It has been more than 2 years since the pandemic disrupted everything on a global scale. The manufacturing industry faced numerous challenges such as a lack of raw materials, delays in shipping, labor shortages, meeting the demand while operating at half the capacity, and ensuring the health and safety of frontline production workers on the shop floor, to name a few.
But at the same time, the pandemic also triggered a wave of digital transformation and forced incredible innovation. In fact, according to a survey of 291 manufacturing leaders by Oracle and IndustryWeek, nearly 50% of the companies said that the pandemic did not negatively impact their business performance. The survey indicated that "the pandemic accelerated innovation, adaptation, and transformation".
Over the past few years, the manufacturing industry experienced a major shift towards automation and digitalization. In this article, we’ll take a look at the future of manufacturing, including the top industry trends that businesses need to follow in 2023 in order to stay ahead of the competition.
We will cover major manufacturing trends across key areas like technology, hiring, sustainable manufacturing, and supply chain. With these trends in mind, businesses can prepare themselves to take full advantage of the opportunities that the industry has to offer.
Technology solutions for manufacturers
For small businesses and manufacturers, the key is to start small with digitization and focus on critical pain points of the business. Avoid jumping on popular trends just for the sake of it as it would hamper your profitability. For instance, many manufacturers probably already use technology to run accounting. Or might be looking into the best ecommerce platforms for manufacturers.
In many B2B businesses, a common challenge is the lack of pricing transparency and the slow credit approval process to buy raw materials. That’s where technology comes into help. Using automation software to help you find efficiencies in your process can be an easy first step towards embracing trends like ERP and cloud computing.
For instance, technologies now exist that enable manufacturers to:
- Offer net terms online
- Run fast, reliable, and professional business credit checks on new customers within 24 business hours
- Manage integrated receivables solutions
- Receive cash advances on invoices
For instance, Resolve helps manufacturers like Archipelago triple their revenue while decreasing the amount of time they spend credit checks by two weeks!
3 key factors driving global manufacturing trends in 2023
As the world gets back to the new ‘normal’, the manufacturing industry still faces some critical challenges. These are the challenges that are driving and would continue to drive a lot of manufacturing trends in 2023 as well.
The 3 main challenges are:
a) Supply chain issues b) A tight labor market c) Economic uncertainty
These three challenges are driving some of the key technology, hiring, and supply chain trends in manufacturing which we discuss below:
Technology trends in manufacturing
Smart factories and industry 4.0 are at the center of all new technologies in manufacturing and digitization of supply-chain.
Industry 4.0 is the next wave of industrial automation which combines the Internet of Things (IoT), Big Data, and Robotics to create a smart factory. These are the combination of technologies that work together to completely transform and automate the manufacturing process - from design and prototyping to forecasting, manufacturing, and servicing.
The goal is to create a digitized manufacturing facility that completely transforms manufacturing by connecting different components(people, processes, equipment) to improve efficiency and reduce cost at all stages.
Some of the top technology manufacturing trends are:
1. Robotics and production automation
The manufacturing sector has seen an increase in the number of robots and automation over the last few years. This is driven by the need to increase efficiency as well as to fill the gap created by the aging workforce.
More and more companies are investing in automated production and robotics, and this trend is expected to continue growing in popularity in the coming years.
In the next few years, we may also see an increase in human-robot collaboration. This is a new type of industrial automation where robots work together with human employees to improve production. Collaborative robots are designed to work with human workers so they can be programmed to perform certain tasks and avoid causing injury to the people working nearby.
This allows the robots to take over repetitive and dangerous tasks, while also allowing employees to get involved in more creative activities.
2. Industrial Internet of Things (IIoT)
The industrial internet of things (IIoT) is a combination of automation and connectivity and it allows different machines and devices to talk to each other and share information.
The IoT (Internet of Things) is essentially a network of physical objects (industrial equipment in the case of IIoT) that have embedded sensors that can record internal data and communicate it externally. This allows manufacturers to learn the behavior and gather insights, implement smarter production processes and improve quality control, while also reducing costs.
More and more companies have been investing in IoT technologies in recent years, and this trend is expected to grow in popularity. According to Gartner, nearly 50% of industrial enterprises would install IIoT in their facilities by 2025 as compared to 10% in 2020.
3. 5G connectivity
According to a report by IBM, a single assembly line powered by IoT can generate 70 terabytes of engineering data every day. This is where high-speed internet and 5G connectivity comes into play as a critical component of a smart factory.
5G can help transmit huge volumes of data in a modern factory with nearly zero latency and wireless connectivity. This helps manufacturing facilities build a seamless connection of equipment and systems to pave the way for high-speed and flexible manufacturing environments.
This is the reason why McKinsey projects a minimum of 22 million 5G units deployed in the manufacturing industry by 2030. The projected market of 5G in manufacturing businesses is estimated at $605 billion by Capgemini.
4. Big data, artificial Intelligence, machine learning, and advanced analytics
As a result of IIoT and 5G, a modern manufacturing facility can generate a massive amount of data. For example, a typical oil rig can have more than 80,000 sensors that can put out an average of 2 terabytes of data every day. (Source: IBM))
You cannot analyze this data with conventional data analysis techniques. This is why there is an increasing trend of advanced data analytics in manufacturing powered by artificial intelligence and machine learning.
The manufacturing analytics market is projected to grow more than 3 times from $8.45 billion to $28.4 billion by 2026.
Smart factories collect data from sensors and other devices to gain insights that help them optimize their processes and improve decision-making. Data allows businesses to monitor several production metrics and make changes to improve quality control, while also reducing costs.
For example, if a machine detects an error, data analytics can send an alert to the company’s employees to fix the problem immediately. An AI system can also mine data to find patterns and make predictions that help businesses make better decisions.
According to Google, Europe already has the highest number of manufacturers (80% in Italy, 79% in Germany) using AI in day-to-day manufacturing operations. The US still lags behind at 64% followed by Japan at 50%, despite being advanced manufacturing economies.
5. Digital twins & predictive maintenance
Interconnected sensors of IIoT and high-speed 5G connectivity enable another popular trend in manufacturing - the use of digital twins and predictive maintenance.
A digital twin is a virtual representation of a physical object or equipment in the case of a factory. It gets data from the IoT sensors embedded in its real-world counterparts. Businesses can utilize this data to carry out simulations for understanding the performance of the machine and make predictions about how it reacts to changing conditions in real time.
Due to this data, manufacturing companies can test certain parts, simulate new dimensions, or even create a digital replica on the factory floor. It can be even used for new product development and testing its performance in the factory environment without even going on the production floor.
But, the best use-case of digital twins lies in the area of predictive maintenance.
One of the biggest causes of heavy losses in manufacturing is machine downtime. According to Gartner, the average cost of machine downtime can get as high as $5600/per minute. Studies have shown that unplanned downtime can cost manufacturers a whopping $50 billion per year.
Predictive maintenance utilizes the digital twin of real-world equipment and advanced data analytics to detect potential defects in advance. It not only reduces unplanned downtimes but also extends the lifetime of machinery by preventing breakdowns.
This is why it has become one of the most sought-after technology trends in manufacturing. The market for predictive maintenance solutions is projected to reach $13.9 billion by 2026, up from $3.8 billion at the end of 2020.
6. Manufacturing ERP powered by cloud computing
Manufacturing companies utilize Enterprise Resource Planning (ERP) to reduce costs, streamline tasks, automate back-office processes, and get data about raw materials and costs to support production.
One example of automating back-office processes is the use of AR automation software to streamline the receivables collection process. This software can be further integrated with the ERP and accounting systems like Quickbook for a complete view of the financial accounting system.
Now, with data generated from factories and production lines, manufacturers have begun using advanced ERP solutions powered by cloud computing functionality.
Cloud computing is a service where data and programs are hosted remotely, so they can be accessed from anywhere. This is usually done through the Internet, and it allows companies to store their data in the cloud and use it through the Internet.
So, this allows manufacturing businesses to access data remotely and share it with their employees, partners, and customers.
For example, they can get real-time data on raw material availability, production status, and impending repairs from the factory floor. This data can help them plan and run their operations more efficiently and collaborate more effectively with their partners and customers.
As we saw in the above manufacturing technology trends, the future smart factory or a modern manufacturing plant is no longer just a physical plant. It is a complete digital ecosystem with massive data hosted and processed in the cloud.
And that makes manufacturing businesses vulnerable to cyber threats just like any other IT business.
In fact, in 2022, IBM's X-Force Threat Intelligence Index 2022 declared manufacturing as the world's most attacked industry. Even 49% of manufacturers in a PwC survey cited cybersecurity risk as one of the biggest challenges to their company
Since the manufacturing industry is more sensitive to downtime, it makes it an ideal target for hackers. That's why cybersecurity is an important trend in manufacturing and will only grow in its importance with the growth of the Internet of Things (IoT) and more devices coming online.
8. Augmented/virtual reality
Augmented Reality (AR) is a technology that places digital information and visuals into the user’s view through a device, like a smartphone, a smartwatch, or a pair of AR glasses. This is different from Virtual Reality (VR), which immerses the user in a computer-generated environment.
According to analytics experts, augmented and virtual reality in manufacturing will reach $2.8 billion this year, 2023. Augmented reality in the manufacturing industry has multiple applications across remote collaboration, workforce training, and customer support.
For example, AR can be used to show the 3D model of a product. This allows manufacturers to collaborate more effectively and efficiently while reducing errors and improving quality control.
Manufacturers also use AR and VR devices to support frontline workers by offering them remote assistance during repairs and troubleshooting.
9. Additive manufacturing: 3D printing
Additive manufacturing is a process where 3D printers create parts by adding layers of material on top of each other to create a finished product. This is different from traditional manufacturing processes where parts are created using a subtractive process where materials are cut down to make a finished product.
3D printing has become a popular trend in automotive manufacturing because it reduces the cost of making new product prototypes by building on-demand spare parts and products. Usually, it takes months to produce or source spare parts for mass production.
But, now manufacturers can use 3D printing to produce them in-house thereby eliminating the supply-chain delays while saving cost and time.
10. Product as a Service (PAAS)
Product-as-a-Service (PAAS) is an emerging business trend in manufacturing in 2023 where manufacturers offer subscription-based, add-on services to customers after selling the equipment.
This manufacturing trend can finally become a reality in 2023 due to the combination of technology trends we discussed above- IIoT, advanced analytics, AI, predictive maintenance etc. Manufacturers can collect performance data with these technologies that help them understand usage patterns and customer needs. It also helps them predict future breakdowns so they can offer proactive service to customers.
This results in an overall superior customer experience where they no longer have to deal with poor after-sales and service support.
On the other hand, manufacturers also enjoy recurring revenue throughout the product lifecycle. Adopting the PAAS model also helps them turn the capital expense (CAPEX) of one-time selling into an ongoing operational expense (OPEX) thereby improving the agility of their overall business.
Hiring trends in manufacturing and workforce management
The manufacturing industry struggles with an aging workforce and increasing resignations. Many experienced frontline workers are retiring and manufacturing leaders are struggling to replace them with a skilled workforce. In fact, nearly 25% of the workforce in manufacturing is 55 years or older.
To make things worse, there is a high tendency of quitting manufacturing as the younger generation seeks better wages, a better working environment, and an improved work-life balance. According to the Washington Post, there is a 60% increase in resignations in manufacturing compared to the pre-pandemic numbers.
If this continues, the shortage in manufacturing employment could hit 2.1 million by 2030, according to the National Association of Manufacturers.
This has led to a number of hiring trends in manufacturing such as:
i) Recruitment push to address the shortage of labor
According to a survey by The National Association of Manufacturers, 76% of manufacturers reported recruitment as the biggest challenge.
While many manufacturing leaders are investing in automation, robotics, and other technologies to deal with the labor shortage, they still need a trained and skilled workforce in these environments to run their operations.
According to the Manufacturing Institute, there will be “4 million high-skill, high-tech and high-paying jobs over the next decade” that need to be filled by manufacturers. Based on the September 2022 data from the Bureau of Labor Statistics, large and small manufacturing organizations already have at least 835,000 job openings.
ii) Increase in wages, upskilling, and training to attract talent
To deal with the shortage of labor, manufacturing leaders are willing to increase pay. In 2022, nearly 75% of manufacturers said that they'd raise wages by more than 3% (industry average).
In addition to wages, another hiring trend in manufacturing is the retaining and reskilling of the workforce.
This is because of the incoming younger generation in the industry who actively seek learning and growth.
According to the Manufacturing Institute, young employees prefer employers who are willing to train them and invest in their skill development. In fact, almost 70% of employees under 25 years of age working in manufacturing admitted to staying with an employer because of these opportunities.
iii) Digitization of shop floor and legacy processes to attract younger force
Increasing wages and upskilling alone won't solve the talent problem in manufacturing alone.
According to a survey, 95% of discrete manufacturers still use paper-based processes while 27% use paper for more than 50% of all processes. Many of them still lag when it comes to digitization despite the pandemic-driven investments in technology.
To attract new labor and a younger workforce that has grown up in the digital world, manufacturers have begun to invest in the digitization of their shop floor and paper-based manual processes. This also includes using software to automate the manual accounts receivable process and prevent human errors that can arise while the business grows.
iv) DEI initiatives
Diversity, Equity, and Inclusion (DEI) initiatives are the key to attracting and retaining talent today. And the manufacturing industry has traditionally lagged behind such initiatives.
For example, women are severely underrepresented in the manufacturing sector with fewer than 1 out of every 3 manufacturing professionals being female. Moreover, they are 1.8 times more likely than men to leave their jobs.
This is the reason why manufacturers are now prioritizing DEI initiatives in their hiring strategy. According to the Manufacturing Institute, 64% of manufacturers said that these efforts are a key focus for them.
Manufacturing supply chain trends
The global disruption to the supply chain is at the root of multiple manufacturing challenges. This disruption is driven by multiple factors, like:
- Rising shipping costs due to inflation
- Increasing labor costs in the offshoring countries
- Logistic challenges due to factory shutdowns
- Geopolitical conflicts and tensions in sourcing regions
According to a poll conducted by the National Association of Manufacturers, nearly 80% of leaders said that supply-chain disruption was a top business challenge for them in 2022.
These challenges have led to many new trends in sourcing and logistics, like:
i) Reshoring trend
Globalization led many manufacturers to outsource their production to countries likeChina. This practice called offshoring worked for years because of international trade deals that helped reduce labor and retail costs.
However, it also came with a number of issues like unpredictable delivery times, lack of quality control, and intellectual property theft, to name a few. Some of these issues were amplified during the pandemic because of shortages in medical supplies and global restrictions that were placed on many suppliers.
So, increasing the pace of reshoring - bringing imported goods back to domestic production has become a key trend in manufacturing. This is also accelerated by the increasing geopolitical tensions and increasing cost of labor and shipping in developing economies.
In 2021, 83% of manufacturing companies in the US had confirmed that they would be reshoring, as opposed to just 54% in 2020. In 2023,1,800 companies in the US plan to reshore production according to the Reshoring Initiative.
ii) New sourcing strategies
Similar to reshoring, the manufacturing sourcing strategy is also going through a shift. The pandemic forced manufacturers to re-evaluate their sourcing from China which was the major supplier of raw materials.
While China still remains, the manufacturers are now considering other countries like Vietnam, the Philippines, and India to diversify sourcing. This is what they term as the “China, Plus One” strategy or near-sourcing. Near-sourcing refers to procuring material from locations that are closer to the production plants thereby reducing the time and cost of transportation as well.
This localized, "China, Plus One" sourcing strategy will continue to be a major trend in manufacturing in 2023 along with reshoring as more manufacturers try to focus on domestic production.
iii) In-house logistics and delivery fulfillment
Logistics and shipping delays from third-party providers over the past few years have been another major challenge in the supply-chain.
This has led many manufacturers to build their own logistics operations or acquire-hiring logistics companies. In this way, they can have greater visibility in their supply-chain and take steps to streamline their fulfillment process for better customer satisfaction. Moreover, they can also eliminate middlemen like suppliers and distributors thereby cutting down on costs and preserving the profit margins.
Though this manufacturing trend would be common only among big conglomerates, this is a huge wake-up call for industrial distributors as well who are at the risk of obsoletion without digitization being their top priority. Continue to read this article to further deep dive into why digitization is critical for manufacturers and distributors.
Sustainable manufacturing trends
i) Waste management
Waste management is a critical aspect of manufacturing and can be seen as a measure of sustainability. Waste management practices can be broken down into the disposal, reduction, and recycling/reuse.
Disposal refers to the act of sending waste to a landfill or incinerator. Reduction is the act of minimizing the amount of waste generated, either by design or by recycling/reuse, which involves making new products out of old components.
Manufacturers have an opportunity to reduce waste by selecting raw materials and components which can be more easily recycled or reused and opting for designs that minimize waste and scrap.
One trend that has emerged is a growing interest in biological waste management. Using biological waste management can reduce water usage and energy consumption while producing fertilizer and other useful by-products.
ii) Aim toward carbon neutrality
Creating carbon-neutral manufacturing operations is another way to increase sustainability. This is because worldwide, the manufacturing industry is responsible for 20% of all carbon emissions whereas, in the US alone, it contributes to 24% of greenhouse gas emissions.
This is why, with the help of government entities, many manufacturing companies are aiming for carbon neutrality.
Carbon neutrality is the practice of balancing a facility’s carbon emissions with an equal amount of carbon being absorbed. This can be achieved by investing in renewable energy sources and carbon reduction initiatives like carbon sequestration and reforestation.
Companies that want to create carbon-neutral manufacturing operations can purchase carbon credits from organizations that have reduced their own carbon footprint. Carbon credits can be applied towards specific carbon reduction projects, like installing solar panels at a factory, or can be applied to an entire company’s operations. Specifying that credits are intended for manufacturing operations can help ensure they are used appropriately.
iii) Use of recyclable and eco-friendly materials
Industrial manufacturers rely on raw materials to create the components needed in their products. Raw materials like metals and plastics are often used in their original form, but some manufacturers are now opting to use recycled materials.
Using recycled materials can reduce the demand for virgin materials, help maintain the health of waterways by keeping pollutants out of waste streams, and help create a more sustainable manufacturing environment.
The most common types of recycled materials used in manufacturing include paper, plastics, and metals. Paper can be used in place of materials like fiberglass and metals like tin and aluminum are often recycled again and again.
Microfactories: Emerging future trend in manufacturing
Microfactories are an emerging trend in manufacturing that is a result of two major trends which we already discussed - smart factories and reshoring/near-sourcing.
A microfactory is a small, modular setup that enables hyper-autonomous manufacturing. It is built by integrating cutting-edge technologies like IIoT, Artificial Intelligence, Robotics, and Big Data to automate the entire production process. The whole setup is a fraction of the size and cost of a traditional factory setup that requires high investment.
Additionally, these microfactories are built closer to the point of trade and focus on local supply. In this way, they further increase efficiency, reduce the cost of shipping, and decrease the time-to-market.
One example of microfactories is Arrival - a manufacturer of electric vehicles that signed a $110 million deal with Hyundai in 2020 and got an order for 10,000 electric vans from UPS.
It is building these vans in the microfactories described above and the company plans to build 1,000 microfactories around the world by 2026.
Summing it up: Manufacturing trends in 2023
2023 might be the year when many technology trends in manufacturing will start coming together to create a complete digital supply chain for many large enterprises. The ultimate goal is to build resilient and flexible manufacturing operations to sustain any external shocks and increase profitability. To learn more about new and emerging technologies in manufacturing, consider using digital net terms for your ecommerce.