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2023 manufacturing industry outlook

Accelerating growth amid anticipated challenges

Despite supply headwinds, labour 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 organisations 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 labour 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 utilisation 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 organisations 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 offence, our 2022 manufacturing industry outlook examines five important trends to consider for manufacturing playbooks in the year ahead.

Five manufacturing industry trends to watch

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 digitalisation 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 labour 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.

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 utilisation 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.

Taking a holistic approach to smart factory initiatives to unlock new horizons

Manufacturers will likely continue progressing towards 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.

Focussing on corporate social responsibility

The fast-evolving environmental, social, and governance (ESG) landscape may require close monitoring in 2023 for manufacturers. Many organisations voluntarily comply with a complex network of reporting regulations, ratings and disclosure frameworks. But regulators globally are also moving towards requiring more disclosures for nonfinancial metrics. Manufacturers are progressing towards their ESG commitments by making operational changes across their value chains.

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