GROWTH THEMES | THEME 5 THE FUTURE OF MANUFACTURING

1. EditGenetics

2. Connected Commerce

3. Digital Reality

4. Conservation Capitalism

5. The Future of Manufacturing

5

GROWTH THEME

The Future of Manufacturing

Factory as a Service

The future of manufacturing is all about automation—not just physical automation (the production and movement of goods in a factory) but also the digitalization of workflows. Think sensors, software, robots, and cobots, all connected seamlessly in a physical-meets-virtual world.

A confluence of factors is leading to a step change in automation. Productivity gains have ground to a halt; society is emphasizing efficiency (which includes limiting emissions and reducing waste); and over the next decade we are estimated to be short 2 million manufacturing jobs due to the industry growing and the workforce aging.

The benefits of automation for manufacturing are easy to visualize. Picking goods in a fulfillment facility is labor

intensive,  but now a product called Vision lets workers see and react to their physical environment virtually, so they can pick and pack with ease. Another exciting area is dark factories, where the lights are turned off and robots run the shop.

But many automation solutions coming to market also deliver clear benefits to consumers. Think of a robot that does dishes and cleans the bathroom. Think of a car that drives itself, so the time we waste in traffic is given back to us. And we all enjoy the benefits of safer, higher-quality products that are made with a lighter environmental impact.

In this, our fifth growth theme, we discuss how changes in manufacturing have the potential to unlock the fourth industrial revolution—and what it means for investors.

The future of manufacturing is all about automation—not just physical automation (the production and movement of goods in a factory) but also the digitalization of workflows. Think sensors, software, robots, and cobots, all connected seamlessly in a physical-meets-virtual world.

A confluence of factors is leading to a step change in automation. Productivity gains have ground to a halt; society is emphasizing efficiency (which includes limiting emissions and reducing waste); and over the next decade we are estimated to be short 2 million manufacturing jobs due to the industry growing and the workforce aging.

The benefits of automation for manufacturing are easy to visualize. Picking goods in a fulfillment facility is labor intensive, but now a product called Vision lets workers see and react to their physical environment virtually, so they can pick and pack with ease. Another exciting area is dark factories, where the lights are turned off and robots run the shop.

But many automation solutions coming to market also deliver clear benefits to consumers. Think of a robot that does dishes and cleans the bathroom. Think of a car that drives itself, so the time we waste in traffic is given back to us. And we all enjoy the benefits of safer, higher-quality products that are made with a lighter environmental impact.

In this, our fifth growth theme, we discuss how changes in manufacturing have the potential to unlock the fourth industrial revolution—and what it means for investors.

The good news is there are likely going to be more winners and losers because they are big and growing markets.

Andy Siepker, CFA, Partner
Portfolio Manager, Global Equity Research Analyst

WHAT ARE THE ENABLERS?

Source: William Blair

Anticipation and Analysis—
Essential to Active Investing

As active growth investors, we seek to anticipate and analyze possible outcomes in a way other investment approaches cannot.

We are ultimately betting against the very powerful reality of mean reversion. The adage that “the more things change, the more they may stay the same” is powerful, and is often true.

But in reality, things do change. Consumer behaviors evolve. Humans innovate and create new solutions. Corporate profit pools shift. And new winners emerge. Just think about some of the things the world was predicting at the turn of the last decade.

And for now, the ability to predict changes is still the domain of humans. It is our job, then, to develop a practice of forecasting, which involves observing, learning, and anticipating the future.

Creating a framework for forecasting helps us decrease the variability around predicted outcomes, improve accuracy, and act on investment ideas earlier and with greater conviction.

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