In many ways, 2023 was a banner year for U.S. manufacturing. Spurred in large part by the passage of the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA), we saw record private sector investment in the manufacturing sector.
Still, 2023 was a mixed bag for individual manufacturers, with “leaders and laggards” emerging in every sector based on a mix of market demand, technological maturity and a host of external factors such as ongoing supply chain disruptions and labor disputes. Manufacturers of AI-optimized chips? Clear winners. Pharmaceutical companies marketing weight-loss drugs? They did well based on high customer demand; conversely, pharmaceutical companies making COVID treatments had a lot of inventory to write off.
2024 will likewise present both opportunities and challenges, with continued investments tempered by higher interest rates, ongoing labor shortages and, inevitably, more supply chain surprises. The one certainty going into the new year? Manufacturers that make smart investments in technology — and that operationalize that tech to drive near-term, tangible value — are going to put an ever greater distance between themselves and the laggards. Looking ahead, we should expect:
Greater transparency as a north star. “Where’s my product?” Leaders increasingly realize that when the customer service department gets that call, the rep better have a good answer, in real-time. That means being able to see all parts of an order, not just the load they are shipping, in real-time, anywhere in the world. Chief Supply Chain Officers (CSCOs) will continue to invest in visibility technologies to eliminate supply chain and manufacturing blind spots and increase transparency and collaboration throughout their organizations to ultimately get their teams away from fighting fires and answering internal questions.
Inventory costs and product portfolios will be under the microscope. The highest interest rates in decades mean that leaders can no longer afford to over-order as a hedge to keep manufacturing lines running. Manufacturers increasingly will leverage technology to read the latest demand signals and order just enough inventory to meet customer demand. Similarly, product portfolios will be continuously assessed relative to demand and SKUs will be rationalized to optimize inventory carrying costs. Efficiently and effectively managing inventory will require a new degree of agility within the manufacturing supply chain to not only detect, for instance, short-filled orders but to identify the options that are immediately available to keep needed inventory flowing. Having real-time insight across your supply chain can help reduce inventory across the board.
Technologically mature carriers will take greater share. I’ve talked to several transportation executives at various manufacturers of late and heard a common refrain around carrier consolidation. They are all looking to build better relationships with a handful of close partners who have established track records of excellent performance. That means carriers who embrace technology to boost delivery performance will take an ever greater share from the tech laggards — especially in a market where capacity isn’t king anymore. Now that they have more leverage, shippers are asking their carriers, “What else can you do for me?”
Talent will follow the tech. Over the course of the pandemic, workers performed heroics with the tools that they had. Going forward, many of them will no longer accept manual processes or archaic tools (yes, I’m talking to you, Excel). Increasingly, workers see a company’s lack of investment in advanced technology as a lack of investment in them. The manufacturers who invest in the latest and greatest — visibility, AI, IoT, data and analytics — will win over the workforce for the future.
Leaders will choose tech that delivers faster time to value. Too many digital transformation projects fail because manufacturers try to boil the ocean or take a long time to implement — by the time the solution is ready to go, the climate has changed. Instead, the savviest manufacturers are focusing on the use cases that can drive the greatest efficiencies and savings in the near term. And more CSCOs and CFOs are working together to actively monitor the ROI of every investment. The ROI doesn’t have to be astronomical, but manufacturing leaders will increasingly choose the vendors and tech that deliver cost reductions and operational efficiencies in a relatively short timeframe and even produce the receipts to show they’re delivering what they committed.
As we look at 2024 and beyond, manufacturers who have embraced technological advancements and operationalized them effectively will not only navigate future uncertainties but will thrive amidst them. The convergence of advanced analytics, artificial intelligence and agile logistics systems is not merely reshaping the landscape; it’s propelling those at the forefront into a future where the agility to respond to market demands and the foresight powered by data-driven decisions sets leaders apart.
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