Global Manufacturing Outlook 2013 KPMG

Global
Manufacturing
Outlook
Competitive advantage:
enhancing supply chain
networks for efficiency
and innovation
An Economist Intelligence Unit
research program sponsored
by KPMG International
Interviewees
We would like to thank the 335 executives who participated in
the survey and the 4 interviewees below for their valuable time
and insight.
Carol Burke Paul McGartoll
Managing Director, Unipart Vice President of Strategy and
Manufacturing Group Business Development, Textron
Sylvain Levesque Bill Scotting

Vice President of Corporate Strategy, Executive Vice President,
Bombardier ArcelorMittal
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
About the survey
This report is based on a survey of 335 senior executives, conducted in November
2012. Executives represented 5 industries: Aerospace and Defense, Automotive,
Conglomerates, Engineering and Industrial Products, and Metals. Forty-six percent
were C-level, including board members. Respondents came from companies of many
different sizes: nearly 30 percent represent companies with more than US$5 billion in
annual revenue. Respondents are distributed globally, with nearly a third each from the
Americas; Asia-Pacific; and Europe, the Middle East & Africa.
1. What are your organization’s global annual 2. Which of the following best describes your title?
revenues in US dollars?
1% Head of department
Other C-level executive
4% CFO/Treasurer/Controller
5%
12%
$25bn and over SVP/VP/Director
9% 28%
8% $10bn to $24.99bn Manager
37%
$5bn to $9.99bn COO/CIO/Technology director
7%
9% $1bn to $4.99bn Head of business unit
$500m to $999m 10% Other/Board member
CEO/President/Managing
24% director/Executive director
34% 11%
3. In which region are you personally based? 4. What is your primary industry?
1%
4%
6% Asia-Pacific 17% Engineering and industrial
products (including
30% North America
29% industrial electronics)
Western Europe
Automotive
30%
Latin America
Conglomerate
18%
Middle East and Africa
Metals
Eastern Europe
18% Aerospace and defense
30% 18%
Source: Economist Intelligence Survey, Nov. 2012

Note: Graphs may not add up to 100% due to rounding.
iii
Foreword
The market headwinds of intense global competition, slow to modest growth,
public sector budget constraints, and Euro-zone instability continue to challenge
industrial manufacturing companies to transform their business models and their
cost structures in ways unimaginable only a few years ago. In the midst of the
continuing focus on cost, some might say that manufacturers have hunkered down
to weather the storm. To the contrary, we believe this year’s Global Manufacturing
Outlook (GMO) reveals that these companies are positioning themselves for a new
era of growth driven by innovation, collaboration across the value chain, and rapidly
changing manufacturing and decision support technology.
On the innovation front, nearly one-third of the respondents to this year’s survey
indicated that they intended to pursue “breakthrough” or “disruptive” innovation
strategies in the product development area. Further, there was a marked (15 percent)
increase in the number of respondents increasing their R&D budgets to 4 percent
or more of their revenue, an upward trend we believe will continue over the next
2-3 years. Finally, the innovation process is quickly shifting to a “partnership model”
bringing together internal resources, customers and suppliers, third party research,
and external funding sources. Speed to market, enhanced products, and the right
innovation business model will ultimately be the differentiator in the battle for global
market share.
The economic impact of the evolution of the supply chain over the past few years has
been dramatic. The concept of nearshoring or sourcing/manufacturing closer to the
end market to reduce cost and risk was a hallmark of the post-recession recovery.
As the recovery gained momentum, new models of cooperation and collaboration
between OEM’s and the value chain helped to optimize processes and further reduce
cost. As you will see from the 2013 GMO, the next wave of supply chain gains will be
the most dramatic yet, with a new spirit of partnership, transparency, and visibility
across the value chain creating enormous economic value from a technology-enabled
demand-driven supply chain.
Underpinning the new models in innovation and supply chain is the extraordinary
advancement in the technology to support everything from the R&D and
manufacturing processes to decision support and data analysis tools, as well as
supply chain visibility and other business intelligence needs. The emergence of
niche players coupled with the capabilities of the traditional players will make this a
technology-rich environment for global manufacturers. Exploiting these technologies
and managing the resulting explosion of data will be critical to remain at the top of
the competitive heap.
One thing we know for sure, the volatility that we have seen the past 5 years will
continue and the strategies, relationships, and tools to compete in this ever-changing
environment must become much more sophisticated. We hope that you will find this
year’s GMO thought provoking and stimulating as you consider your company’s plans
for driving growth and prosperity in the continuing “manufacturing renaissance.”
Jeff Dobbs
Global Sector Chair, Diversified Industrials
iv
Contents
Executive summary 2
Positioning for opportunity 4
The future is in the supply chain 8
The visibility imperative 12
Innovation: forging ahead 16
Conclusion 24
1
Executive summary
Over the past several years, global manufacturers have had to

adapt to remain competitive within a volatile and fast-moving
economic environment. Today, with the global economy stabilizing,
the emphasis on caution is shifting more towards a focus on
opportunity. In this Economist Intelligence Unit report, written
on behalf of KPMG, and our fourth annual global manufacturing
outlook, we find global manufacturers generally optimistic about
the future, and taking steps to capitalize on potential opportunities.
Companies are adopting a number of strategies to stay ahead
of the curve, including a deeper emphasis on collaboration with
partners and suppliers in the search for new ideas.
2 KPMG Global Manufacturing Outlook: Competitive advantage

Key findings from the 2013 report are:
• Global manufacturers are increasing transaction activity to take
advantage of growth opportunities in global markets, while reassessing
operations and product portfolios to control costs. Nearly a third of all
companies in our survey are planning mergers or acquisitions to capitalize on
opportunities in new markets, and close to half of larger companies (those
with revenue over US$5 billion) are doing so. 4 in 10 say they plan to exit
unprofitable, non-core product lines and unprofitable, non-core business units
over the next 2 years.
• Companies are viewing their channel partners as more of a “network”

which is critical to achieving a “demand-driven” supply chain, i.e. one
that provides a real-time view to total demand, supply, and capacity
information. For companies of all sizes, genuinely closer working relationships
between suppliers and other partners will be critical to maximizing their
responsiveness to changes in the market. More effective and efficient
collaboration enables firms to optimize inventory, logistics, and other
operational costs.
• Visibility is the new watchword in supply chain optimization and
a major opportunity for many companies. Many companies have a
substantial opportunity to boost performance, agility, and resilience by
improving visibility across their supply chain network. Nearly half of the
companies say they lack visibility beyond their Tier 1 partners. And only
9 percent say their firm can assess the impact of supply chain disruptions
within hours, although for the biggest companies (revenues of US$5 billion
or more) this rises to 20 percent.
• Increasingly, companies are placing the supply chain at the center of their
strategies to innovate. Many companies are starting to see their suppliers
as a source, not just of production and logistics, but also of ideas. Half of our
survey respondents say that partnerships, rather than in-house efforts, will
characterize the future of innovation. And investing in R&D and innovation
remains a priority: 42 percent expect their company to invest greater than
4 percent of their revenue in innovation over the next 2 years.
• Companies see value in both breakthrough and incremental innovation
to stay competitive. Nearly a third of respondents whose firms are
stepping up R&D say their company will invest in breakthrough innovation.
The remaining two-thirds of respondents who see a resurgence of R&D
activity are focused on incremental innovation – enhancing existing product
lines and services. This number rises to 78 percent among larger companies
(revenues of US$5 billion or more), compared to 64 percent of smaller
companies. The focus on both breakthrough and incremental innovation
suggests companies are revisiting R&D strategies according to what’s most
effective for their operations.
KPMG Global Manufacturing Outlook: Competitive advantage 3

Positioning
for opportunity
Global The past few years have brought
both large-scale upheaval and
Global manufacturers remain
focused above all on the world’s
manufacturers major new opportunities for global
manufacturers. The repercussions on
2 biggest economies, the United
States and China, for sales growth.
are redoubling the world economy of the 2008 global
financial crisis prompted companies
The US represents a new source of
optimism, with signs that a new era
their efforts to to reduce costs and shrink operations.
Yet at the same time, the spreading
of manufacturing dynamism may
be dawning. A number of factors,
become more ubiquity of digital technology and the among them rising production costs
emergence of innovations like 3-D in Asian countries and lower energy
efficient and printing have opened exciting new costs brought on by the domestic
innovative. horizons.
This Economist Intelligence Unit
shale gas revolution, are convincing
some to revisit the US, with its
technological prowess, attractive
study, written on behalf of KPMG,
talent pool and scaling opportunities,
finds global manufacturers redoubling
as a primary base. For similar reasons,
their efforts to become more
China continues to be a magnet for
efficient and innovative, both to stay
global manufacturing companies:
competitive in mature markets, and
although economic growth there has
to capitalize on growth opportunities
decelerated and costs have risen, the
in the emerging world. Firms are
economy remains one of the most
looking to deepen their relationships
dynamic in the world; as a production
with partners, invest in innovation and
base it offers tremendous efficiency,
strengthen their operations to prepare
and a strong engineering skills pool.
for growth.

At the same time, companies
expect to maintain a global presence
For ArcelorMittal, the principal areas
for expected sales growth are Brazil,
Mergers and
in markets beyond the 2 major
powerhouses. Other markets that
South America, Africa, Middle East,
along with the US. “Despite some
acquisitions
continue to be regarded as the top
ones for sales growth span India, the
economic disruption associated with
the “Arab Spring” we are expecting
feature on
UK, Brazil, and Germany. In our past some growth in North Africa, the agenda of
surveys, these have consistently especially Algeria, in the oil and gas
featured among the top markets that industry,” says Bill Scotting, executive approximately
companies look to for sales growth.
As Sylvain Levesque, vice president of
vice president of ArcelorMittal.
While companies look to global
1/3 of our
corporate strategy at Bombardier, puts
it: “While most dollar growth in our
markets to leverage opportunities, respondents.
mergers and acquisitions feature
business is coming from traditional
on the agenda of nearly a third
economies in terms of percentage
of our respondents; this number
growth, the fastest are South Asia,
jumps to 47 percent for larger
China, India, Brazil, and certainly other
companies (those with revenue
South American countries.”
KPMG Insight
UK Open for Business
The 2013 survey ranks the UK 4th as a country pound over recent years which has made
where global companies expect sales growth British exports cheaper.
in the next 12-24 months. This is an increase in
The UK government has launched initiatives
ranking from the 2 previous years (5th in 2011,
to encourage local production and foreign
and 6th in 2012), and whilst this may be linked to
investment in UK manufacturing. Examples
recent UK government initiatives to encourage
Stephen Cooper such as the Patent Box regime which gives tax
both exports from the UK, and investment
Partner, incentives for companies to register patents
into the UK by foreign companies, it may also
Head of Diversified in the UK and reductions in the UK corporate
be reflective of the recent weakening of other
Industrials and income tax rate (reduced by 2 percent since
countries such as Germany and Brazil.
Automotive, 2010) are part of the UK Government’s stated
KPMG in the UK The Eurozone has traditionally been the objective of the having the lowest corporation
UK’s biggest export market. With the Euro tax rate in the G20. The UK has recently seen
Crisis impacting European demand, the UK numerous automotive manufacturers investing
is increasing its focus on emerging markets. in plants in the UK such as Jaguar Land Rover,
From 2007 – 2012 British companies more Nissan, BMW, Toyota, General Motors, Honda
than doubled their exports to the fast growing and Nissan.
BRIC markets, supported by UK Government
The UK is showing the world that it is ‘open for
trade missions, and the weakening of the
business’.

36 percent will of over US$5 billion). Indeed, the
number of companies that are not
their current operations. 4 in 10
respondents say their cost-control
divest noncore considering any transaction activity,
16 percent, is at a low level compared
priorities over the next 2 years consist
of exiting unprofitable or non-core
assets or to past years. Forty-five percent
of larger companies also say they
product lines and business units.
activities in will invest in Greenfield projects to

As companies look to maintaining –
and widening – their global footprint,
increase capacity in growth markets.
the next 2 years. Companies are also using transaction
it will become even more critical
to ensure that their operations are
activity to rationalize operations: over
efficient and minimize waste. This
a third say they will divest noncore
research finds that companies have
assets or activities in the next
many opportunities to make significant
2 years. At the same time, companies
improvements in these areas.
recognize the need to reassess
KPMG Regional Perspective
Alex Shum
Head of Diversified Industrials, KPMG in China
China remains the fastest growing economy in the world and While China provides a large talent pool for R&D, the cost
one of the most attractive investment destinations globally in of recruitment and retaining such talent continues to rise on
many industry sectors, if not all. the back of inflation and high costs of living which – in the
more developed regions of the country – have been driving
Under the 12th 5-Year Plan, the Chinese government’s policies expectations of pay rises for skilled labor. Uncertainty also
remain on course in terms of favoring investments in high-end prevails as to technology platforms and options.
equipment manufacturing, high-tech, energy-efficient products
and new materials sectors. In large part, these measures Investment spending also remains cautious in China, driven
are aimed at modernizing the manufacturing sector, moving by uncertainty as to the timing and magnitude of a global
domestic manufacturers up the value chain and protecting the economic rebound and the potential impact of measures
environment. In turn, this helps divert overseas and domestic recently announced by the new Chinese central government
investments and attracts managerial and R&D talent to these leaders.
sectors; a welcome trend for Chinese companies who are
increasingly recruiting overseas talent for key management
positions.

KPMG Regional Perspective
Dr. Gerhard Dauner

Europe, Middle East, and Africa, Head of Diversified Industrials, KPMG in Germany
Over the past few years, European manufacturers have made However, we believe that achieving sustainable cost reduction
great progress in embedding efficiency initiatives and cost- requires a transformational change supported by cross-
cutting programs into their operations, closing unprofitable functional and inter-company programs. In other words,
businesses and divesting of non-core assets. Based on recent Europe’s manufacturers will need to focus on changing the
improvements in margins reported across the continent, it mind-set and the daily routines of their people and suppliers
seems that these measures are taking hold. rather than chasing one-off initiatives.
But while cost reduction remains important and deeply As such, Europe’s manufacturing executives would be well
embedded in the minds of Europe’s manufacturing managers, advised to review their past sourcing and footprint decisions
we expect to see new measures emerge to further improve in light of today’s environment and be willing to take on
operational effectiveness. These may include the optimization radical new approaches such as the re-shoring of outsourced
of existing processes along the value chain in order to build functions, the installation of local R&D departments and the
“clusters” of competence; greater focus on local development development of production facilities focused on individual
and production facilities within existing markets; and the market demands.
development and implementation of incremental and (to a
lesser degree) pioneering innovation as a way to safeguard
product differentiation and reduce time to market.

The future
is in the supply chain
The #1 Manufacturers are placing the supply
chain at the center of their efforts to
order, the challenge now is to improve
supply chain performance through
challenge achieve their strategic priorities. Global
manufacturers’ ability to optimize
genuinely closer working relationships
and collaboration across the network.
is “intense performance and cost in their entire
supply chain will be key to helping
As Mr. Levesque expresses it,
“We are pushing the limits of lean
competition them become more competitive and
resilient. “The supply chain is going
manufacturing; [we are] “leaning” the
supply chain.”
and pressure to be absolutely critical in the future,”
For survey respondents, the biggest
says Carol Burke, managing director
on prices.” of Unipart Manufacturing Group, a
challenges their company faces are
intense competition and pressure on
supplier to the auto, energy generation,
prices, keeping the business model
and oil and gas industries.
competitive, and uncertain demand.
Many companies are seeing an Ms. Burke sees suppliers playing
opportunity for improved collaboration a bigger role in helping companies
with channel partners to help them overcome their challenges and meet
stay at the forefront of the market their strategic goals: “Providing
and be more responsive to changes a combination of manufacturing,
in customer demand. While the lean logistics, and consulting is going to be
manufacturing revolution was focused the way forward.”
on getting businesses’ own houses in

Companies that are starting to view
partners as more of a “network” than
In the words of Paul McGartoll, vice
president of strategy and business
Just over
a “chain” are finding other significant
benefits. As companies step up
development at Textron, “Collaboration
in the supply chain…is the nature of
1/2 say
investment in innovation, whether
in search of “breakthrough” R&D
the business. If someone is supplying
just us, they’re not going to be as
partnerships,
or incremental improvements to competent as people working with a rather than
existing products and services, they number of customers. We work with
are increasingly looking to their supply suppliers to adapt their capabilities for in-house
network for ideas: 51 percent of our
survey respondents say partnerships,
our requirements.”
Companies are recalibrating their
efforts, will
rather than in-house efforts, will
characterize the future of innovation.
supply chains as they seek to capitalize characterize
on opportunities and respond to
Suppliers that work for a range of firms challenges. A majority (57 percent) of the future of
are likely to be able to contribute more. survey respondents say that optimizing
innovation.
KPMG Sector Perspective
Eric Damotte
KPMG Global Head of Metals
Metals outlook
All things considered, 2013 will likely be remembered move by many organizations to reduce downstream costs
as a year of foundational change for the metals sector. and capture some of the value lost to intermediaries
Restructuring and cost cutting will continue in the slow by rethinking their distribution and customer service
growth markets of Europe; investment will pick up in offerings. On the upstream side, we expect to see an
the high growth markets in Asia; and consolidation will uptick in the pace of partnering and joint ventures as metals
continue, particularly in China where significant room still organizations look to secure the cost benefits of vertical
remains for the industry to modernize. integration without outlaying massive amounts of capital or
Much like the respondents in the broader survey, metals shouldering too much risk.
companies are keenly exploring new opportunities for cost Likely the greatest competitive advantage, however,
cutting. In those markets where overcapacity is perceived will come from renewed efforts to drive product and
to be more structural in nature, we expect to see a further process innovation. Indeed, as customers become more
restructuring of assets. At the same time, continued sophisticated in their needs and regulators add increased
restrictions on available capital and a temporary drop in pressure for environmentally-friendly products and more
resource prices around the world has catalyzed metals efficient energy use, those organizations that are able
organizations to focus more on the optimization of their to quickly respond to shifts in demand and location will
existing assets rather than the acquisition of new ones. ultimately capture a greater share of the market.
The supply chain has also come sharply into focus for
metals companies. Over the past year, I have noted a

KPMG Insight
Embedding tax into the optimization strategy
As this year’s Global Manufacturing Outlook of the impact of more common factors
indicates, most multinational manufacturers such as the availability and cost of a skilled
are currently struggling to ‘triangulate’ workforce, general location costs and local
their supply chain to achieve end-to-end income tax rates, but few seem to pay close
visibility among customers, suppliers, enough attention to the longer-term transfer
partners and intragroup entities. This is not pricing picture.
just about improving ERP systems or other
In order to stay competitive, multinational
Loek Helderman ICT elements; it also requires organizations
enterprises must therefore continue to
KPMG Head of to carefully plan and monitor the division
consider the impact of tax in optimizing a
Global Tax Efficient of roles, risks and tangible and intangible
company’s overall value chain (including
Supply Chain assets amongst the group.
Management,
situations where post-merger integration
KPMG in the Value chain management has always may be impacted). Simply put, companies
Netherlands prioritized the ability to achieve operational will need to ensure that the location of
cost savings and improved control while the group’s functions, risks and assets are
also optimizing tax (and, in some cases, properly aligned and embedded in a transfer
creating a tax saving), particularly in areas pricing policy that is consistent with the
such as asset, risk and function location- business economics.
selection. Many executives are keenly aware

Supply chain strategies that characterize companies’ top operational priorities
Large companies (revenue over US$5 billion)
Operational
improvement 1
41%
2 Demand-driven
planning
56% 36%
3 Integrated
planning
business
Small companies (revenue under US$5 billion)
Operational
improvement 1 46%
2 Centralized
procurement
58% 39%
3 Supplier
management
Source: Economist Intelligence Unit survey, Nov. 2012.
inventory, transportation, logistics,

and other operational costs is central
Fifty-five percent say they will diversify
their manufacturing locations, and half
58 percent
to achieving operational priorities.
For large companies in particular,
of respondents say they will diversify
their supply bases.
say they will
demand-driven planning (cited by
41 percent) and integrated business
A critical challenge facing many regionalize/
planning (36 percent) figure among
companies as they seek to promote
greater collaboration among their
localize supply
their top strategies for supply-chain
optimization.
network of partners is achieving a
greater level of transparency and
chains to improve
Recalibration is geographical as well
as operational. Fifty-eight percent of
communication than many practice
now. Doing so will require them to
the management
respondents say they will regionalize/ attain greater visibility into how their of their supply
localize supply chains to improve the entire supply and partner network fits
management of their supply chain risk. together. chain risk.

The visibility
imperative
47 percent Visibility is becoming a new
watchword in supply-chain
supplier performance in terms of risk,
reliability, and quality (45 percent).
struggling to optimization. Improving speed,
communication, and resilience
When asked about their supplier
visibility, the largest proportion of
align operations is a major opportunity for most
companies, and increasing end-to-
survey respondents, 49 percent, say
their companies are familiar only with
to real-time end visibility in the supply chain will
be a key factor of success. Without a
their immediate tier 1 partners in the
supply chain; they know very little
fluctuations complete picture of their whole supply about partners beyond, let alone their
chain, companies cannot achieve the entire network.
in customer true demand-driven planning they
Increased transparency across a
demand. aspire to because they cannot respond
efficiently to changes in supply,
supply chain helps foster better
and faster communication and
capacity, and demand.
collaboration between partners
Improved end-to-end visibility of and even customers. According to
the supply chain can enable firms Ms. Burke from Unipart, her company
to get partners working together is spending time and money to do
more efficiently – and thus be more just this. “We are getting closer with
responsive to changes in today’s suppliers and further into the supply
fast-moving global marketplace. In chain,” she says. Moreover, as global
our survey, nearly half (47 percent) of companies expand into new markets
respondents say a top challenge to or products/service lines, strong
their supply chain efficiency is aligning visibility can help ensure that the
operations to real-time fluctuations addition of more partners doesn’t
in customer demand, followed by merely add to complexity.

Companies have little visibility beyond tier 1 suppliers
How much visibility of supply and capacity information do you
have across your suppliers and logistics partners?
49%
32%
4% 9%
No visibility Some visibility Enhanced visibility Complete visibility

Little to no Tier 1 Limited Tier 1 supplier Tier 1 supplier visibility Tier 1, 2, and beyond
supplier visibility visibility, but not and some Tier 2 suppliers visibility
Tier 2 and beyond supplier visibility
KPMG Insight
Demand-driven supply chain
As manufacturers look to become but rather philosophical. Do current
Rob Barrett
leaner, more cost efficient and more processes and policies reflect
Managing
customer focused, we have seen a a demand-driven culture where
Director,
growing trend towards “demand-driven” information is willingly shared and
Advisory,
supply chains where all planning, all material movements are driven
KPMG in
purchasing, and replenishment by consumption? Have trusted
the US
decisions are aligned with actual relationships and agreements with
demand at the furthest point of partners and suppliers been properly
Amit Gupta consumption. To get there, companies established? How will the added
Partner, are establishing multi-tier visibility and value be measured for customers,
Advisory/ reducing information latency across suppliers and partners, and how
Management the supply chain, resulting in inventory- will this value be shared among the
Consulting, related, operational and capital cost participants?
KPMG in savings while simultaneously improving
the US Experience has proven that the best-
delivery performance and customer
designed demand-driven networks
service.
are those developed in collaboration
Adopting a demand-driven supply with key suppliers/customers
chain model is a journey and therefore and rolled out through an iterative
the demand-driven processes will approach with continuous process
evolve over time. However, this improvement measured against a
new model does require a shift in shared benefits model.
thinking away from traditional “supply
Business leaders should note, however,
chains” towards the concept of
that this is often an emotional journey
highly integrated “supply networks”
replete with its own highs and “valleys
where multiple tiers of companies are
of despair.” But those that are able to
working off the same shared view of
manage the transition effectively will find
total demand and total available supply
that demand-driven approaches allow
with common processes and metrics.
companies to leapfrog their competitors
The greatest challenges for most and sustain a competitive differentiation
organizations may not be technical, for an extended period of time.

KPMG Insight
A taxing environment for manufacturers
It may be time for manufacturers to put their tax And while tax planning – in and of itself – is certainly
department on speed-dial. Indeed, as I look across key to success, manufacturing organizations will
the findings in this report, one thing becomes also need to be highly cognizant of how their tax
clear: the issue of tax is even more important for strategies and structures may be perceived – not
manufacturers than ever before. only by tax authorities but also by the public in
general. Right around the world, we have seen
And rightfully so. Those organizations that are
major organizations come under heavy fire for
able to enhance their competitive position and
Joerg Strater creating overly aggressive or artificial structures.
reduce their risk using smart and transparent tax
KPMG Global Reputations have been damaged, relationships
planning will almost certainly gain an advantage
Head of Tax with tax authorities have been bruised and loyalty
for Diversified over their peers.
with customers has been diluted.
Industrials Some, such as those seeking to expand into new
Over the coming years, we expect to see tax
markets and segments, will want to hone their tax
authorities develop and promulgate new sets
capabilities in foreign markets and develop a clear
of rules designed to eliminate aggressive tax
understanding of local tax requirements. Others,
strategies, increase transparency in reporting
like those investing in R&D, will find opportunity to
and protect the tax ‘take.’ Those manufacturers
maximize their investment by comparing available
that are able to get out ahead of this evolving
tax incentives offered by certain jurisdictions.
tax environment will almost certainly enjoy an
And, as my colleague Loek Helderman notes on
easier transition to tax compliance and a better
page 10, the tax implications surrounding supply
relationship with their key stakeholders going
chain operations or optimization efforts are myriad.
forward.
Good visibility also strengthens ensuring that we have different suppliers

Only 9 percent say operational resilience. Currently, only who can do more at the right quality.”
their organization 9 percent of respondents say their

organization can assess the impact of
Those firms that successfully harness
emerging technological applications
can assess the unplanned supply chain disruptions
in a matter of hours, while 17 percent
will be best placed to optimize visibility
and communication. According to
impact of unplanned say it takes 3 weeks or longer. Larger
companies may be better equipped to
Mr. Levesque, the aircraft industry uses
supply chain deal with unforeseen shocks. Twenty

percent of companies with revenue
a mix of old modes of communication,
like faxes, as well as open network
disruptions in a of US$5 billion and over say they can
technology, such as enterprise
resource planning systems (ERP).
assess the impact of a disruption in
matter of hours. a matter of hours. That said, this still
“IT is both an enabler and a ticket of
admission,” he says.
leaves 80 percent of them with room
for improvement. Connectivity is clearly an area in which
companies see room for improvement.
But while catastrophic disruptions –
A significant portion of respondents say
or “black swan” events such as the
they use email, fax, or mail as one of the
Fukushima earthquake and tsunami,
top 2 ways to share data and transmit
have focused much media attention on
information about demand through
the role of the supply chain in disaster
the supply chain. This is followed by
response, for most companies, a huge
traditional B2B networks and web-based
opportunity lies in strengthening day-
partner portals. Smaller companies
to-day operations. As Mr. Levesque of
(companies with revenues of less than
Bombardier notes, “It is not so much
US$5 billion), are more likely to use
catastrophic disruption; rather, it is about
email, fax, or mail (cited by 46 percent of

Data-sharing methods to transmit information across the supply chain
Large companies (revenue over US$5 billion)
Web-based
1
39%
partner portal
2 Email, fax, or mail
40%
37%
3 Traditional B2B/EDI network
Smaller companies (revenue under US$5 billion)
Contract
call-offs 1 46% 2 Email, fax, or mail
25% 40%
3 Traditional B2B/EDI network

Respondents selected top two.
respondents, compared to 39 percent surprising – though this can be

of larger companies). Larger companies attributed to the more common use
(those with revenues of US$5 billion of email. However, as technology
or over), meanwhile, are more likely becomes cheaper and communication
to prefer web-based partner portals, software becomes a more effective
followed by email, fax, or mail and way to communicate, companies
traditional B2B/EDI network. Although may find more ways to collaborate
the increased use of portals has led to efficiently across networks rather
improved transparency and connectivity, than hierarchically. Along the way,
the limitations of such portals do not companies may find that greater
yet allow for more comprehensive information-sharing at different levels
transparency across the network. and stages of the production process
can spark new ideas to help firms
The high number of respondents
enhance their products.
that still use email, fax, or mail is

Innovation:
forging ahead
Companies remain well aware of the This year’s study finds that the trend
importance of R&D and innovation towards investment in R&D continues,
in strengthening their competitive with 63 percent of respondents
advantage. A majority of respondents, saying that their company invested up
57 percent, say they expect at to 3 percent of revenue in R&D and
least 10 percent of their company’s innovation in the previous 24 months,
revenue over the next 2 years to come and 28 percent invested greater than
from innovations. Even when firms 4 percent. The outlook for the near
were contending with an economic future is even more positive. The
downturn, last year’s report found that number of respondents who expect
well over a third of all respondents to invest at least 4 percent of their
said they expected to expand revenue in R&D over the next 2 years
innovation and R&D efforts over the is 15 percentage points greater than
next 2 years. the number who invested this over
the last 2 years.
R&D investment
70
63%
60
Percentage of participants
50 48%
42%
40
30 28%
20
9% 10%
10
0
0-3% Greater than 4% Don‘t know
R&D investment as a percentage of revenue
Last 2 years Next 2 years

Increasingly, companies are finding
that their supply chain partners can
say that the links between their R&D
function and supply chain are not very 43 percent say that
play as critical a role in their innovation
strategies as can investments in
strong. And 32 percent of respondents
say that one of the top challenges
the links between
R&D, provided they can overcome
a series of challenges in deepening
companies face to innovation is
complexities in collaborating with
their R&D function
collaboration with outside partners.
Currently, 43 percent of respondents
suppliers and partners. Mitigating such
challenges requires a shift in thinking.
and supply chain
are not very strong.
Top 5 innovation challenges companies face

What are the major challenges your company faces in
its ability to innovate?
1 Aligning innovation
to company strategy
2
Complexities in
collaborating with suppliers and partners
3 Executing
on innovation – on time and on budget
4 Shortage of ideas
to drive innovation
5
Incomplete view of/difficulty understanding the
needs of our customers
Respondents selected top three.

2/3 of respondents As communication across the supply
network improves, companies are
This is fewer than might have been
expected from last year’s survey.
are focused on turning more to their network of
partners in the supply chain for new
Nearly 3 in 5 of all respondents in last
year’s survey said their company would
incremental ideas. As previously mentioned, half
of the companies surveyed say that
increase radical innovation over the
next 2 years. Still, a significant portion
innovation while partnerships will characterize the of respondents in this year’s study
future of innovation. “In terms of see value in focusing on breakthrough
1/3 are focused innovation, we work closely with OEMs innovation. In particular, among
on breakthrough themselves,” says Mr. Scotting of

ArcelorMittal. “We are involved in the
respondents from the automotive
industry who are seeing resurgence in
innovation. early stages of platform development –
something like 7 years out.”
R&D, this figure is as high as 41 percent.
Meanwhile, of the respondents who
Most companies that expect a say there has been a resurgence of
resurgence in R&D efforts seem to R&D in their business, 68 percent are
think that incremental innovation – focused on incremental innovation.
enhancing existing product lines and This is largely unchanged from last
services – is the preferred path to year’s survey, when 72 percent
staying competitive, but 31 percent do of respondents expected their
think breakthrough opportunities exist. incremental innovation activity to
Doug Gates
KPMG Global Head of Aerospace and Defense
Aerospace & Defense Outlook

These have not been easy times for the aerospace and suggest these organizations are focused on trimming fat and
defense (A&D) sector. On the commercial aerospace side, growing their core business to prepare for the future.
backlogs have hit record levels and projections show that
Other A&D leaders are finding new opportunities to grow.
growth is not likely to let off anytime soon. For the defense
Some are finding success in `repurposing’ their existing
sector, the picture is somewhat more challenging as
products, services and business models laterally into
governments slash defense budgets to balance the public
adjacent markets. A new solution in cyber security – a key
books. But with continued economic uncertainty ahead, it
requirement for the A&D sector – may also play well in the
seems clear that organizations in both the aerospace and the
financial services sector, for example, while unmanned
defense sectors will need to undergo a paradigm shift if they
aircraft designed for the defense sector are showing their
hope to enhance their margins, retain their balance sheet
value as a vital tool in areas such as border security and
strength and grow their competitive advantage.
protection for major events.
This report – and our companion A&D Sector Report –
The next few years should also see a rise in the number
provides ample evidence that some of this necessary
of A&D organizations expanding into new global regions.
change is already underway. Large A&D players are
However, executives should be warned: success in foreign
30 percent more likely than the industry average to say they
A&D markets takes much more than a sales presence. It will
would be cutting back or delaying planned investments
require long-term local relationships, a keen understanding
and almost 10 percent more likely to say they would exit
of customer demands on the ground and a market-savvy
unprofitable product lines in the next 2 years. Some may
approach to regulatory and legal compliance.
say this is simply a `hunker down’ mentality; others would

Marty Phillips
KPMG Global Head of Management Consulting for Diversified Industrials
Competition heats up
Clearly, the world of manufacturing has become much more developing lower-cost products or creating greater value for
competitive. With minimum positive growth on the horizon, the end customer.
companies continue to compete on cost and – as a result –
Both are a challenge. Driving further costs out of an
are searching for new approaches and models that will trim
already tight structure requires companies to look beyond
any remaining excess out of the product cycle. No wonder
the back office towards the actual costs of engineering,
then that manufacturing executives have turned their eyes
manufacturing and procurement. At the same time, adding
towards reworking their engineering, design and supply
more value to their products requires manufacturers to gain
chain processes with a view towards greater collaboration
ever-clearer insight into the needs and preferences of their
both upstream and downstream.
customers, requiring them to not only understand how their
Everything I see in both this report and the actual market competitors deliver value, but also how to predict what
indicates that competition is only going to heat up from customers will want in the future.
here. According to this report, manufacturers are seriously
Ultimately, this year’s report shows that – to win in
rethinking their plans to expand into new and unfamiliar
this complex and constantly evolving environment –
markets and product lines. And while this will effectively
manufacturers will need to focus on 2 key priorities going
reduce risk and capital costs, it also narrows the scope for
forward: process innovation and customer insight and
new growth. Indeed, in this hyper-competitive environment,
service. Those that get it right should eat well; those that
any gains in market-share must, by necessity, be taken off
don’t will simply be eaten.
the shoulders of competitors. This can only be achieved by
increase or significantly increase.

Seventy-eight percent of large
As firms rethink their innovation
strategies in the context of leveraging 75 percent of
companies that say there has been a
resurgence of R&D say incremental
opportunities in global markets,
they may start rethinking their R&D
companies say
innovation is their primary strategy,
compared with 64 percent of smaller
destinations as well (see Spotlight on
sourcing decisions). For now, many
they are not
companies that say the same. companies do not see much benefit
moving their R&D beyond the markets
considering
“When we’re looking at a “clean sheet,”
a new aircraft, we will seek a step
in which they are established. A moving their R&D
majority (75 percent) of companies,
change in innovation. But even then, it
incorporates many technologies from
both large and small, say they are not to a new country.
considering moving their R&D to a
the past as well,” says Mr. Levesque
new country. Among the 18 percent
of Bombardier. “For example, regional
that say they are considering such a
jets started with 50 seats, then they
move – and these are overwhelmingly
went 70, then 90 were specified. But
smaller companies (revenue less than
essentially it was the same avionics and
US$5 billion) – China and India are
design at the core.” Mr. Levesque points
the preferred destinations.
out that the benefits of an incremental
approach to innovation are not just in Regardless of R&D locations,
the end product, but also the way in companies overall see the benefits
which incremental innovation can help of investing more in innovation.
improve processes. For example, R&D This reinforced push for innovation
might be focused on delivering a better among companies suggests the
way of assembling a plane, and also manufacturing sector’s optimistic
end up improving guidance systems by outlook may be warranted.
positioning parts in a way that improves
quality and efficiency.

Spotlight on sourcing decisions
Where companies will be sourcing their products, services and R&D
In November 2012, The Economist respondents from Japan, another

argued that, for manufacturers, global manufacturing powerhouse.
“product innovation will go hand-in-
For global companies that do look to
hand with production breakthroughs,
locate manufacturing plants outside
so more companies will want their
their home countries, they select their
research and development teams
R&D locations based on a number of
close to their factories.”
considerations. Established markets
This year’s EIU research certainly typically offer more financing options
finds many global manufacturers and better IP enforcement than most
looking to source closer to home, as emerging economies, but other
well as keep their R&D units closer considerations include a favorable
to their production base. A majority business operating environment,
of respondents from the 5 biggest availability of skilled talent, and lowest
economies where our survey overall total cost.
respondents are based, say they
Taking all of these factors into account
expect to increase sourcing from their
and combining them with longer-term,
home country over the next 2 years.
growth-market demographics, China
And almost all of these respondents
and India are prime destinations for
expect R&D and product development
increased investment. This is true of
to be carried out at home.
Textron, which recently announced
Owens-Illinois, a US glass bottle a joint venture with AVIC, China’s
manufacturer, announced in major aircraft manufacturer, and will
September 2012 that it would build see an assembly plant located in
a new R&D center in Ohio. More the country to serve the burgeoning
recently, a smaller company, Eclipse Chinese aviation market. Meanwhile,
Inc, announced in March 2013 that it its engineering and R&D facility is
would create formal R&D departments located in Bangalore, India’s tech hub.
in the US. The trend goes beyond In February 2013, they announced
US companies. Last fall, Hero plans to further expand its engineering
Motorcycles, an Indian manufacturer, center by adding more personnel.
announced plans to establish new The center focuses on creating new
R&D centers in its home country. products for all of Textron’s offerings,
including helicopters, aircraft,
Perhaps unsurprisingly, China is, on
automotive, and industrial segments.
average, the second most popular
sourcing destination after the home Bangalore is an area in which Textron
country among respondents from the is moving aggressively to exploit the
5 major manufacturing markets in our aviation industry capability in India,
survey (China, US, Japan, Germany, according to Paul McGartoll, vice
and UK). But for respondents from president of strategy and business
one major manufacturing power development at the company. “The
(the UK), sourcing from the US is benefits include language, quality
expected to be just as important as of education and the tradition of
sourcing from China–and the US also engineering. If China is becoming
figures relatively high on the list of the workshop of the world, India is
preferred sourcing destinations for becoming its design office.”

Sourcing Destinations
Where respondents based in China, US, Japan, Germany, and UK
expect to increase sourcing over the next 2 years.
China
85% China
32% Hong Kong
9% India
US
89% US
18% Canada
13% UK
13% China
Japan
87% Japan
29% China
16% US
16% India
Germany
70% Germany
32% China
22% India
UK
59% UK
29% US
29% China

KPMG Insight
Collaboration
Collaborating with partners and suppliers on innovation helps to bring the best ideas to the table
quickly and gives manufacturers an edge. Choosing the right partners and opportunities is critical.
Who works best with our company? Do we have the right processes to ensure speed to market?
Moving past business as usual is essential to succeed in the new economy.
Ken Seel
Global Head of Conglomerates,
KPMG in the US
Reverse innovation
Savvy manufacturers seeking to enter new markets are rethinking and re-engineering their products
to meet the unique needs and price points of the emerging markets. In a trend known as ‘reverse
innovation,’ manufacturers are locating their R&D efforts in countries like India and China and
creating simpler, lower cost designs better suited to a number of emerging markets. For
example, GE Healthcare’s initiatives to develop designs and products for the Indian market is
expected to create new demand segments at lower price points for the company, while Honeywell
is reportedly building innovation hubs in India and China to develop systems and solutions that may
drive its growth in several regions.
Richard Rekhy
Chief Executive Officer,
KPMG in India
Japan staying competitive

While many continue to hope that the much-discussed ‘6 difficulties’ of the Japanese business
environment will be overcome by the second Abe Administration (which was elected towards the
end of 2012), Japanese manufacturing companies continue to struggle.
For the most part, Japan’s manufacturing sector is fighting to secure it’s competitiveness in a global
business world where emerging countries such as China, India, and ASEAN countries offer a clear
cost advantage. Moreover, recent advancements in digitalization and the modularization of parts
manufacturing now underway in the emerging markets is effectively nullifying the quality advantage
of “made in Japan” products.
And while this may be good news for global companies (and Japanese manufacturers) attempting to
develop global supply chains, it also raises a distinct risk of commoditization of products. Historical
evidence suggests that Japan will only achieve price competition once manufacturers have identified
the unique value that they offer to the markets that they serve.
The challenge for Japan’s global companies, therefore, is to balance the need to be globally cost
competitive while still being seen as unique and value adding.
Given the expectations of decreasing domestic consumption, it seems increasingly likely that
Japanese companies will need to be the front runners of the movement to establish a new global
business model that satisfies both of these critical demands.
Mina Sekiguchi
Associate Partner,
KPMG in Japan

R&D tax incentives
Governments across the globe are looking to partner with industry by offering R&D tax incentives that
specifically promote and target innovation and growth. Over 40 countries are now offering R&D
incentives that provide tax-effective options for locating and structuring R&D operations. This is a win-
win situation for both the countries, who can reap substantial spin-off economic benefits, and the
businesses, who can benefit from increased innovation to bolster their growth and profitability.
Carlo Ciaramitaro
KPMG’s Canadian and Americas R&D Tax Incentives Leader,
KPMG Canada
General & administrative spend

While most companies have been keenly focused on optimizing manufacturing costs over the past
few years, some of the more savvy organizations have now started to refocus their efforts
onto the growing impact of general and administrative spend. In many cases, general &
administrative functions such as corporate governance, sales effectiveness or procurement are
being re-cast as not only a cost driver, but also a potential value creator. As such, we are seeing
companies develop and implement effectiveness and efficiency target operating models for their
general & administrative functions that – in many cases – are comparable to the approach taken
within the manufacturing network.
Dr. Alexander Riedel
Partner, Advisory,
KPMG in Germany
Brazilian government incentives
Things are (finally) looking up for Brazil’s industrial sector. Indeed, while other sectors of the local
economy have been seeing positive growth – largely as a result of low unemployment, growing
income levels and rising credit – results from Brazil’s industrials sector have been somewhat
contradictory over the past few years.
In part, this mismatch between local market economics and the performance of the industrials
sector has been the result of difficulties related to competitiveness and the appreciation of the local
currency which dampened export growth. But competition for skilled and qualified professionals is
also hampering growth by pushing up the cost of labor.
Recently, the government has taken steps to respond to slow growth in the sector including
initiatives to increase production, tax rate reductions, tax incentives and greater control over
foreign exchange, all of which should set the tone for 2013 and bring some relief to the sector.
The first budding signs of recovery can already be seen. In January, industrial output grew by
2.5 percent over last December, the greatest monthly advance in almost 3 years (and 5.7 percent
growth year-over-year), according to the Brazilian Institute of Geography and Statistics IBGE’s data.
And while February 2013 may have resulted in a slight decline, the overall picture seems to indicate
that good news is on the horizon for both Brazil’s manufacturers and foreign investors.
Charles Krieck
Partner in Charge, Audit,
KPMG in Brazil

Conclusion
Slow growth in the global economy and advancing technologies in
the manufacturing sector present global manufacturers with a mix
of challenges and opportunities. Companies are looking to deepen
collaboration with partners in their supply chains to strengthen
operational efficiencies and move towards more flexible demand-
driven operations.
End-to-end visibility will be at the core of improved performance

and collaboration. Currently, companies have limited visibility
beyond their immediate tier 1 suppliers. Yet they need a
comprehensive picture of supply and capacity across all levels of
their network if they are to maximize responsiveness to changes
in market demand.
Innovation and R&D strategies remain critical to staying ahead of

the game and manufacturing companies are increasingly placing
their partner network at the center of their strategies to generate
fresh ideas. Half of our respondents say that their firms will rely
on partners for innovation. Communication with key supply chain
innovation partners will be vital in order to drive the necessary
product enhancements with the speed, quality and cost the
market is demanding.
At the center of all this is fine tuning supply chain links to work
more effectively with partners. Companies that make the most of
their supply chains have the potential to become more profitable
in the years ahead. As Carol Burke from Unipart puts it, “Supply
chain effectiveness is the invisible advantage.”

Diversified Industrials Major Country Leadership
Global/USA
Jeff Dobbs
Global Sector Chair,
Diversified Industrials
Sweden +1 313 230 3460
Björn Hallin jdobbs@kpmg.com
KPMG Partner/Head of
Industrial Markets
KPMG in Sweden
+46 8 723 96 26
bjorn.hallin@kpmg.se
UK
Stephen Cooper
Partner, Head of Diversified
Industrials and Automotive
KPMG in the UK
+44 20 73118838
stephen.cooper@kpmg.co.uk
Canada
Don Matthew
Partner, Canadian Lead
KPMG in Canada
+1 604 527-3770
dmatthew@kpmg.ca
Netherlands
Tom Van der Heijden
Partner
KPMG in the Netherlands
+31206 567520
VanderHeijden.Tom@kpmg.nl
France
Philippe Grandclerc
Partner
KPMG in France
+33155686952
pgrandclerc@kpmg.fr
Spain
Manuel Parra
Partner/Head of Diversified
Industrials
KPMG in Spain Brazil
+34914563400 Charles Krieck
mparra@kpmg.es Partner in Charge, Audit
KPMG in Brazil
+551121833102
ckrieck@kpmg.com.br

Russia
Marc Van der Plas
Head of Markets
KPMG CIS
EMA/Germany
+74959372525 x13142
MarcVanDerPlas@kpmg.ru Dr. Gerhard Dauner
Europe, Middle East,
and Africa, Head of
KPMG in Germany
+49 89 9282 1136
gdauner@kpmg.com
Switzerland
Bryan DeBlanc
Partner
KPMG in Switzerland
+41 58 249 2944
bryandeblanc@kpmg.com
Italy
Roberto Giovannini
Head of Consumer and
Industrial Markets, Advisory
KPMG in Italy
+390514392611
rgiovannini@kpmg.it
Japan
Osamu Matsushita
Head of Diversified
Industrials
KPMG in Japan
+81352188768
omatsushita@kpmg.com
China
Alex Shum
Head of Diversified
Industrials
KPMG in China
+862122122508
alex.shum@kpmg.com
India
Richard Rekhy
Chief Executive Officer
KPMG in India
Australia
+91 124 307 4303
Cameron Slapp rrekhy@kpmg.com
Sector Leader, Diversified
Industrials and Building
Materials
KPMG in Australia
+61 (2) 9335 7258
cslapp@kpmg.com.au

KPMG’s Global Diversified Industrials Steering Group:
Jeff Dobbs Doug Gates Ken Seel
Global Sector Chair, Global Head of Global Head of Conglomerates
Diversified Industrials Aerospace & Defense +1 203 406 8526
+1 313 2303 460 +1 404 222 3609 kseel@kpmg.com
jdobbs@kpmg.com dkgates@kpmg.com
Joerg Strater
Eric Damotte Osamu Matsushita Global Head of Tax for
Global Head of Metals Head of Diversified Industrials Diversified Industrials
+349 1456 3406 KPMG in Japan +49 211 475 8381
edamotte@kpmg.es +81 352 188 768 jstrater@kpmg.com
omatsushita@kpmg.com
Dr. Gerhard Dauner
Europe, Middle East, and Africa, Mathieu Meyer
Head of Diversified Industrials Global Head of Automotive
KPMG in Germany +49 711 9060 41730
+49 89 9282 1136 mathieumeyer@kpmg.com
gdauner@kpmg.com
Marty Phillips
David Frey Global Head of Management
Head of Strategy and Consulting for Diversified Industrials
Operations Consulting +1 678 525 8422
KPMG in China mwphillips@kpmg.com
+86 108 508 7039
david.frey@kpmg.com
Additional contributors:
Robert H Barrett Loek Helderman Mina Sekiguchi
Managing Director, Advisory KPMG Head of Global Tax Efficient Associate Partner, Business
KPMG in the US Supply Chain Management Strategy and Development
+1 480 459 3535 KPMG in the Netherlands KPMG in Japan
rhbarrett@kpmg.com +312 06 56 1415 +813 32 667 007
helderman.loek@kpmg.nl mina.sekiguchi@jp.kpmg.com
Carlo Ciaramitaro
Canadian and Americas Charles Krieck Michele Hendricks
R&D Tax Incentives Leader Partner in Charge, Audit Global Executive for
KPMG in Canada KPMG in Brazil Diversified Industrials
+1 519 251 3522 +55 112 183 3102 KPMG in the US
cciaramitaro@kpmg.ca ckrieck@kpmg.com.br +1 203 406 8071
mhhendricks@kpmg.com
Stephen Cooper Richard Rekhy
Partner, Head of Diversified Chief Executive Officer Martha Collyer
Industrials and Automotive KPMG in India Senior Marketing Manager
KPMG in the UK +91 124 307 4303 KPMG in Canada
+44 20 73118838 rrekhy@kpmg.com +1 416 777 3505
stephen.cooper@kpmg.co.uk mcollyer@kpmg.ca
Dr. Alexander Riedel
Amit Gupta Partner, Advisory
Partner, Advisory, Performance & Technology
Management Consulting KPMG in Germany
KPMG in the US +49 89 9282 1210
+1 847 274 4533 ariedel@kpmg.com
agupta10@kpmg.com
kpmg.com/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accu-
rate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International.
KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does
KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
Designed by Evalueserve. Publication name: Global Manufacturing Outlook: Competitive advantage
Publication number: 130103. Publication date: May 2013

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Global

Sylvain Levesque Bill Scotting

Source: Economist Intelligence Survey, Nov. 2012

Over the past several years, global manufacturers have had to

2 KPMG Global Manufacturing Outlook: Competitive advantage

• Companies are viewing their channel partners as more of a “network”

KPMG Global Manufacturing Outlook: Competitive advantage 3

4 KPMG Global Manufacturing Outlook: Competitive advantage

KPMG Global Manufacturing Outlook: Competitive advantage 5

activities in will invest in Greenfield projects to

KPMG Regional Perspective

6 KPMG Global Manufacturing Outlook: Competitive advantage

Dr. Gerhard Dauner

KPMG Global Manufacturing Outlook: Competitive advantage 7

8 KPMG Global Manufacturing Outlook: Competitive advantage

KPMG Sector Perspective

KPMG Global Manufacturing Outlook: Competitive advantage 9

10 KPMG Global Manufacturing Outlook: Competitive advantage

Large companies (revenue over US$5 billion)

Small companies (revenue under US$5 billion)

Source: Economist Intelligence Unit survey, Nov. 2012.

inventory, transportation, logistics,

KPMG Global Manufacturing Outlook: Competitive advantage 11

12 KPMG Global Manufacturing Outlook: Competitive advantage

No visibility Some visibility Enhanced visibility Complete visibility

KPMG Global Manufacturing Outlook: Competitive advantage 13

Good visibility also strengthens ensuring that we have different suppliers

their organization 9 percent of respondents say their

supply chain deal with unforeseen shocks. Twenty

14 KPMG Global Manufacturing Outlook: Competitive advantage

Large companies (revenue over US$5 billion)

2 Email, fax, or mail

Smaller companies (revenue under US$5 billion)

Source: Economist Intelligence Unit survey, Nov. 2012.

respondents, compared to 39 percent surprising – though this can be

KPMG Global Manufacturing Outlook: Competitive advantage 15

16 KPMG Global Manufacturing Outlook: Competitive advantage

Top 5 innovation challenges companies face

KPMG Global Manufacturing Outlook: Competitive advantage 17

on breakthrough themselves,” says Mr. Scotting of

KPMG Sector Perspective

Aerospace & Defense Outlook

18 KPMG Global Manufacturing Outlook: Competitive advantage

increase or significantly increase.

KPMG Global Manufacturing Outlook: Competitive advantage 19

In November 2012, The Economist respondents from Japan, another

20 KPMG Global Manufacturing Outlook: Competitive advantage

Source: Economist Intelligence Unit survey, Nov. 2012.

KPMG Global Manufacturing Outlook: Competitive advantage 21

Japan staying competitive

22 KPMG Global Manufacturing Outlook: Competitive advantage

General & administrative spend

KPMG Global Manufacturing Outlook: Competitive advantage 23

End-to-end visibility will be at the core of improved performance

Innovation and R&D strategies remain critical to staying ahead of

24 KPMG Global Manufacturing Outlook: Competitive advantage

26 KPMG Global Manufacturing Outlook: Competitive advantage

KPMG Global Manufacturing Outlook: Competitive advantage 27

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