Since the Covid-19 pandemic, we’ve witnessed a revitalization in American industrial policy. The economic ripples of the pandemic highlighted the precarious nature of long-spread supply chains and outsourced labor; now having internalized these lessons, many firms are re- or nearshoring their operations instead. Accordingly, experts may believe US manufacturing is poised for growth in the coming years as jobs come back home.
But the post-pandemic era isn’t the only thing paving the way toward growth. Advancements in artificial intelligence (AI) and automation technology have allowed manufacturers to increase efficiencies across the board. Logistics lessons learned over the past few years may have helped unlock new ways to strengthen supply chains.
Let’s dive headfirst into what the experts say about growth in US manufacturing. What should leaders look for? Where should they put their money? And how can you position yourself financially to leverage these opportunities?
The Continued Effect of the Pandemic Recovery
While the pandemic is over, many industries in the US and abroad are still reeling from its effects. Labor shortages have left their mark, worker strikes threaten slowdowns (and outright shutdowns), and a tightening economic situation prevents some from making large purchases.
For instance, new vehicle sales in auto manufacturing have been steadily improving. But experts predict some slowdown as 2023 heads into 2024.
Globally, research from Interact Analysis predicts a manufacturing constriction in 2024. Current economic turbulence paired with ongoing conflicts in Eastern Europe and the Middle East may dampen the global manufacturing industry—and likely all industries that rely on supply chains tied to these regions.
But while the rest of the world deals with constriction, US manufacturing may see continued growth as we move into 2024. As long as they can fight against interest rates and labor shortages, US manufacturers may have the chance to capitalize on coming headwinds.
How Supply Chain Disruptions Impacted US Manufacturing Growth
Among the most significant hurdles for US manufacturing growth is supply chain fragility. We all saw how the pandemic poked holes in our just-in-time system. As a result, companies learned the value of keeping extra stock on hand, ordering ahead of time, and securing additional warehouse space.
They also learned how reliant they were on overseas suppliers for shipping and, obviously, manufacturing. With spontaneously shutting down during the pandemic, predictions were difficult to make as output slowed and stopped.
According to a survey of senior-level supply chain executives between 2020 and 2022:
- Only 2% of companies said they were “fully prepared” for the pandemic.
- Disruptions affected 57% of companies.
- A full 72% said business was impacted negatively.
The manufacturing industry was hit particularly hard, with 97% of all industrial products companies saying the pandemic negatively affected them. It’s likely because you can’t do core manufacturing jobs remotely. These firms needed people on the factory floor. But depending on where they operated, pandemic restrictions prevented this.
That said, the pandemic also saw a significant push toward technology to cope with Covid-era labor shortages. How might we continue to see technological growth as US manufacturing rebounds in 2024 and beyond?
How AI and Automation Could Drive Innovation and Growth in US Manufacturing
Manufacturing has always been at the cutting edge of innovation. After all, it only took 100 years to go from the Model T to Tesla. More recently, much of that innovation has been in AI technology and automated processes. Both have put US manufacturing on the fast track toward growth in the coming years.
By embracing automotive tech, US manufacturers have streamlined processes and boosted operational efficiencies—a trend that should continue indefinitely. In fact, the industry has found so many ways to automate that we’ve moved into a new phase of technological advancement called hyperautomation.
Hyperautomation is a business-driven strategy aimed at quickly discovering, validating, and automating as many business and IT activities as possible. AI has proved to be the driving force behind the hyperautomation trends. With it, companies may easily identify which processes can be automated and which may require a human touch.
But AI isn’t the only tool manufacturers can use to boost efficiency. They can also leverage:
- Event-driven software architecture
- Machine learning
- Robotic process automation (RPA) and business process management (BPM) software
- Intelligent business process management suites (iBPMS)
- Integration platform as a service (iPaaS)
Hyperautomation in US Manufacturing
Hyperautomation as a market is forecast to exceed $82.2 billion by 2028. According to Salesforce, four out of five companies plan to include hyperautomation in their 2024 technology roadmaps.
Specifically, manufacturers will be able to use hyperautomation strategies to:
- Boost Supply Chain Efficiencies: Hyperautomation will enable manufacturers to improve their supply-chain management processes (upwards of 65%) thanks to intelligent and sustainable warehousing strategies. They can use AI to create more efficient warehouse layouts, while hyperautomation improves overall inventory management.
- Increase Productivity: Automating repetitive tasks allows you to focus human labor on crunch points that require a human touch. Manufacturers can rely on robots to handle complex tasks, while AI can quickly identify areas where productivity could be improved.
- Learn What Customers Want: AI can comb the internet, gather data, and conduct surveys, allowing you to get to the core of your target audience’s desires. From there, you can make more informed decisions regarding investments and new product launches.
Challenges and Opportunities in Manufacturing Talent and Workforce
AI and automation will only get companies so far. To truly leverage growth opportunities [[link to: New Manufacturing Technology Challenges and Opportunities to Understand for 2024]], US manufacturing will need to overcome current hurdles in the labor market.
According to the Bureau of Labor Statistics, manufacturing in the US is currently short 600,000 jobs. As older employees retire, we don’t have enough young workers to fill their roles. Business leaders may need to evaluate their hiring strategies and find new ways to attract and retain top talent.
Building a strong company culture is an excellent place to start. Manufacturing often isn’t the most attractive job. So, it’s up to business leaders to find ways to make it more appealing to younger generations. Employee satisfaction may be among their top priorities. This means building an inclusive environment that thrives on diversity and provides a reasonable work-life balance.
Next, companies may want to prioritize training. Manufacturing, by nature, is prone to accidents. Improperly trained employees can be a hazard to themselves and others.
Furthermore, training can help boost employee confidence. Sometimes, there’s more value in investing in robust training programs than a cutting-edge piece of machinery. Employees want to learn. They want to develop skills that’ll come in handy as they climb the career ladder.
Providing competitive benefits, like top-notch retirement planning, is another way to boost retention and employee engagement. By partnering with trusted banking experts, like the Retirement Plan Services team at HTLF, manufacturing firms can provide their employees with comprehensive retirement plan solutions. They’ll be able to leverage materials to bolster their financial education, no matter where they are on their retirement journey.
Finally, embrace employee feedback to fill gaps in your hiring processes. As it stands, manufacturing sports a low employee engagement level of 25% (eight points below the national average). Communication can be the key to boosting employee engagement. So, find ways to leverage feedback tools and be sure to act on employee concerns.
Supply Chain and Logistics Challenges and Opportunities
Manufacturers across the globe learned how fragile their supply chains were during the pandemic. It’s been a turbulent time.
Between geopolitical tensions, labor shortages, and expensive shipping costs, what sort of supply chain challenges might US manufacturing face that could hinder growth? Are there steps they can take to overcome these challenges?
Understanding Lead Times for Production Materials
Since the onset of COVID-19, navigating evolving and challenging supply chains has been a critical focus of many US manufacturers. While we’re seeing signs of stabilization, average lead times for production materials have yet to return to pre-pandemic levels.
For example, average lead times peaked at an all-time high of 100 days in July 2022. Those figures steadily improved to 87 days as of August 2023. While we anticipate continued improvements, it’s unclear how long it will take to return to pre-pandemic levels.
Digitization of Supply Chains
Digital solutions have extended a lifeline to manufacturers who are ready to embrace technology in order to overcome ongoing supply chain struggles. In fact, a recent Deloitte survey found that 76% of manufactures are in the process of adopting digital tools to increase visibility into their supply chains.
For some, metaverse technology is leading the charge, with 21% of survey respondents indicating that they’re already incorporating metaverse tech into their supply chain ecosystems. As an example, manufacturers in the aerospace sector have begun using digital twins of their supply chains to simulate potential real-world scenarios. The digital twin allows them to draw heat maps, highlighting components that exert the most influence and are susceptible to volatility. From there, they can identify alternative suppliers and routes should that scenario unfold in real time.
Ultimately, digital supply digitization will empower manufacturers to reduce dependencies while increasing agility and robustness. As the industry continues navigating the post-pandemic world—one full of economic uncertainty, shortages, high interest, and conflict—digital trends will play a critical role in boosting supply chain efficiencies.
Cybersecurity Threats
Connectivity changed the world. It also opened the door to a new kind of crime: cybercrime. Protecting sensitive data is crucial to sustaining your reputation and surviving as a business. A data breach is a quick way to lose the trust of valuable customers and clients.
You may want to get ahead of online threats by prioritizing cybersecurity. Instill a culture of safe internet practices, such as VPNs and robust passwords. Train all employees on the latest scams and learn how to spot suspicious emails from malicious actors. [[link to: Business Email Compromise: How BEC Scams Can Threaten Your Business ]]
The Influence of Sustainability and Social Responsibility on US Manufacturing Growth
The information age has made us more aware than ever. For businesses, social and environmental responsibility must be at the forefront of thought. Manufacturers would be wise to find ways to become eco-friendly and make positive changes in their local communities.
Corporate social responsibility (CSR)may be critical to the growth of US manufacturing. It embodies how your company regulates itself and makes responsible choices regarding the environment and society. Specifically, CSR pushes organizations to positively impact their community by celebrating diversity and inclusion in the workplace.
From a business standpoint, CSR may impact performance and profitability. You might comply with local and federal regulations. But if your practices don’t align with your customer’s values, they’ll quickly pivot to your competitors.
Some business leaders think adopting sustainable practices is more expensive. But actually, sustainable practices have been shown to increase operational efficiencies by reducing waste and overall costs. Consider how limiting plastic waste in your packaging processes can save money on inputs and also have a positive impact on the environment.
Regarding manufacturing, emissions are among the industry’s tallest hurdles. In 2020, the industrial sector was responsible for 24% of total greenhouse gas emissions. To truly leverage growth opportunities, US manufacturing must find innovative ways to lower their emissions. This may include green web hosting, sourcing natural materials, and investing in sustainable programs.
Growing Trends in Customer Experience and Demand
Modern consumer demands have pushed US manufacturing toward adopting customer experience (CX) software to sustain growth and profits. Forward-thinking manufacturers reaped the benefits of these technologies in 2022 and 2023. The same trends are expected to continue into 2024.
Augmented reality (AR) and virtual reality (VR) are two key technological advancements that may help manufacturers improve CX. These visual experiences allow customers to become more engaged in the buying process. Many automakers use AR to build virtual sales floors where customers can explore all their products.
Manufacturers must also try to improve CX in both B2B and B2C sales. For example, if wholesalers are your primary buyers, you’ll want to find ways to leverage automotive technology to improve those relationships. In general, the best CX management software can help enable you to strengthen relationships with all consumer profiles.
New customer service channels will also play a significant role in 2024. Customers expect various means to contact your company. These include email, phone, online chat, and video chat. We may also see AR introduced in the customer service sphere, allowing representatives to take a virtual hands-on approach to problem-solving.
The benefits of adopting a customer-centric culture cannot be overstated. Manufacturers are operating in a world where supply chains remain unpredictable, and cost bases are always increasing. Maintaining happy, loyal customers is critical to profiting during turbulent times.
Consider the following strategies for adopting a customer-centric mindset and how it may benefit your company:
Strategic Customer Segmentation
When you group customers into segments, you’re able to target them with pinpoint precision. What matters most is the criteria used for segmentation. On the one hand, you could use static data, such as proximity, size, sales, or sector. This is a simple approach but has a low benefit ceiling.
Alternatively, you can invest in market research to segment customers based on needs. Or, you can focus on value-added per customer. The latter approach allows you to prioritize those with high profit potential, which could easily account for between 70 and 80% of your earnings.
Leveraging Steps Along the Customer Journey
Like your B2C customers, your B2B partners follow similar steps along the customer journey. Tracking these touchpoints allows manufacturers to boost efficiency, increase customer satisfaction, and improve the overall CX.
You will need to be a little more flexible with B2B customers, as their needs will vary depending on individual circumstances. They may also require additional services, like online monitoring and consulting. Consider focusing on your most important customer first. Ensure their journey is as smooth as possible before moving to other clients.
Data, Data, Data,
Data is the backbone of your consumer-centric mindset. The only way to capitalize on valuable insights is to ensure this data is readable and actionable. Ensure that customer data flowing from multiple channels inevitably empties into one standardized database.
There was a time when data silos were only accessible to their relative departments. The sales team could leverage sales data; the accounting team could access financial data. This, however, doesn’t facilitate a well-rounded approach. Data needs to be unified and available to everyone at any time. A nugget of financial data may prove critical to your sales team.
Of course, this exemplifies the need for robust cybersecurity measures. Ensure your data is only accessible to trusted people within the company. Breaches are extremely costly.
Are You Financially Prepared for the Future of Manufacturing?
With growth on the horizon for US manufacturing, are you financially prepared for what’s coming? Will you be able to leverage opportunity while overcoming inevitable obstacles?
Financial planning in the manufacturing sector comes down to accurate forecasting. This may include expenses, capital investments, revenues, and cash flow. By aligning them with your company’s objectives, you may be able to build a robust financial plan that allows you to:
- Effectively allocate resources
- Compare your performance against industry benchmarks
- Identify growth opportunities and financial risk
- Attract financing for expansion opportunities
A solid financial plan and a reliable banking partner will help you make more informed and confident decisions. Investors and stakeholders will also feel more confident in your company. From board members to employees, well-rounded financial planning assures all players of the company’s future goals.
Plan for Future US Manufacturing Growth Today
US manufacturing may be poised for growth in 2024, but that doesn’t mean it won’t come without its fair share of challenges. By adopting technological advancements and heading into the new year with a well-rounded financial plan, you can easily seize these opportunities.
Both are made significantly easier with the help of a reliable banking partner like New Mexico Bank & Trust, a division of HTLF Bank. They can help with cash flow management, revenue forecasting, and more. Their knowledge will be invaluable, especially during turbulent economic times.
Get in touch with New Mexico Bank & Trust, a division of HTLF Bank today to speak with one of our commercial bankers. We’ll help you leverage growth opportunities heading into 2024.
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