Manufacturing Today - November/December 2016 - 17

JEFF FRENCH | COLUMN BY

Global political and
economic headwinds

Moving forward
These are not quiet times for our clients, and we do not expect a return to
normal anytime soon. In our recently
produced whitepaper, "The State of
Manufacturing," we explore the disruptive forces that are challenging
manufacturers to fight current headwinds and succeed. mt
Jeff French is the National Managing Partner of Grant Thornton

LLP's Consumer and Industrial Products practice and leads the
firm's Manufacturing practice. He has more than 29 years of experience and has worked with companies on a variety of complex technical matters, corporate and liquidity challenges, and infrastructure
issues. Jeff can be reached at jeff.french@us.gt.com.

NOVEMBER/DECEMBER 2016 manufacturing-today.com

17

T ECHNOLOGY

P RO F I TA B I L I T Y

M A N U FA C T U R I N G

AH
S R EXPO 2016

L E A N

N EWS

C ANADA MANUFACTURING

Geopolitics

Despite the current weakness in global markets, rapid urbanization and a
growing middle class show that the
future lies in emerging markets. Chinese manufacturers look to move up
the manufacturing value curve and
have proved resourceful at doing so -
in some cases, potentially relying on
cyber-espionage to gain access to the
technologies they need to make that
shift. Countries in South Asia and Africa are gaining a foothold for labor
arbitrage in manufacturing. While the
risks increase here from less-stable
governments, the move to new nations also creates the spark for a new
consumer class in these regions.

S U S TA I N A B I L I T Y

Advanced manufacturing technologies are making processes faster and
more efficient, but these very advances change the competitive landscape
and increase the already high exposure to cyber risk and espionage.
The Internet of Things, sensors
and advanced robotics are transforming many manufacturing operations, making processes faster and
more efficient. These new technologies have the potential to increase
the value of assets exponentially
while reducing the need for human
intervention in a tight skilled labor
market. Not all manufacturers can
make the required investments, and
new entrants from the technology
industry are shaking up entrenched
industry players.
Technology creates the opportunity to know your customer better than
ever before. There may be a point
where knowing your customers cross-

Insufficient cost controls and risks
still challenge supply chains. Cost
control challenges arise because of a
lack of transparency across the supply chain, conflicting performance
objectives of various segments in
the organization and the inability to
spot cost savings opportunities in the
smaller components of the supply
chain. Meanwhile, supply chain disruption is ranked as the most significant and difficult risk management
challenge for manufacturers. This
disruption is caused by any number
of factors, including natural disasters, geopolitical instability and implementing new software.
In addition, globally interconnected value chains create new challenges
for manufacturers, as taxing authorities take a broader role in defining
where value is created. The Organisation for Economic Co-operation and
Development (OECD) is addressing
base erosion and profit shifting, and
the IRS has proposed regulations to
limit inversions, which highlights
the importance for manufacturers to
review their tax structures and transfer pricing policies. In the past, there
were set locations where value could
be tracked and taxed. Today the value
focus is on knowledge, brand and other intangibles, assets that are harder
to assign or associate with a particular
tax jurisdiction.

SERVICE

Competitive opportunities
and threats

The value chain

SPACE TECH EXPO

Weak global demand, a strong dollar
and bloated inventories require further productivity gains to compete in
the global market. The recent Brexit
vote shows that the global economy is fragile, fickle and increasingly
fragmented. Sluggish global growth,
a strong U.S. dollar, weak corporate
profits and bloated inventories are
weighing on the outlook.
One positive note is that productivity for manufacturers in the U.S. has
outpaced that of most other nations
- so much so that China's unit labor
costs are now only 4 percent lower
than the U.S.'s, despite a still significant wage differential. The challenge
will be to eke out even more productivity gains.

es the line to knowing their secrets.
Who owns and controls the data of
their partners, suppliers and customers is an evolving issue. In addition,
manufacturers face risk in the area of
cyber-espionage more than any other
industry. It's critical for manufacturers to develop comprehensive cyber
security programs and response plans
in case of a breach.


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Table of Contents for the Digital Edition of Manufacturing Today - November/December 2016

Table Of Contents
Manufacturing Today - November/December 2016 - Cover1
Manufacturing Today - November/December 2016 - Cover2
Manufacturing Today - November/December 2016 - 1
Manufacturing Today - November/December 2016 - Table Of Contents
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Manufacturing Today - November/December 2016 - Cover3
Manufacturing Today - November/December 2016 - Cover4
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