4 Manufacturing Industry Trends to Be Aware of in 2024

This article was written by Jake O’Donnell, Senior Consultant, Advisory

The manufacturing industry is currently navigating a complex landscape marked by evolving challenges and emerging trends. As we begin 2024, it is crucial to understand these trends as well as what key issues the industry may face, such as global supply chain disruptions, labor shortages, and the rapid adoption of digital technologies. The industry is also grappling with the effects of geopolitical tensions and environmental concerns, which are reshaping global manufacturing dynamics and providing new challenges for those in the industry. Below are four trends to be aware of as you plan for the year ahead.

Embracing Technology

The rapid advancement of technology has significantly enhanced manufacturing capabilities through more efficient order processing. Automation plays a vital role in boosting operating margins by eliminating inefficiencies in the manufacturing process and preemptively identifying maintenance needs. Adopting a proactive maintenance approach can prevent the expensive downtime caused by critical equipment failures.

Implementing an Enterprise Resource Planning (ERP) system is another strategic move. Your key personnel and executives should focus on business growth, and their involvement in day-to-day operations can often be a suboptimal use of their time. An ERP system can streamline efficiencies across various business processes, including finance, human resources, procurement, and automation support, freeing up valuable time for your leadership to concentrate on expansion and innovation.

Real-Time Data to Make Informed Decisions

Analyzing your product mix and understanding the cost-volume relationship is crucial in the manufacturing industry. Access to real-time sales data is key for making proactive, forward-looking decisions. Consider who your primary customers are and evaluate your dependency on specific segments of your customer base. It's important to identify which products yield the highest margins and support your business effectively.

The significance of real-time data in this analysis cannot be overstated, as it enables you to make well-informed decisions swiftly. A thorough review of your stock-keeping units (SKUs) might reveal that certain products do not offer a sufficient return on invested capital, leading to the strategic decision to discontinue those product lines. Conversely, you may find opportunities to emphasize higher-margin products. By reorienting your sales efforts towards these more profitable items, you could see a substantial improvement in your bottom line, ultimately enhancing shareholder value.

Supply Chain Diversification

In recent years, the manufacturing sector has been deeply impacted by significant supply chain disruptions. These issues, stemming from a variety of factors like the COVID-19 pandemic, geopolitical tensions, and natural disasters, have highlighted the vulnerability of global supply chains. Manufacturers have faced challenges such as delays in raw material deliveries, increased transportation costs, and a lack of visibility across their supply networks. These disruptions have not only affected production schedules but also led to increased operational costs and strained customer relationships. To mitigate these challenges and improve supply chain resilience, manufacturers are adopting several strategies. One key approach is diversifying the supply base. By not relying on a single source or region for materials and components, companies can reduce the risk of disruptions. This diversification includes exploring local or regional suppliers to shorten supply chains and improve responsiveness. Another strategy is investing in technology for better supply chain visibility. Technologies like IoT, AI, and blockchain can provide real-time data and predictive analytics, helping companies anticipate and manage potential disruptions more effectively. Additionally, manufacturers are increasingly adopting lean inventory practices and just-in-time production, which, while requiring a more precise coordination, can significantly reduce inventory costs and waste. Building strong relationships with suppliers is also critical; by collaborating closely, companies can better understand and mitigate risks throughout the supply chain. These strategies, combined with a continuous assessment of supply chain vulnerabilities and scenario planning, can help manufacturers navigate the complexities of the global supply landscape and ensure a more stable and efficient production process.

Recognizing and Rewarding Key Employees

The current labor market in the United States remains tight, making the retention of a skilled workforce critical for manufacturers, especially as the industry shifts towards digital integration. Aligning the incentives of the company with those of key employees is an effective strategy for retaining valuable staff and attracting new talent. As significant changes occur at the executive level, clear and consistent communication with employees becomes increasingly important to ensure that everyone is aligned and understands the expectations set by management. Understanding what drives your employees can greatly facilitate their alignment with the company's strategic goals, creating a more productive and harmonious work environment. “The best way to teach is the way that is most understood.”

On the other hand, the integration of advanced technology and AI to establish “smart factories” presents an opportunity to reduce labor costs. This technological advancement can significantly enhance operational efficiency and improve profit margins.

Strategic planning in today’s complex landscape is no easy task. If you need further guidance or have any questions as you consider how the above trends may impact your business this year, we are here to help. Please do not hesitate to reach out to our Advisory & Consulting experts, Jake O’Donnell and Mike Binz, to discuss your specific situation.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.