With the rapid progression of technology and shifting global dynamics, the manufacturing sector is undergoing profound transformations.
Following the global pandemic, the manufacturing sector took a big hit but is moving in a positive direction, with an annual growth rate of 3.57% expected between now and 2028.
As the sector continues to recover, manufacturers are looking for strategies to be more resilient and protect their companies against global economic factors. In this article, we’ll delve into the top five trends shaping the manufacturing industry in 2024 and strategies to tackle these challenges head-on and harness the opportunities they present.
1. Smart Factories Are Transforming Operations and Shop Floors
A smart factory is a super-advanced, automated factory that uses technology to be much more efficient, accurate, and flexible. It’s a bit like comparing a regular phone to a smartphone — it can do a lot more things, and it can do them a lot better.
The term “smart factory” is often used when we talk about “Industry 4.0”, the fourth industrial revolution. The first industrial revolution was about mechanization with water and steam power. The second was about mass production with assembly lines and electrical power. The third was about automating production with electronics and information technology. And now, the fourth is about digitizing all of this with smart and autonomous systems.
Companies have leaned on traditional supply chain and manufacturing ecosystems for decades but the COVID-19 pandemic and other global challenges exposed these systems and highlighted a need to shift to a more agile solution.
The global smart factory market size is expected to hit around $321.98 billion USD by 2032, growing at a CAGR of 9.52% from 2023 to 2032. Companies that invest in digital transformation and smart factory technology can receive impactful business benefits, including:
- Improved Product Quality: Automated processes and quality control measures powered by AI can lead to significantly improved product quality. Machines are less prone to error compared to human operators, and consistent performance ensures uniformity in products. Additionally, machine learning can predict and detect defects or faults before they become critical.
- Increased Efficiency: By leveraging automation, machine learning, and artificial intelligence, smart factories can optimize production lines. They can reduce downtime, minimize waste, and enhance operational efficiency. Real-time data analysis helps identify bottlenecks or inefficiencies that can be addressed quickly.
- Sustainability: Smart factories can also contribute to sustainability goals. Automation and AI optimization can lead to more efficient use of energy and resources, reducing a factory’s environmental impact. Also, predictive maintenance means machinery can be kept at peak efficiency, further saving energy.
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2. Predictive Maintenance and Digital Twin Technology Are Enabling Better Decision-Making
The cost of downtime because of inefficient maintenance can be staggering for leading manufacturers. For example, large plants lose 323 production hours a year and the average cost of lost revenue, financial penalties, idle staff time, and restarting lines is $532,000 per hour, amounting to $172 million per plant annually.
That’s where predictive maintenance comes in.
Predictive maintenance uses data analyses tools and techniques to predict possible defects in equipment and processes to help you fix them before they result in failure.
Predictive maintenance can result in a 40% reduction in maintenance costs, a 70% decrease in downtime, and a 25-30% increase in overall equipment effectiveness (OEE). The Predictive Maintenance Market size is expected to grow to $15.9 billion USD by 2026, at a CAGR of 30.6%.
The growth of AI, IoT, and Big Data has also made way for a trend called “digital twins.”
Digital twin manufacturing is a concept that uses a digital replica or “twin” of a physical manufacturing process or system. This digital model mimics the behavior and performance of its physical counterpart in real-time, providing valuable insights and enabling better decision-making.
The digital twin market is expected to reach $73.5 billion by 2027.
3. Supply Chain Challenges Are Reviving Reshoring
Global issues like the war in Ukraine and the COVID-19 pandemic continue to cause supply chain disruption and it doesn’t appear to be getting better anytime soon.
Manufacturers are having to make the best of a bad situation and it is resulting in them bringing production closer to home — in other words, reshoring.
According to The Reshoring Initiative report, more than 364,000 reshoring and FDI jobs were announced for 2022, up 53% from the previous record of 238,000 set in 2021.
There are many benefits to reshoring, including:
- Reduced Transportation Costs: When manufacturing is done domestically, the costs and time associated with transporting goods internationally are significantly reduced. For example, car manufacturers like Tesla benefit from reshoring by producing cars closer to their main market, reducing logistics costs and time.
- Quality Control: Reshoring allows for closer oversight and higher control over production processes, ensuring a consistently high-quality product. Apple, for example, has brought some of its manufacturing back to the United States to tightly control the quality of its products.
- Speed to Market: Domestic manufacturing can significantly reduce the lead time from production to market, allowing for quicker responses to market changes. When faced with sudden demand for ventilators during the COVID-19 pandemic, many US companies were able to pivot and produce them domestically, demonstrating the agility of reshored manufacturing.
- Local Job Creation: Reshoring can stimulate local economies by creating jobs. General Electric, for instance, reshored some of its appliance manufacturing operations to Kentucky, creating several hundreds of jobs and boosting the local economy.
Expect this trend to continue as companies look to become more resilient and less vulnerable to global crises that impact their supply chain.
4. Manufacturers Are Reskilling Workers and Raising Wages to Overcome Labor Shortages
In 2023, manufacturers are facing the challenge of a tight labor market and high turnover rates as they navigate shifting talent models.
According to a report by Deloitte and the Manufacturing Institute, an estimated 2.1 million manufacturing jobs could go unfilled by 2030—and the cost of those missing jobs could potentially total $1 trillion in 2030 alone.
This trend is further compounded by voluntary separations outnumbering layoffs, indicating significant workforce churn. As a result, operational efficiency and margins are being adversely affected by this ongoing workforce shortage and exacerbated by supply chain limitations.
To combat these challenges, manufacturers are adopting the following strategies to attract and retain talent:
- Increasing Pay: With talent scarcity becoming more pronounced, manufacturers are considering raising wages to attract and retain skilled workers. A survey from The National Association of Manufacturers in 2022 reported that nearly three-quarters of manufacturers would be increasing pay by 3% in 2022.
- Reskilling and Upskilling: The increasing adoption of digital technologies in manufacturing necessitates advanced technical and digital skills among the workforce. Employees under age 25 said they stay with their current employer because of training and development (69%) and career opportunities (65%). Manufacturers are likely to prioritize reskilling initiatives, which may include continuous training programs to enhance employees’ skills, partnering with startups to access new technology and talent, and collaborating with academic institutions to tap into digital expertise.
Additionally, the Deloitte report says 75% of manufacturing respondents stated that retaining existing talent is a top challenge, so you can expect this to remain a top priority moving into 2024.
5. Manufacturing Companies Push the Sector Toward Carbon Neutrality
According to the World Economic Forum, one-fifth of the world’s carbon emissions come from the manufacturing and production sectors and consume 54% of the world’s energy sources.
There are already a number of Fortune Global 500 companies committed to going carbon neutral, including one-fourth of them committing to reaching carbon neutrality by 2030.
This is largely driven by eco-conscious consumers who are demanding eco-friendly products and supporting companies that share the same values as they do.
There are a few key benefits for companies who commit to going carbon neutral in today’s world:
- Enhanced Reputation and Brand Value: Manufacturers that go carbon neutral enhance their reputation as environmentally responsible organizations, leading to increased brand value and customer loyalty. An example is Patagonia, a leading outdoor clothing company that offsets its carbon emissions and promotes sustainable practices, earning a strong reputation for environmental stewardship.
- Cost Savings and Operational Efficiency: Transitioning to carbon neutrality often involves adopting energy-efficient technologies and optimizing processes, resulting in reduced energy consumption and cost savings. For instance, Interface, a global modular flooring manufacturer, implemented energy-efficient measures that led to a 96% reduction in carbon emissions and substantial cost savings.
- Access to New Markets and Customers: Going carbon neutral allows manufacturers to tap into emerging markets and attract customers who prioritize sustainability. Unilever, a multinational consumer goods company, achieved carbon neutrality across its operations and experienced increased market share by meeting the growing demand for sustainable products.
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The Future of Manufacturing Belongs to the Visionaries
Embracing these trends will require visionary leadership and a proactive mindset. Manufacturers must recognize the potential of smart factories and harness advanced technologies to optimize operations and gain a competitive edge.
Leveraging predictive maintenance and digital twin technology, Manufacturers can make informed decisions and unlock new levels of efficiency. Reshoring offers an opportunity to build resilience and mitigate supply chain risks, while prioritizing carbon neutrality demonstrates a commitment to sustainability and attracts eco-conscious consumers.
By adopting these trends and embracing a forward-thinking approach, manufacturers can position themselves as industry leaders and shape a prosperous future for the sector.
