The world is on the brink of a fourth industrial revolution, in which engineering and manufacturing (E&M) companies have to prepare for even more complex markets that will emerge over the next two decades.

A DHL white paper titled “Engineering & Manufacturing 2025+ Building the World” sheds light on major manufacturing trends and implications for future supply chains to deal with this changing environment. The white paper, based on interviews with E&M companies and industry experts, describes industry trends as well as manufacturing sector responses. To address these impending significant changes, including shorter lifecycles, more individualized customer demands, technological advances, new materials, E&M production processes have to become more intelligent and the centerpiece of this production is the smart factory.

Connected machines, work pieces and systems are creating intelligent networks along the entire value chain that can control one another autonomously. Intelligent industrial production machinery will no longer simply process products as programmed but must be able to gather and process information on orders and production in real time and adjust parameters accordingly. Additionally, manual work processes will be supported by technology, too. A great example of this is with augmented reality, a promising tool expected to increase efficiency and re-design complete production chains. At the same time, all players along the E&M value chain are becoming more and more connected and integrated – also driven by technological developments.

One more important driver and trend for intelligent, integrated and flexible production processes is increasing volatility and other exogenous threats. Some of these exogenous threats and volatility include speculation, trading activities, geopolitical interests or the weather. These factors are driving up volatility of E&M markets. They result in more uncertainty and a lack of predictability in planning and decision making processes.

To counteract these threats and volatility, we have to practice resilience. Although it is broad and challenging, future supply chains have to be resilient and must be built around risk management. Resilience includes supply chain planning and operations, as well as management, based on maximum visibility, process alignment, and cooperation among all supply chain partners, facilitated by a risk management culture and clear performance requirements. With demands increasing and change happening so quickly, supply chains will play an even more important role as today and can become the key value driver for E&M companies.

Mark McGonegal is the vice president, global sector head, engineering and manufacturing (E&M) for DHL Global Forwarding. He has direct management responsibility for the E&M team in the Americas region.