The top 7 manufacturing industry trends to watch

ARTICLE | November 11, 2022

Authored by RSM US LLP

Change is a constant in the manufacturing industry, but the COVID-19 pandemic has uncovered the fact that many middle market manufacturers historically had not prioritized investments in their infrastructure, and thus were ill prepared to respond to supply and demand disruptions caused by the crisis. Going forward into 2023, manufacturers need to be proactive about adapting their operations in order to thrive in today’s competitive landscape. Digital transformation and the changes associated with the Fourth Industrial Revolution, or Industry 4.0—driven by more dynamic and interconnected operations—will be at the heart of all these efforts.

Here are seven key trends RSM has identified for the manufacturing industry.

1. Importance of enhancing IT architecture

Most middle market manufacturers’ information technology infrastructure is not ready to support advanced Industry 4.0 technologies. IT professionals and infrastructures have a key role to play, as they provide the enabling technology for these digital transformation efforts.

Technology should lead the way in how manufacturers are thinking about investments, and manufacturers will need a flexible, scalable and highly interconnected IT architecture to support the shift to more data-driven operations and meet the challenges of the future.

2. Data-driven decision-making

Machines, assembly lines, smart sensors, robots and other devices generate enormous amounts of industrial data. Historically, manufacturers have not taken advantage of this wealth of data. As more and more companies implement such connected devices and technologies, a robust data strategy becomes of paramount importance.

With advancements in machine learning and artificial intelligence, shifting to a data-driven decision model will provide management with forward looking and predictive insights about the business, allowing manufacturers to optimize their working processes, enhance their decision-making and strengthen their risk assessment procedures. Ultimately, this will help organizations ensure continuous business growth, boost the quality of their performance and maintain a competitive edge.

3. Continuing urgency of cybersecurity

While advanced technologies are streamlining many aspects of traditional manufacturing operations and breaking down longtime barriers that can stymie innovation and collaboration across the entire value chain, they are also creating more opportunities for cybercriminals to compromise manufacturers.

Manufacturers—and any third parties they work with—need to raise the bar in terms of how they protect themselves in an environment where workers, machines, supply chains and organizations are becoming ever more digitally connected. Understanding which critical information and intellectual property assets need to be protected from potential cyberattacks—and taking action to put those protections in place—will increasingly become a source of competitive advantage.

4. The factory of the future

For years, middle market manufacturers have been hesitant to invest in Industry 4.0 tools and technologies that could help them reimagine their manufacturing operations. Now, it is becoming more common for these companies to embrace cost-effective technologies and tools to analyze data and improve the quality and efficiency of the manufacturing process, thereby allowing them to increase throughput and rapidly adjust course in response to disruptions or shifts in supply and demand.

As manufacturers continue along their digital evolution, where cyber and physical system interaction becomes the norm, the “factory of the future” will become the factory of today.

5. Reimagining global supply chains

While manufacturers historically have focused on making their supply chains more cost-efficient, few have considered how to address vulnerability to trade risks or global pandemics. The past year has shown that companies that have invested in technology and focused on supply chain agility have an edge against their competition, and that will continue to be true as we look to the future.

Manufacturers need to take advantage of technology to create more connected supply chains, providing an opportunity to link various pieces of the supply chain together to receive more data. Companies that prioritize the digitization of their supply chains will be in a better position to respond to future supply and demand disruptions.

6. Shifting workforce dynamics

As manufacturers grapple with the increasing role that technology plays throughout their organizations, the impact on their workforce will be significant. The dynamic and fast paced environment created by today’s advanced technologies—from intelligent robotics to big data and the industrial Internet of Things—will require the current workforce to adapt. We expect this will bring a renewed emphasis on cultivating new skills for an environment in which analytics increasingly drive business decisions and humans more commonly coexist with robots.

Manufacturers will need to reassess and update their training and workforce development strategies to keep pace with this industry shift.

7. Importance of environmental, sustainability and governance issues

More and more companies “are treating ‘sustainability’ as an important objective in their strategy and operations to increase growth and global competitiveness,” as the Environmental Protection Agency and other groups have noted. Environmental, sustainability and governance issues (known as ESG) are becoming a key guiding framework for companies when it comes to delivering long-term value for all stakeholders (and that goes well beyond shareholders to include customers and employees, too).

Prioritizing ESG issues can also mean higher profitability and decreased business risks. ESG indicators may therefore be useful gauges of company performance and of a sound investment. Companies must pivot to meet changing market and customer expectations on these ESG metrics, and have systems in place to track and report on their performance in these areas.