Following a tumultuous 2023 which saw macroeconomic, geopolitical, and technological stressors for businesses across the globe, not least the manufacturing industry, 2024 is projected to be a year of recovery and change. Manufacturing and industrials experts, Partner Dan Coral and Principal Lauren Kauffman, offer insight on what to expect, sharing the 5 key trends that manufacturers should be aware of in 2024.

Manufacturing Trends

Setting the scene

But before we jump right in, let’s look back over 2023. Macroeconomic troubles this year, like high interest rates and inflation, have slowed down loan activity and led to a 10-year low in the consumer confidence index (CCI), a global metric indicating consumer confidence towards the future economic situation.

For the global manufacturing industry this has resulted in a reduction in manufacturing-related capital investment. But this has not been a homogenous phenomenon. Certain economies, like India, Mexico, countries in the middle East, such as Saudi Arabia, and some in Southeast Asia, like Singapore and Taiwan, have improved their GDPs and manufacturing outputs in 2023. Furthermore, according to Chief Economists, the global inflationary surge will begin to yield in 2024, starting with central banks slowly ratcheting down interest rates. Manufacturers, especially those outside of the countries stated above, should continue into early 2024 with a cost-cutting mindset as the cost of money remains high, but prepare for growth once demand and capital investment return in the latter half of the year and into 2025.

The geopolitical conflicts we’ve seen this year across the globe will also continue to be fundamental concerns for producers next year, who may be reliant on material inputs, labour, or demand from these regions. Manufacturers need to be cognisant of the geopolitical risks they may be exposed to along their value chains and the reputational consequences associated with any actions they take related to these conflict areas.

Read on to find out how you should be preparing your business to succeed in 2024. Dan and Lauren share insight on the considerations organisations must take to stay ahead, especially with regards to cost-cutting activities in the short term (during this continued recessionary period) and revenue-driving activities once recessionary scares recede and demand and loan activity picks back up.

Continue plans for industry 4.0, but be cautious about aggressive action

Industry 4.0, also referred to as smart manufacturing, refers broadly to factory automation, digitisation, and the realisation of the significant value of data through AI, machine learning (ML), internet of things (IoT), and more. These technological improvements are cost-intensive for manufacturers, and corporate teams need to begin plans for future implementations immediately, but potentially delay action until later in the year, due to cost concerns. Over the longer time horizon, this tech will serve as a powerful lever for cutting costs through optimised demand forecasting, more efficient operations, reduction in waste products, etc.

Stay aware of emerging legislation

Due to increasing geopolitical threats and the risk associated with highly globalised supply chains, many national governments, especially in developed countries, are looking to build domestic manufacturing operations for critical technologies. The United States, for example, has passed multiple relevant pieces of legislation to support domestic manufacturing, most notably the Inflation Reduction Act (IRA), and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act. Legislation like these and others contain tax incentives for manufacturing companies to use as a cost saver. It is imperative that manufacturers remain vigilantly aware of pending legislation related to their business both to take full advantage of low-risk capital and to reduce future effort needed for compliance.

Prepare a future-ready talent plan

Talent acquisition and retention operates as both a potential cost saver and revenue driver for manufacturers and will continue to be a high priority in 2024. Uncertain manufacturing demand trends make hiring full-time employees seem risky, which has led to the rise of flexible on-demand positions, similar to contract work and the gig economy. The manufacturing workforce is diverse, with employees ranging from design and engineering to assembly and delivery, and aging, highlighting the importance of training existing workers and upskilling the talent pipeline to fit future need. Companies need to develop sophisticated future talent plans in 2024, leveraging the emerging capabilities of AI to find well-suited areas for manufacturing, exploring gig economy business models, and pushing customised and targeted STEM education and outreach to save costs in over-hiring and drive revenue through a more skilled workforce.

Sustainability concerns remain paramount

Like talent, sustainability operates as both a cost saver and revenue driver and continues to be a dynamic business challenge for companies and important consumption criteria for the public and investors. Several mandatory corporate sustainability disclosures are expected to be enforced starting in 2024, meaning that ESG (environmental, social, governance) performance will become a more measurable, consistent, and trustworthy data source. Corporate leaders need to remain very up to date with these emerging sustainability regulations as they are internationally relevant, reputationally significant, and require internal corporate ESG strategy plans. The manufacturing sector is the third most carbon intensive sector, only topped by energy generation and transportation, making it primed for considerable ESG improvement. This presents a new opportunity for responsible businesses to gain a competitive advantage and could mean changing market dynamics. Circular economy considerations are also a core ESG concern for the manufacturing industry, as a high-waste sector, and producers will continue to ramp up their initiatives to design out waste (e.g. Apple’s plan to use 100% recycled rare earth and conflict materials by 2025). Manufacturing companies are noticeably exposed across several sustainability topics and high-performing ESG companies will surely be rewarded with more investment, contracts, and consumption over the coming years.

Industry convergence

Lastly, we are observing a growing blurriness between industries. This trend has led to the success of companies that defy traditional sector or industry categorisation. Examples of this trend include Amazon, an e-commerce giant which has diversified into other areas like cloud storage, Tesla, which can be characterised as both an auto manufacturer and software company, and many others. Going forward, manufacturers should look to incorporate industry and sector diversification into their long-term growth plans to improve resilience and provide more comprehensive customer experiences.

To ensure your business leads the way within manufacturing in 2024, and is both resilient and innovative, get in touch with Dan, Lauren, and our team today.

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