Despite supply headwinds, labor shortages, and an uncertain economic environment, the manufacturing industry continues to surpass the expectations of previous years. To maintain this growth, leaders should leverage digital technologies, adopt strategies for the future of work, and drive supply chain resiliency. Our 2023 outlook explores five manufacturing industry trends that can help organizations turn risks into advantages and capture growth.
Competing in the new market demands business agility
It’s unusual to see positive economic indicators paired with historic labor and supply chain challenges. But this is the trajectory for the US manufacturing industry in 2022 emerging from the pandemic. The recovery gained momentum in 2021 on the heels of vaccine rollout and rising demand. As industrial production and capacity utilization surpassed pre-pandemic levels midyear, strong increases in new orders for all major subsectors signal growth continuing in 2022.
However, optimism around revenue growth is held in check by caution from ongoing risks. Workforce shortages and supply chain instability are reducing operational efficiency and margins. Business agility can be critical for organizations seeking to operate through the turbulence from an unusually quick economic rebound—and to compete in the next growth period. As leaders look not only to defend against disruption but strengthen their offense, our 2022 manufacturing industry outlook examines five important trends to consider for manufacturing playbooks in the year ahead.
Investing in advanced technologies to help mitigate risk
Manufacturers have increased their digital investment over the past few years and accelerated the adoption of emerging technologies. Companies with higher digital maturity have shown greater resilience, as did those that accelerated digitalization during the pandemic. Continued investments in advanced manufacturing technologies can help develop the required agility.
Implementing a broad range of talent management strategies to reduce voluntary exits
Addressing the tight labor market and workforce churn amid shifting talent models is expected to remain a top priority for most manufacturers in 2023. Despite a record level of new hires, job openings in the industry are still hovering near all-time highs. Additionally, voluntary separations continue to outnumber layoffs and discharges, indicating substantial workforce churn. This prevailing workforce shortage, elevated by supply chain limitations, is reducing operational efficiency and margins. Manufacturers are pursuing several approaches to strengthen their talent retention strategy.
Three. Supply chain
Relying on time-tested mitigation strategies with enhanced tactics to achieve supply assurance
Of surveyed executives, 72% believe the persistent shortage of critical materials and the ongoing supply chain disruptions present the biggest uncertainty for the industry, even in the coming year. Manufacturers are mitigating these risks not only with increased utilization of digital technology but also with time-tested approaches including building local capacity and moving from just-in-time sourcing to create redundancy in the supply chain.
Four. Smart factory
Taking a holistic approach to smart factory initiatives to unlock new horizons
Manufacturers will likely continue progressing toward smart factory transformations, as these initiatives drive future competitiveness. Many manufacturers are making investments in laying the technology foundation for their smart factories. One in five manufacturers is already experimenting with underlying solutions or actively developing a metaverse platform for their products and services.
Focusing on corporate social responsibility
The fast-evolving environmental, social, and governance (ESG) landscape may require close monitoring in 2023 for manufacturers. Many organizations voluntarily comply with a complex network of reporting regulations, ratings, and disclosure frameworks. But regulators globally are also moving toward requiring more disclosures for nonfinancial metrics. Manufacturers are progressing toward their ESG commitments by making operational changes across their value chains.
Paul is a vice chair, Deloitte LLP, and the leader of the US Industrial Products & Construction practice. He has more than three decades of experience in the industrial products and automotive sectors and has focused on helping organizations address major transformations. Paul drives key sector industry initiatives to help companies adapt to an environment of rapid change and uncertainty—globalization, exponential technologies, the skills gap, and the evolution of Industry 4.0. Based in Cleveland, Paul also serves as the managing principal of Northeast Ohio.
Kate Hardin, executive director of Deloitte’s Research Center for Energy and Industrials, has worked in the energy industry for 25 years. She leads Deloitte’s research team covering the implications of the energy transition for the industrial, oil, gas, and power sectors. She has served as an alumni expert at Yale’s Center for Business and Environment, and she is also a member of the Council on Foreign Relations.