Going by the current headlines, Europe has become a difficult place for industrial production: Excessive bureaucracy, soaring energy prices and chronic labor shortages make it hard for manufacturers to stay on the path to growth. That said, Europe’s major industrial companies are still global leaders in both technology and quality in many segments, but the risk of losing that position is rising. What will it take to get Europe’s manufacturing sector back on track for growth? Using various analyses and our recent consulting projects, our new whitepaper provides a broad overview of the current situation and offers possible responses for manufacturers in the current economic and political environment.

All for one in Europe’s manufacturing sector

Between now and 2030, European industrial manufacturers will face considerable geopolitical challenges, particularly as tensions between China and the U.S. are shaping global economic dynamics. Our Deloitte CFO survey  indicates at least for a year now that CFOs are already factoring these tensions more and more into their investment decisions. Europe’s enterprises have to prioritize both a global reach and a strong local presence to achieve lasting growth, making the most of the opportunities and minimizing the risks of each specific location. Between now and 2030, it will be vital for manufacturers to rethink – and adopt a more agile approach to – their global production networks.

Creating customer-centric solutions that win

With the global quality gap closing in industrial goods, 78 percent of European manufacturers see the solutions business – alongside continuing product differentiation – as a major opportunity to set themselves apart from global rivals. And omnichannel will be the platform of choice for customer interaction in that scenario. According to our Customer Excellence study, optimizing the touchpoints along the customer journey can deliver efficiency gains of up to 10 percent. This will, however, require decisive action: Our studies show that only 46 percent of today’s manufacturers have mapped the entire customer journey, while the rest still lack the necessary data.

Rethinking collaboration as an engine for the future

Between now and 2030, European industrial manufacturers need to step up their innovation game. Ecosystems and partnerships – even among competitors – could point the way forward here. Our Manufacturing Industry Outlook indicates that more than 60 percent of the manufacturing executives we surveyed are already relying on alliances with specialist partners as part of their innovation and growth strategy. With a focus on making these relationships less transactional and more strategic, there is huge potential to develop new and improved business models. Ideally, these partner ecosystems would be built around shared structures and cultures. One possible idea is “Europe, Inc.”, an alliance grounded in common European values and objectives that may offer more opportunity than a fully global approach (see the whitepaper for more hypothesis).

Making sustainability a clear priority

Sustainability looks set to remain a top issue for manufacturers through 2030. And even though Europe is recognized as a green pioneer, industrial manufacturing and other high-emission industries are under increasing pressure to change their practices. The stricter the regulations become the more options companies have in terms of strategy – from pioneering eco-warriors set on achieving energy independence to mainstream companies simply adding a green product line. Each company seems to take a different approach to sustainability: Based on our current survey, 36 percent of our respondents have made regulatory compliance their main priority, while 64 percent want to become sustainability leaders. It is vital for manufacturers to decide early on which role they want to play in the energy transition.

Building resilience – not only in the supply chain

According to our experts, we still expect more political tensions, regulatory constraints, and cybercrime in the future. Those industrial manufacturers focused exclusively on efficiency and cost optimization should be careful not to neglect issues like supply chain security and state-of-the-art manufacturing, including cybersecurity as well as agile production and administration processes. One way to make workflows more agile is to outsource non-core business activities. Our analysis found that more than the half of Europe’s industrial manufacturers rely on shared service partners and cybersecurity expertise to make their production sites more resilient. In addition to cutting costs, encouraging more professionalization of non-core disciplines and accelerating digital transformation, this will ultimately give manufacturers the agility to respond to changes in the market.

Banking on artificial intelligence

Using artificial intelligence (AI) and data analytics in software and chatbots has enormous potential to make the industrial manufacturing sector more competitive between now and 2030. AI is already improving production processes, quality control, preventative maintenance and automated software coding. 67 percent of the industry experts in our study see artificial intelligence as a key lever for future success and expect significant efficiency and innovation gains as a result. Advances in AI and data analytics are driving trends from automation and quality control improvements to digital twins and personalized customer touchpoints. With only limited time left to invest in AI, Europe’s manufacturers need to act now to secure their digital future, increase efficiency and innovate new business models. 

Find innovative ways to recruit and retain talent

We expect the talent shortage in industrial manufacturing in Europe to continue well into 2030, even as candidates are expected to bring more skills to the table. 62 percent of manufacturers in our study cited talent recruitment and retention as their greatest challenge. At the same time, 80 percent of those companies say they don’t have the skills they need for Industry 4.0 – a clear sign that continuous training and upskilling are essential elements in adapting to the ever-changing technology landscape. AI can provide valuable support here, empowering global teams and overcoming language barriers with advanced translation and communication technologies.

The strategic roadmap for 2030 is critical

The next few years will see a massive, multidimensional realignment in Europe’s industrial manufacturing sector. Very few in the sector have a fully formed strategy for 2030, even though it is only slightly over 5 years away. The key here is to take an agile approach to these seven paths and to tailor each step specifically to your company and its circumstances. These are the core questions you need to explore:

1. Where should I be collaborating with other companies to strengthen my global position?
2. How can I create end-to-end solutions using my current product and service portfolio to maintain my competitive edge?
3. To what extent am I capitalizing on partnerships with software firms or even competitors to remain competitive?
4. What role do I intend to play in the sustainability transition?
5. Where can I increase resilience across the enterprise with a view to not only securing the supply chain but also becoming more agile overall?
6. How do I plan to use artificial intelligence in the short and the long term?
7. Are there ways I can adapt the company and its corporate culture to attract more talent?

Europe and its manufacturing industry will face some tough challenges over the next few years, but the medium and long-term prospects are probably a lot better than today’s business headlines might suggest.

Download the whitepaper “The Future of European Manufacturing: Ready for 2030? Seven paths to success” and find out more about the factors we feel are decisive for Europe’s industrial manufacturers.