Insights

Despite supply challenges, labor shortages, an uncertain economic environment, and other obstacles, the manufacturing industry is expected to build on the acceleration gained in 2023.

This article aims to guide ThoughtFocus clients by highlighting key considerations for mid-market manufacturing companies in the year ahead. It emphasizes the importance of leveraging digital technology, attracting and retaining talent through upskilling initiatives, mitigating supply chain risk, implementing smart factory initiatives, and adapting strategies for the future of work.

With the potential to overcome challenges and capitalize on innovations, Thoughtfocus’ manufacturing and technology capabilities can help clients navigate the evolving landscape and achieve their growth and productivity goals.

A SECTOR UNDERGOING MASSIVE CHANGE 

The manufacturing sector is currently undergoing significant transformations. 

As the global economy recovers from the impact of the COVID-19 pandemic, many countries are witnessing a resurgence in manufacturing activities, leading to a surge in investment in this sector. 

The Manufacturing Supercycle has emerged as a significant driver of investment and a primary factor in the requirement for manufacturers to transform. This manufacturing supercycle is driven and accelerated by factors such as increased consumer spending, infrastructure development, and new government policies. 

TECHNOLOGY TRENDS 

Investing in advanced technologies is crucial for manufacturers to mitigate risks and increase resilience. Companies with higher digital maturity have shown greater ability to adapt and pivot quickly, especially during uncertain times. 

By investing in the right technologies, manufacturers can improve forecasting and supply chain visibility. Implementing digital capabilities across the value chain helps protect long-term profitability and improve efficiency. Advanced manufacturing technologies such as robotics, automation, artificial intelligence, and machine learning can enhance productivity and provide a competitive edge. Finding the right mix of technology adoption that strengthens the core processes while also pushing the boundaries is essential.  

DIGITAL TRANSFORMATION 

To stay relevant, manufacturing companies have embraced digital transformation. Many manufacturers are redefining their identity as data companies producing tangible products.  

AI, machine learning, IoT, and robotics are utilized in various operations such as research and development, production and assembly, order management, pick-and-pack, just-in-time inventory, logistics management, reverse logistics, and other essential functions.   

THE RETAIL INFLUENCE  

In the past, manufacturers were disconnected from the end consumer and retailers acted as the connector. Today’s consumers buy directly from manufacturers and understand their role in the supply chain and customer satisfaction. Manufacturers are now expected to take responsibility for the entire customer experience. This responsibility extends beyond quality assurance and includes catering to the end consumer directly.

The changing dynamics of the retail customer experience drove this cultural shift. The proliferation of omnichannel experiences in everyday life forced manufacturers to adopt more customer-centric tactics.

Retail customers now expect speed, convenience, real-time visibility into product and inventory status/location, fast delivery times, real-time communication, and a seamless end-to-end experience from manufacturers.

Retailers now rely on manufacturers to meet customer experience expectations and, in turn, manufacturers need to align with those expectations.

All these create a ripple effect, and consumers are more inclined to hold manufacturers and the supply chain accountable for negative customer experiences rather than blaming the retailer.

THE CLOUD IS THE GREAT ENABLER 

A cloud-based data platform can enable manufacturers to democratize data and bring together operations and information technology networks. 

AUTOMATION EVERYWHERE 

Manufacturers have long deployed automation to make production more efficient. This continues with robotics and other automated systems. However, today manufacturers are fast becoming data companies — data informs and runs their processes, feedback loops, and production to the point where some manufacturers run autonomous assembly lines. Automation to this extreme requires data, applications, software, IoT, platforms, and systems to be integrated.

FLEXIBLE SUPPLY CHAINS 

Now that the pandemic disruptions in the supply chain have eased and the prices of raw materials have declined, manufacturers are turning their attention back to growth and expansion. This means assessing what’s possible with new and emerging technology.

Many manufacturers are building tech platforms or partnering with software companies to transform the experience for customers and develop new innovative capabilities (such as predictive maintenance) to better serve customers. The entire retail and supply chain ecosystem now expects greater innovation, visibility, connected systems, and automated real-time communication. Manufacturers that can’t meet that expectation will be left behind for those that can. It requires a supple, agile ecosystem.

PULLING EVERYTHING TOGETHER 

The emergence of advanced technologies like artificial intelligence, machine learning, robotics, code manufacturing, and integrated workflow have revolutionized the processes, data pipelines, and overall operations in manufacturing. 

Combined, the convergence of all these forces have created a sense of urgency for manufacturers to transform their operations and embrace digital technologies. With increased demand and competition, manufacturers are pressured to optimize their processes, increase productivity, and deliver products faster.  

Digital transformation is crucial in achieving these objectives. By embracing these technologies, manufacturers can streamline their operations, reduce costs, improve product quality, and meet the growing demands of customers in a highly competitive market.  

MAXIMIZE TALENT 

As we move into 2024, addressing talent management shortages is crucial.

With the increasing use of digital technologies in manufacturing, upskilling and reskilling the workforce is essential. Manufacturers are investing in continuous training, collaborating with academic ecosystems for access to digital skills, and even partnering with startups for new technology and talent.

Manufacturers recognize that increasing diversity will expand the talent pool and are working to meet representation targets and create inclusive environments.

Flexible work arrangements are another focus for manufacturers.

Some work with outside organizations using KPO or Digital Operations – a form of outsourcing that enables organizations to efficiently and effectively assess business processes holistically to take advantage of new technologies without defaulting to simple cost optimization with BPO. Digital Operations drive breakthrough customer experiences, provide scale, increase productivity, and lower costs.

Other organizations offer employees remote work arrangements. Remote work has proven successful for business continuity, companies are exploring ways to add flexibility across their operations. This includes addressing factors like well-being and flexibility, which are important to both experienced workers and the younger generation entering the workforce. 

ACHIEVE A FLEXIBLE SUPPLY CHAIN 

Here are some recommendations for clients to ensure supply assurance by relying on proven strategies and implementing enhanced tactics: 

• Strengthen relationship management and supply chain visibility: Forge strong partnerships with suppliers to navigate disruptions effectively. This collaboration can help identify alternative transport routes and sources for components. Additionally, engage with tier 1 suppliers while developing redundancy in the supply chain. 
• Build redundancy in the supply chain: Diversify the supplier base and add redundancy to mitigate risks. Evaluate the cost of multiple suppliers against the benefits of increased agility and risk mitigation. Consider taking equity stakes or acquiring suppliers to gain more control over the supply chain. 
• Increase local capacity: Integrate businesses across the value chain to reduce exposure to logistics issues and transportation bottlenecks. Consider opening new production facilities in local locations to boost production capacity for parts and materials. 
• Embrace digital technologies: Utilize digital capabilities to enhance supply network visibility, control, and coordination. Invest in innovation and digital transformation to achieve supply assurance in future disruptions. 

By following this guidance, clients can enhance their supply chain resilience and mitigate the impact of disruptions on their operations. 

A SMART FACTORY IS ATTAINABLE 

To achieve smart factory transformation and unlock new levels of productivity, it is vital to take a holistic approach.  

This involves laying the technology foundation by enhancing connectivity through cloud computing, edge computing, and 5G.  Leading manufacturers also partner with specialized technology companies to further their smart manufacturing initiatives.  

Once the digital core is established, investments can be made in disruptive technologies such as augmented reality, artificial intelligence, the Internet of Things, additive manufacturing, blockchain, and advanced analytics.  

Some manufacturers are already experimenting with digital technologies to create a seamless and unlimited reality experience, known as a metaverse. However, it is crucial to prioritize cybersecurity and invest in cyberinfrastructure to stay ahead of cyber threats.  

Monitoring efforts should be increased to detect abnormal behavior in information technology and operational technology to prevent catastrophic damage. Overall, with the right approach and investments, the smart factory is attainable and will increase productivity.  

SUSTAINABILITY IS GOOD BUSINESS 

Developing better waste reduction capabilities and investing in technologies for product recycling can make manufacturing operations sustainable.  Sustainability and waste reduction is a key driver of success in the manufacturing industry. Embracing sustainability will benefit the environment and enhance the reputation and profitability of manufacturing businesses.  

ADAPT AND THRIVE

Manufacturers are actively adapting to these emerging trends to stay competitive and drive innovation by leveraging advanced technology.  

Additionally, real-time data, driven by customer feedback and IoT, is crucial in informing product design and engineering, leading to innovative solutions.  

Manufacturers continuously strive to leverage these new customer experiences, whether through direct-to-consumer channels or traditional retail. In terms of supply chain management, cloud-based and integrated order management systems, along with inventory management systems, enable seamless connectivity and real-time visibility for all supply chain members. This enhanced visibility allows for easy tracking of inventory status and enables proactive management of disruptions or delays through automated triggers and alerts. Ultimately, this visibility across the supply chain mitigates risks and enhances the ability to meet customer expectations.  

Automated demand forecasting and production scheduling are crucial to meet customer expectations. Manufacturers can accurately track customer inventory and sales volumes by integrating data and systems, allowing for autonomous production planning. Real-time integration with suppliers enables an automated purchase order process, ensuring that inventory and material demands are met promptly. Cognitive supply chains utilize AI and automation to monitor supply and demand, automatically ordering more inventory when certain thresholds are reached. This streamlined approach creates a stable and predictable supply chain, guaranteeing that customer demand can be met efficiently.

Manufacturers are now adopting predictive maintenance and operations protocols alongside demand forecasting to enhance efficiency. By proactively alerting end users about potential issues, unexpected disruptions to equipment or systems can be prevented. This proactive approach also extends to consumers, such as in the auto industry, where manufacturers are responsible for notifying customers about maintenance needs. Fueled by IoT and performance data, predictive analytics provide valuable insights that inform demand forecasting. This enables manufacturers to anticipate end-of-life or replacement needs, enabling them to produce the required products even before the customer realizes it. This customer-centric approach is a significant advantage of predictive analytics in the manufacturing industry.

THINKING ABOUT THE FUTURE

The role of IT in the manufacturing industry is crucial in shaping its future. With the increasing importance of data and technology, manufacturers are transforming into data companies. To effectively respond to these trends, IT is adopting platform engineering approaches to standardize technology and create standard tools across the organization. This brings stability and cost reduction and enables faster and more efficient innovation. Additionally, continuous customer experience, driven by automation and predictive analytics, ensures a seamless and personalized experience. Artificial intelligence and automation are essential for various processes, from predictive analytics to streamlining operations. Real-time integrations, especially in cloud systems, are vital for creating a connected and transparent ecosystem. By automating the integration process, manufacturers can simplify and enhance their operations.  

The manufacturing sector is undergoing significant transformations driven by technological advancements and the increasing importance of customer experience. Manufacturers are embracing digital transformation and utilizing technologies like AI, machine learning, robotics, and integrated workflows to improve their processes and meet customer expectations. Cloud-based solutions and integration are crucial for enhancing efficiency and connecting systems, applications, tools, and resources. The post-COVID era has further emphasized the need for a supple ecosystem and greater innovation within the industry.

To stay competitive and drive innovation, manufacturers are adapting to these trends by leveraging advanced technology. Real-time data and automation play a crucial role in informing product design, enhancing customer experiences, and enabling seamless connectivity within the supply chain. Manufacturers are adopting predictive maintenance and operations protocols alongside demand forecasting to enhance efficiency and proactively address potential issues. IT plays a crucial role in shaping the future of the manufacturing industry, with a focus on data and technology. Platform engineering approaches, automation, and real-time integrations are key strategies for manufacturers to stay ahead in this evolving landscape.

Manufacturers can proactively address issues, optimize their operations, and deliver a seamless and personalized customer experience by adopting predictive analytics, automation, and real-time integrations. IT plays a crucial role in shaping the future of the manufacturing industry, and manufacturers must continue to prioritize data and technology to stay competitive in the modern, high-tech manufacturing landscape.

To navigate these uncertainties and capitalize on opportunities, manufacturing companies should consider the following actions: 

• Embrace digital technology: Increasing the utilization of digital technology can enhance supply chain visibility, productivity, and connectivity with suppliers, partners, and consumers. Embracing digital transformation will be crucial for staying competitive and adapting to changing market dynamics.
• Focus on talent attraction and retention: With labor shortages being a persistent challenge, companies should prioritize attracting and retaining talent. This can be achieved through upskilling and reskilling programs, providing flexibility where possible, and promoting diversity, equity, and inclusion in the workplace.
• Mitigate supply chain risk: Building local capacity and moving away from just-in-time sourcing can help mitigate supply chain risks. Creating redundancy in the supply chain will enable companies to better navigate disruptions and ensure a steady flow of materials and components.
• Implement smart factory initiatives: Smart factory initiatives, leveraging automation, artificial intelligence, and data analytics, can help manufacturing companies achieve targeted business goals. This includes improving efficiency, reducing costs, and enhancing product quality.
• Adapt strategies for the future of work: The manufacturing industry is evolving rapidly, and companies must adapt their strategies to align with the future of work. This may involve exploring new business models, embracing sustainability practices, and staying ahead of emerging trends and technologies. 

Given these recommendations, we invite you to schedule a meeting with our team. We have the expertise and experience to help your company navigate the challenges and seize the opportunities that lie ahead in the manufacturing industry. Let us work together to drive growth, innovation, and success in 2024 and beyond.