The 'dark satanic mills' are a thing of the past: modern industry is playing an increasingly important role in both the economy and in the everyday lives of people. The structure and size of the sector is changing, as are the working conditions. Modern industry is, in the main, high tech and, with a few exceptions, very clean. Despite the turbulent economic times of recent years, virtually all manufacturers have been improving their value chains.

They have also taken important steps to find new revenues streams, by seeking new global markets for their products and new places to source, manufacture and distribute them. Currently, the industrial sector represents 20% of the UK gross domestic product, and 14% of the US. 
 
Amongst the biggest players in this segment are Siemens (€72.4 billion turnover in 2007), Boeing ($66.4 billion in 2007), Caterpillar ($44.9 billion in 2007), Lockheed Martin Corporation ($41.9 billion in 2007) and BAE Systems ($31.3 billion in 2007).

Value Chain Globalisation

While factories in North America and Western Europe are not likely to disappear, the shift of manufacturing to lower-cost regions keeps unbridled. According to Deloitte, a large majority of North American (85 %) and Western European companies (69 %) plan to maintain or expand manufacturing in their home regions. However, about one-third or more also make goods elsewhere.

For North-American companies, the new eldorado is usually Mexico (42 %), Western Europe (39 %) and China (37 %), while Central (38 %) or Eastern Europe (35 %) and China (32 %) are the perfect destination for Western Europe-based manufacturers.
Deloitte also predicts that the new factories of the next years are to be built or expanded in China. Some 37 % of North American and 31 % of Western European manufacturers say they will locate or expand factories in that country.   

Global Value Chain Dispersion: The Importance Of 'Glocalisation'

Whether it involves marketing, sourcing or engineering, businesses are facing pressures from three main areas: customer demands for lower cost, the pursuit of new markets around the globe and innovation.

Customer-derived cost pressures are probably the biggest force. Thus, the trend to build products in lower-cost regions is rampant. But reducing costs is not the only reason why manufacturers move value chains overseas. With stagnant markets at home, the drive for revenue growth is another lure.

China, for example, is not merely a cheap destination to produce low-cost furniture, cars and clothing for the rest of the world. Chinese customers, about 1.3 billion, represent an enormous potential market. The importance of localising goods into the respective market is crucial, as customers are four times more likely to make a purchase when they are addressed in their native language.

The pressure to locate value chain operations in new markets extends to key suppliers as well. Thus, even companies without global ambitions may be forced to expand their operations geographically to preserve key customer relationships. 

Synchronisation Of Customer, Product And Supply Chain Operations

Industry's top performers have been forced to gear up and make major improvements in key processes over the last few years. Their value chain advantages begin with cross-functional business process excellence and integration within three areas:

•    Marketing, sales and customer-related operations
•    Planning, sourcing, manufacturing and distribution process
•    Product innovation, engineering, and development process

Market leaders also make wide use of technologies that integrate activities in each business process: Customer Relationship Management (CRM) to link market, sales and services; Product Lifecycle Management (PLM) and Product Data Management (PDM) software to tie together the steps of product development, warehouse and transportation optimisation systems in the supply chain.