With overall 2022 demand and production capacity at their highest levels in recent years, manufacturing has surpassed expectations emerging from a global pandemic. However, the industry must still grapple with challenges related to labor shortages, automation, continued supply chain disruptions, and rising cyber threats — not to mention inflation and economic uncertainty.
Mitigating these risks while improving processes and identifying new efficiencies will require bold leadership and innovation. Here are 10 trends that will shape manufacturing in 2023:
1. High Outputs Despite a Decline in Labor Force
2. Automation in Artificial Intelligence-Evolving Employment Positions
3. Cybersecurity Threats on the Rise
4. Continued Battles Against Supply Chain Disruptions
5. Greater Progress Towards Smart Factories
6. Reassessments in Supply Chain Efficiency
7. Enhancing Margins Through Data-Driven Decisions
8. Greater Progress Toward Carbon Neutrality
9. Heavier Dependence on Digital Processes
10. Market Competition Fueling Ecosystem Collaboration
Trend #1: High Outputs Despite a Decline in Labor Force
While output will continue to increase as manufacturers ramp up post-pandemic production and meet the growing demands of consumers, attracting and retaining a quality workforce will remain a challenge. Deloitte predicts US manufacturing will have over two million unfilled jobs by 2030, and 77% of manufacturers anticipate ongoing difficulties finding workers.
Keeping up with demand will require optimization of the supply chain through digital transformation, artificial intelligence (AI), and closer collaboration with trading partners. Employee retention will take on more urgency, especially given current demographics (e.g., aging population and historically low levels of immigration). Creating a robust talent strategy that prioritizes diversity, fosters inclusivity, and prepares the workforce for the future will be critical for continued success.
Trend #2: Automation in Artificial Intelligence-Evolving Employment Positions
While automation in manufacturing is nothing new, organizations are leveraging robotics more than ever to manage operations, decrease costs, and maintain their position in the market. As a result, the global industrial robotics market is expected to get a massive post-pandemic boost from $44.6 billion in 2020 to a projected $73 billion by 2025. Analysts expect the growth will be largely driven by the companies shifting to inhouse manufacturing to avoid future global supply chain issues.
Robotics has come to the rescue of other sectors, like agricultural manufacturing, which struggled to fill the labor gap. For example, robotics enabled produce growers to complete planting and harvesting when travel restrictions and border closures decimated their labor supply. Other companies have invested in “cobots” to work side-by-side with human employees when they couldn’t attract additional labor.
But while robotics can dramatically improve how companies operate, they continue to spark concerns about the potential negative impact on the workforce. As companies reevaluate how to best use their human capital, we expect them to focus on upskilling employees to take on duties requiring more collaboration and communication — skills robots are less likely to master (at least anytime soon).
Trend #3: Cybersecurity Threats on the Rise
While manufacturing’s embrace of data and technology has propelled the advancement of the industry, it comes with increased exposure to harmful cybersecurity threats. Companies that are pursuing industrial internet of things (IIoT) are especially vulnerable, as threats that were once confined to IT environments can now impact operational technology (OT). This can have serious consequences including production shutdowns, product tampering, infrastructure sabotage, threats to public safety, and more.
A recent study revealed more than half of respondents don’t feel prepared to detect and combat cyber attacks against IIoT. Fortunately, having a robust cybersecurity solution can keep those threats at bay. Here are other threats to be aware of now and in the coming year.
• Ransomware: A form of malware that encrypts files and demands payment to unlock them
• Denial-of-service (DDoS) attacks: An attack that floods a server with traffic to prevent users from accessing online services and sites
• Data theft and fraud: Data breaches from external actors or insiders that purposely or inadvertently compromise company data
• Sophisticated phishing schemes: Highly targeted schemes like spearfishing that use official-looking communications to target individuals or teams
Trend #4: Continued Battles Against Supply Chain Disruptions
After two years of disruptions related to the pandemic, analysts initially projected supply chains would be back to normal by now. Instead, 78.3% of manufacturing leaders cite supply chain disruptions as their top business challenge, with only 10.8% believing it will improve by the end of this year.
Unfortunately, it appears disruptions will continue well into or through 2023. For instance, manufacturers like Ford are still struggling with shortages of parts. They ended the month of September with between 40,000 and 45,000 SUVs and pickups they couldn’t finish because they needed critical computer chips.
Of course, the supply chain is always vulnerable to catastrophic weather events, geopolitical unrest, and other factors. But recent events like Hurricane Ian, worker strikes, Russia’s war in Ukraine, and China’s Covid lockdowns pummelled a supply chain that was already fragile.
But there’s hope on the horizon — at least from an international transportation capacity. According to a recent report from Sea-Intelligence, about half of the shipping congestion has been resolved, and normal operations should return in March 2023.
Trend #5: Greater Progress Towards Smart Factories
Manufacturers will continue to invest in technology to become smart factories, with 75% expected to adopt at least one component of smart manufacturing in 2023. Here are the technologies leading the transformation:
• Sensors: Placed on machines and devices to track and monitor processes. For instance, they can monitor machine temperature levels and self-correct or alert operators when a problem arises. When connected to a network, sensors can be used to monitor more than one machine at a time.
• Cloud computing: A more flexible, less expensive way to manage the data sensors collect. The cloud makes it possible to upload, store, and evaluate data in real-time to support agile, strategic decision-making.
• Big Data analytics: Provides insights into production process performance, identifying error patterns and more accurate predictive quality assurance. Different factories and organizations can share the data to solve common problems and further enhance processes.
• Virtual and augmented reality: Allows companies to create visual simulations of manufacturing processes and environments to support and improve operational processes, product development, and training programs. For example, VR technology makes it possible to design, test, and create prototypes of new products in a virtual environment.
• Digital twins: Provides a virtual replica of a physical object or process to simulate performance in the real world under varying conditions and circumstances. For example, creating a digital twin for a wind turbine (based on data collected from sensors on a physical turbine) allows an energy company to project how a turbine will function and perform in the environment it’s placed in.
Trend #6: Reassessments in Supply Chain Efficiency
The 2020 worldwide supply chain disruption impacted 95% of all supply chains and demonstrated the limitations and drawbacks of traditional operations or business-as-usual approaches. As a result, manufacturers are reassessing every aspect of the production process, accelerating the adoption of new technology for procurement, inventory, assembly, logistics, transportation, and sales. The inventory management software market alone, valued at $1.53 billion in 2021, is expected to reach $2.56 billion by 2029.
However, digitizing and optimizing the entire supply chain remains the overriding goal, enabling companies to improve efficiency, predict production and inventory changes in near real-time, and react quickly when disruptions occur. And while the shift to digital isn’t new — 87% percent of manufacturers surveyed have already made the change or are in the process of doing so — completing the transformation is more urgent than ever.
Trend #7: Enhancing Margins Through Data-Driven Decisions
Downtime in manufacturing can have a crippling impact on the bottom line. For example, one study found that large manufacturing plants lose an average of 323 production hours a year. Taking into account the lost revenue, idle staff time, financial penalties, and restarting lines, it cost an average of $432,000 per hour or $172 million per plant per year. However, downtime costs are highest for auto manufacturers, whose 29 hours of monthly downtime cost about $1.3 million per hour.
As a result, ensuring all equipment functions at optimal performance levels is a critical priority. Manufacturers continue to shift away from traditional time or usage-based maintenance practices in favor of predictive maintenance tools and technologies to catch issues before production is impacted. Through a combination of IoT, AI, and machine learning, it enables a proactive, data-driven approach to reveal important trends that enable operators to make better decisions. More companies will embrace this proven approach in the coming year to boost ROI, improve output, eliminate unplanned downtime, and reduce machine failures.
Trend #8: Greater Progress Toward Carbon Neutrality
As the third largest contributor to greenhouse gas emissions, reducing the carbon footprint across the supply chain has become an urgent priority for the manufacturing industry. Regulations and government investment have fueled significant progress toward sustainability by requiring manufacturers to transform end-to-end operations to low-carbon or carbon-neutral systems. In addition, manufacturers’ customers are imposing stringent environmental, social, and governance (ESG) requirements of their own, further motivating manufacturers to rethink past ways of doing business and how they manage relationships with trading partners.
As manufacturers prioritize sustainability initiatives in the coming year, we can expect digitalization will be at the top if recent studies like Accenture’s are taken to heart. It found that accelerated digitalization in German manufacturing would represent more than 50% of total CO2 reduction efforts.
Trend #9: Heavier Dependence on Digital Processes
COVID revealed the importance of being able to do our jobs remotely. But while many workers only needed an internet connection to fulfill their responsibilities, others required more specialized technology to make it possible to complete their work when they couldn’t be onsite.
For example, digital twins, artificial intelligence (AI), machine learning, VR and AR (virtual reality and augmented reality) allowed manufacturers to perform remote monitoring, servicing, and equipment operation from afar. With near real-time communication and enough processing power to make it seem the operator is onsite with the machine, more companies are adopting digital processes to safeguard against future disruptions in the workplace.
Trend #10: Market Competition Fueling Ecosystem Collaboration
Staying competitive in the manufacturing industry requires a renewed focus on strengthening relationships. Through closer collaboration and integration with customers, partners, and suppliers, companies can detect and respond to disruptions, changing market conditions, or customer needs more effectively and quickly.
Of course, the pandemic revealed that many supply chains lacked basic communications or digital connectivity to support internal collaboration, let alone communication with essential stakeholders, like packaging networks or multi-tier supply networks. One study revealed only 28% of manufacturers worldwide had that ability.
As a result, partner and customer-centric manufacturers are adopting ecosystem integration solutions to create collaborative work environments and generate shared value opportunities. In addition, manufacturers are positioning themselves for long-term success with access to foundational network visualization and mapping tools that facilitate real-time connections across data, people, processes, machines, and systems.
Realize Efficiency in Manufacturing
Like all businesses, manufacturers have become multifaceted ecosystems of suppliers, partners, systems, applications, distributors, and more. Sky-high customer expectations, economic uncertainty, and evolving production methods add further complexity. It’s clear that a fresh approach to integration — one that delivers control and agility — is needed to solve today's end-to-end supply chain challenges.
Cleo’s Integration Cloud (CIC) delivers, consolidating manufacturing API, EDI, and file-based integration technology into a single platform. It allows manufacturing companies to leverage the cloud to connect data and B2B systems across all suppliers and distributors and with their internal backend ERP, TMS, or WMS systems. Here’s what our customers can do as a result of implementing the CIC:
• Accelerate onboarding of partners and applications for 4x faster time to revenue
• Improve customer satisfaction by delivering on performance expectations through greater visibility into SLAs
• Consolidate transaction silos under one real-time view
• Meet any integration requirement over multiple communication protocols, including AS2, SFTP, and more
• Assess the health of EDI integrations and pinpoint and respond to issues immediately
• Gain the benefit of EDI, API, and flat-file integration on a single platform
• Enjoy the choice of self-service, managed service, or a blended deployment approach
Ready to learn more about how the Cleo Integration Cloud platform combines the best of traditional and modern cloud integration services into a single ecosystem integration platform? Check out our demo video for manufacturing and get in touch.
Find out more about how manufacturing companies are modernizing their integration with a Manufacturing Solution Brief.