"Manufacturers must evaluate the rapidly changing innovation ecosystem and develop a strategy for how they fit into it," states Jeff Dobbs, Global Sector Chair of KPMG's Industrial Manufacturing Sector. "Everything should be on the table, from re-evaluating your internal innovation organization design, access to partnerships with new niche disruptive innovators, utilization of open innovation communities or reallocation of R&D investments to new and bolder product development ideas." Dobbs' advice came as KPMG released its 2015 edition of their Global Manufacturing Outlook, a survey of 386 senior executives conducted by Forbes early in 2015. Those who responded to the annual survey represent aerospace and defense, automotive, conglomerates, life sciences - medical devices, engineering and industrial products and metals. Half of respondents hold C-level positions and a third represent organizations with more than US$5 billion in annual revenue.

Preparing for "a major transformation coming to the manufacturing sector"

According to KPMG, innovation and technology-driven transformation is on the horizon, and manufacturers around the world are "tweaking and adjusting their business models and operating structures in preparation for the battle."

The firm released 6 key highlights from the report:

  1. "Manufacturers are increasingly innovation-led and focused on improving R&D efficiency and value." 32% of survey respondents say R&D efficiency is their biggest challenge.

  2. "Sales growth and cost reductions continue to top the agenda as manufacturers prepare for increased competition." 55% of executives say sales growth is their firm's top priority, while 41% cite reducing their cost structure.

  3. "Manufacturers are increasingly looking for breakthrough innovations and are increasing investment in R&D." Pursuit of breakthrough advances is the primary strategy of 41% of survey respondents. Nearly three quarters say they will spend in excess of 4% of revenues on R&D over the next two years.

  4. "Manufacturers are entering into partnerships and adopting new technologies to improve speed-to-market and lower innovation costs." Partnerships are said to be the basis of innovation for more than 75% of respondents.
  5. "Reducing costs and preparing for new product launches are high priorities for manufacturing supply chain organizations." 46% of respondents will aim to lower costs and working capital. Nearly 30% will restructure to support growth.
  6. "Concerns about supplier performance and capacity remain high but visibility into supplier organizations remains surprisingly low." Flexibility, performance and capacity are the top three supply chain challenges cited by respondents, while only 14% claim supplier visibility into Tier 1,2 and beyond.

Read the full report: KPMG Global Manufacturing Outlook 2015

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