Accelerating timelines, sustainability requirements, the rise of AI and IOT devices – there are myriad challenges that manufacturers currently face and will continue to encounter in the future. The question for leaders is: How can they leverage these challenges into opportunities to innovate, grow and stay competitive?
Brian Kramer, the manufacturing industry practice lead at The Hartford, outlines five top trends for business leaders to watch:
- Emerging technology
- Talent retention
- Sustainability efforts
- Supply chain progression
- Evolution of the micro factory
“Leaders need to stay informed to maximize operational efficiencies across all phases of production,” Kramer said.
1. AI, IOT and Other Emerging Technologies
Factories and industrial plants are leveraging artificial intelligence (AI) and the Internet of Things (IoT) to drive more efficient operations, lower production costs and improve the quality of products.1 Kramer estimates that the use of AI and IoT across manufacturers may be as high as 30%.
IoT is being used more frequently on manufacturing floors. IoT devices have various sensors that can monitor temperature, vibration, voltage, currents and more. This can detect early warning signs of any predicted malfunctions, thus creating a safer workplace. With these devices, manufacturers can determine which products meet quality specifications and which need a physical inspection.2
The need for industrial AI has developed in the wake of a tight labor market. From 2010-2022 the average monthly growth in the workforce within the U.S. was 0.5%.3 Industrial leaders continue to face pressure to produce more with less labor.
In 2022, North American industrial companies ordered over 44,000 robots to aid in manufacturing production.4 AI machinery can fully automate complex tasks and provide precise analysis of processes. Many major manufacturing companies have adopted AI to run quality inspections, manage supply chains and perform predictive maintenance.5
2. Attracting, Retaining and Re-Skilling Talent
As the labor shortage continues, it is imperative for industrial leaders to focus on attracting and retaining strong talent. Sixty-five percent of manufacturing workers are open to other job opportunities and are actively looking for new jobs. As a result, half of manufacturing workers have faced high organizational turnover over the past year, leading to increased workloads for much of the industry.6
“Some workers have retired or exited the workforce. Others may be on the sideline waiting for the right opportunity to join the industry. Finding, on-boarding, training and retaining new talent continues to be a challenge,” Kramer said.
In a manufacturing and engagement study, 83% of manufacturing employees cited enjoying the work they do as a reason for staying with their current employer.7 To create a positive environment for future workers, business leaders should prioritize two factors:
Hire Skilled Talent
Maintaining a strong workforce begins with strong recruitment efforts. It is important to consider how to continually increase wages and provide more in-depth training.
As the industry shifts, companies must think about hiring talent that is skilled with the use of AI and robotics or invest in the training necessary to teach employees how to use the new technology. Demand for manual labor and physical skills is expected to decline with advancements in automation and technology.
Target a Diverse Labor Pool
Diversity, equity and inclusion plays a critical role in attracting and retaining employees. Companies in the top quartile of gender and ethnic diversity were 25-36% more likely to financially outperform others.8
3. Net Zero, ESG and Sustainability in Manufacturing
The manufacturing industry has made significant headway in reducing their impact on the environment, particularly in reducing CO2 emissions. By minimizing the reliance on fossil fuels and switching to renewable energy sources, manufacturers are attempting to accelerate their journey towards net zero emission.
“Manufacturing companies have been investing in sustainability on several fronts. One example is harvesting solar energy with solar panels installed on roofs or in open areas. This reduces overall greenhouse gas emissions,” said Kramer.
There are several reasons why companies are pursuing sustainable efforts:9
- Increasing operational efficiencies by reducing costs and waste
- Reaching new customers and increasing competitive advantage
- Protecting and strengthening brand and reputation
- Building long-term business viability and success
- Responding to regulatory constraints and opportunities
Beyond this, Kramer explains that manufacturers are exploring sustainable ways to source raw materials or component parts. “Many manufacturers prominently display their sustainability practices on their website. Taking this one step further, we see companies investing in various certifications. That can include LEED Certification, which encompasses facilities using less water, less energy and fewer natural resources. Organizations also invest in becoming a Certified B Corporation, which focuses on social and environmental accountability.”
4. Evolving Supply Chain Dynamics
Businesses in the industry have felt the impact as vulnerabilities of the global supply chain continue to be exposed. To mitigate future effects, manufacturers are looking to continue re-shoring efforts, as international labor and shipping costs increase.
Shipping delays, parts shortages and transportation delays had the greatest impact on manufacturing companies recently.10 Companies are exploring new strategies to source parts and raw materials to find the most cost-effective supplies.
Kramer stresses the importance of planning ahead to mitigate any potential loss with the uncertain world events. “I believe planning for the unexpected is critical in building resiliency. From changing weather patterns to global pandemics, developing a contingency plan for supply chain disruptions may be the difference between continuing or pausing production. Planning for these situations reduces downtime potential, but also acts as a quality control mechanism. Sourcing new vendors and building new vendor relationships before supply chain disruption occurs can reduce potential bottlenecks.”
Ways to combat ongoing supply chain disruptions:11
- Strengthen existing relationships
- Pursue regionally diverse suppliers
- Rely on digital tools for increased visibility into the supply chain
5. Emergence of the Micro Factory
As the manufacturing landscape changes, micro factories are emerging in the U.S. These small-to medium-scale, highly automated, technologically advanced facilities are used for the local assembly of complex products or systems and have been cited as a source for increased production.12
Kramer sees the industry continuing to leverage micro factories in the future. “Micro factories may exist and serve as contract manufacturers, meaning they are hired to producer certain products or parts. I also see them as a way for existing traditional facilities to modernize their production process and expand into other geographic regions. From an automation perspective I would expect operational efficiencies, but I would also envision a reduction in logistic costs depending on the type of manufacturing industry. Lastly, I see micro factories as a way for new manufacturers to enter the market.”
With smaller footprints and a reduced investment, these factories will continue to afford manufacturers faster production times and flexibility in their production process.
“Planning for these changes, as well as uncertainty, should be the focus. The manufacturing industry should continue leveraging and adopting new technology that will lead to overall operational improvements,” said Kramer.
1,3,4 “Industrial AI: How Is Artificial Intelligence Transforming the Manufacturing Industry?,” Nasdaq, April 2023.
2 “How is IoT Used in Manufacturing: 8 Use Cases and Upcoming Trends,” Imaginovation Insider, May 2023.
5 “5 Ways Machine Learning Is Leading To Smarter Manufacturing,” Business.com, May 2023.
6 “How Manufacturers Can Engage & Attract Top Talent,” Industry Today, September 2022.
7 “Manufacturing Engagement and Retention Study,” Manufacturing Institute, August 2023.
8 “The Manufacturers’ Guide To Finding and Retaining Talent,” MEP National Network, August 2023.
9 “Sustainable Manufacturing,” United States Environmental Protection Agency, August 2023.
10,11 “Meeting the Challenge of Supply Chain Disruption,” Deloitte, September 2022.
12 “Why the Microfactory Is the Next ‘Big’ Thing for Manufacturing,” TechHQ, September 2020.
The information provided in these materials is intended to be general and advisory in nature. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations contained herein are as of September 2023.
