The world around us continues to change and we are changing with it.
We continue to focus on becoming an even more resilient organization, which will enable us to better manage the accelerating pace of technological change and volatility in the geopolitical environment. Today’s world, and that of the future, require that we become more agile and adaptable than ever before and that we work and lead in different ways than we have in the past.
Planning for the unknown is a must in a world where the pace of change continues to accelerate. Margin Resiliency at its core is technology-enabled productivity applied to drive price/margin excellence, supply chain improvements utilizing Industry 4.0, next-generation procurement and an ever more productive back office. In this new environment of persistent but ever-changing headwinds, we are working to improve our margins, which will help fuel our future progress and investments in outperformance and innovation. This is a major transformative program that is expected to deliver $300–$500 million in value by 2022.
The fourth industrial revolution, also known as Industry 4.0, integrates connected intelligence into all steps of the manufacturing process—and it’s changing how the shop floor is even conceived. It’s more than robots performing precise tasks in a familiar sequence, it’s an ecosystem of people and technology working in an integrated and efficient production system. We are lighting up our factories to ensure we have the data and infrastructure to move to the connected factory. We are leveraging automation with robotics and cobotics, and upskilling our people in the process. We also are leveraging digital apps and advanced analytics, utilizing artificial intelligence and machine learning to find better ways to make better products.
This is more than principles of productivity in action. The manufacturing plant is becoming an organism that improves itself, iteratively and creatively. For example, our new Craftsman plant, opening in 2020 in Dallas/Fort Worth, Texas, was built from the ground up on Industry 4.0 principles, starting with a “digital twin” virtual plant that is helping to optimize how the physical machinery works in real time. Optimizing the plant virtually before purchasing the equipment resulted in capital savings and better installation that was fine-tuned from the outset.
This revolution of all of our factories continues as we maximize opportunities around the globe. A first mover in our industry at deploying Industry 4.0 technologies at scale, we continue to deliver program-level productivity and customer agility benefits in our manufacturing facilities across our global footprint.
“Make Where We Sell”
Our end users prefer buying things produced locally. Making where we sell makes sense. By supporting workers wherever we do business, we help to ensure the overall strength of our communities. For example, our Made in the USA program has drawn tremendous positive response from our consumers and is a key attribute of our Craftsman brand’s revival and remarkable growth. This powerful strategy is reducing lead time and costs, avoiding tariffs, elevating our local market presence and relevance, and ensuring our products respond to local needs. Make where we sell and source where we make have been an integral part of our global strategy in Tools & Storage and will continue to accelerate in the coming years.
Behind the scenes, the digitalization of procurement is a revolution unto itself. Data analytics have given us a more robust view of, and transactional leverage on, what things should cost and how and where to prioritize our spend. This includes indirect costs and managing costs across our entire global enterprise, not just business unit by business unit. The transformation of our supply management organization has increased the speed and accuracy of decision-making and knowledge-sharing related to purchasing, and has quickly become a core driver of profitability and margin resilience.
Security Transformation Update*
Our commercial electronic security business continues to transform and has started to translate operational improvements into tangible results. We continue to apply new technology strategically in the pursuit of consistent organic growth with margin expansion. First, we are lowering the cost to serve by leveraging machine learning and predictive analytics to improve our security monitoring and field service organizations. Second, our focus is to solve for the needs of the small to mid-size customer with on-demand, connected solutions with simple installation and flexible monitoring. Third, we are leveraging advanced data analytics to deliver real-world customer insights that unlock productivity and revenue-growth opportunities for our larger customers. These solutions will leverage technology and commercial partners to evolve our value proposition with the necessary speed to ensure we are on the forefront of technology and can deliver with the necessary speed. Our strategy is clear, focused, robust—and starting to generate the results we envisioned.