By Dave Evans, Co-Founder and CEO, Fictiv
The supply chain boundaries behind the products we depend on have been laid bare over the past two years. As a result, more than ever, people are paying close attention to the state of supply chains, and significant disruption to this industry is inevitable.
Industrial technology companies are finding ways to build better supply chains by leveraging software, robotics and predictive technology powered by machine learning and artificial intelligence. Although infrastructure does not traditionally attract investment, the opportunities are vast if you can spot them. Right now, manufacturing and supply chain systems are in the midst of a massive transformation, and capital is already flowing to the companies doing the work.
Investment in industrial technology represents enormous value
SaaS companies have attracted massive investment for years, but have also been overvalued with high revenue multiples driving steep valuations. In contrast, multiples for industrial technology companies are lower and, given the current environment, are more reasonably priced and represent substantial potential gains for investors.
These companies are driving a wave of digital transformation that will reinvent our manufacturing infrastructure and transform the speed at which we can create the transformative innovations needed, such as electric vehicles, commercial rockets and breakthrough medical devices that save Lives.
Although the complexity of the products being manufactured has increased dramatically, the way we make these products has changed little, if at all, over the past four decades.
Innovation in manufacturing operations and supply chain management is long overdue, and it’s more evident than ever that we need to automate and digitize much of manufacturing and supply chain management systems. to match the speed of innovation the world needs.
Supply chain and manufacturing transformation is inevitable
The need for a faster and more resilient supply chain has never been greater, especially as disruptions have occurred more frequently – from global trade wars in 2018 and 2019, a global health pandemic in course over several years, to a devastating war in Europe. These macro issues aren’t going anywhere, and those paying attention are bracing themselves for more disruptions in the future.
We have reached an inflection point in product innovation and supply chain operations where change is not just inevitable, it is demanded. We already saw this same trend play out in computing 20 years ago.
Before the days of cloud computing through services like AWS and Azure, companies relied on their on-premises server racks and created huge IT organizations dedicated to installing and maintaining those CAPEX investments. Yet servers were crashing regularly and couldn’t keep up with the volatility of load balancing. The received wisdom at the time was that greater investment in these fixed costs would result in greater availability, which required large IT management organizations.
Manufacturing and supply chains work the same way today, as massive operations teams manage internal CAPEX and fragmented supplier outsourcing. Just as IT has been disrupted over the past two decades, supply chain and manufacturing operations are poised to move from slow, expensive, people-centric systems to agile, resilient, and data-driven systems. the cloud. Processes are evolving as organizations seek to eliminate costs while scaling agile production.
Now is the time to invest
In response, there is a rising tide of manufacturing and supply chain innovation in both the private and public sectors. Public companies such as Salesforce and Google have created manufacturing clouds to improve operational efficiency, and many private companies are streamlining logistics and automating supply chain procurement workflows.
Manufacturing and supply chain systems are complex, so it will take an ecosystem of innovative industrial technology companies to drive end-to-end transformation. The market demand is there and is fueling the next wave of Industry 4.0 investment.
Valuation multiples remain reasonable and it is time to invest in companies that drive this transformation forward.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.