The globalization of manufacturing and the increased dependence on digital technology is transforming the sector and changing its competitive advantage profile. This is a long-term trend, but we are seeing its effects more clearly with each passing year.

Globalization has meant that all companies must now be more cost competitive, in both domestic and foreign markets. Meanwhile, the explosion of digital technology has forced manufacturing to look at its competitive advantage not just in terms of cost competitiveness, but also in the way the sector defines products and markets. Product and market differentiation are now even more important than they have been historically. These truths apply across the manufacturing sector, but general industrial equipment and electronics are two areas where these forces are particularly strong.

We’re also seeing the effects of digitalization on the supply chain. Nothing defines manufacturing more than the supply chain, and digitalization has allowed manufacturers to bring in inputs—both raw materials and finished products—from around the world and assemble them in a modern factory. It has also allowed them to be more responsive to customer demand. Customer relationship management is new in manufacturing, and again, the electronics industry is one of the first to have adopted this advance.

There are still many companies that haven’t fully digitalized, but the next step will be embracing analytics and then artificial intelligence. We’ll be seeing more and rapid change: The digital revolution is only about halfway through transforming the manufacturing sector.

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