– Product information available in the PLM must
penetrate plant walls to allow reaching a upper
level in flexibility and reactivity to product
innovation, new product launch as well as to
engineering changes in production
– Tight integration between PLM and MES
applications, at a degree that is rare to find
today in the average manufacturing companies
• Critical capabilities
– Simulate and optimize the production process
– Provide workers with visual information about
how production activities should be carried out
– Communicate engineering changes in real-time
on the shop floor
– Provide quality feedbacks from shop floor to
engineering departments
• Leading MES vendors stressing the above
capabilities will get a significant competitive
advantage
 #8 Energy Management and Sustainability Will
Continue Being a Priority on the Plant Floor

Worldwide Sustainability Index Net Profit Margin, 1Q02–2Q11  For leading manufacturers, the
sustainability agenda remains a priority,
9 even in tough market conditions
8  Being “green & ethical” demonstrated to
7
be a sound business driver
– Superior appeal on customers and
6
shape market demand
(%)

5
– Provides product differentiation
4 – “Reduce, reuse, recycle” as the
3 new lean principle
2
 Achieving a greener supply chain helps
meet customer fulfillment needs even
1 when it doesn’t bring significant business
performance improvements
0
1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11  No single new IT application is needed
Sustainability Index companies
to support sustainability, rather a strong
discipline in adapting, integrating and
All manufacturing using existing IT applications (e.g. PLM,
MES, SCM, BI, Network Design)

Source: IDC Manufacturing Insights , 2011

#9 Achieving Maintenance Excellence Will Emerge
as an Operational Cost Containment Measure

• Do “the right amount of maintenance, in the

right place, at the right time”
• Still, maintenance not been strictly part of
manufacturing operations
– Extensive outsourcing of maintenance
activities
– “Prima donnas” approach by maintenance
teams
• Leading manufacturers will:
– Have maintenance staff directly reporting to
overall order fulfillment tasks managers
– (Re)define a comprehensive maintenance
model for any company assets (RCM)
– Consider the overall financial impact of
maintenance
• Need for proper IT tools, and integrate
them seamlessly with business apps
Your opinion required... again
• #5 Consumer Mobile Handheld Devices Will
Emerge as a Viable Option on the Plant Floor
• #6 Security on the Plant Floor will Attract Significant
Investments
• #7 Manufacturers Will Extend and Integrate PLM on
the Plant Floor
• #8 Energy Management and Sustainability Will
Continue Being a Priority on the Plant Floor
• #9 Achieving Maintenance Excellence Will Emerge
as an Operational Cost Containment Measure
 #10 Manufacturing Operations Applications
Worldwide IT Spending will Outpace other Business
Applications Industry (Worldwide) 2012
Worldwide, Manufacturing Operations Software, IT growth on
spending forecast, Manufacturing 2011

Aerospace ++
10000 8.0% 9%
7.8%
9000 8% Automotive =
7.7%
8000 7% Electronics and electrical +
7000 6.4% equipment
6%
6000 Industrial machinery and heavy
5% =
$M

5000 equipment
4.0% 4%
4000 Chemicals
3% =
3000
2000 2% CPG (FBT, personal care =
products)
1000 1%
Durable consumer products =
0 0%
2010 2011 2012 2013 2014
Metal fabrication
IT spending YoY Growth
-
Metal processing
Source: IDC Manufacturing Insights , 2011
-
Essential Guidance
• A volatile world economy has put a renewed emphasis on disciplined
manufacturing operations management
– Companies have come to realize that consistent processes,
informed people, and open lines of communication can go a long
way to delivering market share gains, improving profitability, and
encouraging innovation where the company meets the customer.
– The current situation is born of long term changes in business
models that must be reconciled with application deployments that
are, at best, suboptimal
• Modernizing the applications used to support new, customer driven
operating models should be and are a priority for companies across all
industry segments.
– Those companies that invest aggressively will enjoy the benefits of
higher revenue growth, improved profitability, and customer led
innovation
– IDC Manufacturing Insights expects comprehensive projects in
Manufacturing Operations area to move up the priority list at major
manufacturing companies and draw substantial investment over the
next five years
Thank You!
Questions?

Sanjeev Pal
IDC Manufacturing Insights, US
Twitter – @sanj_pal
spal@idc.com

Pierfrancesco Manenti
Head of IDC Manufacturing
Insights, EMEA
pmanenti@idc.com