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2024 Manufacturing industry overview & trends to watch

June 5, 2024

Manufacturing remains a vital force in the U.S. economy. In 2022, it contributed $2.3 trillion, accounting for 11.4% of the nation’s gross domestic product1. However, the industry faces several challenges due to changes in technology, sustainability, customer relationships and reshoring.

Manufacturing technology trends

The manufacturing industry has long been one to embrace innovation. The following are examples of new technologies impacting the sector:

  • Internet of Things (IoT) and Artificial intelligence (AI)—To gain real-world insights and increase efficiencies, manufacturing organizations are leveraging IoT devices as well as AI innovations:
    • IoT: IoT technology within industrial settings focuses on integrating machinery and data management to boost productivity and enhance quality. Through this framework, connected machinery and edge devices (i.e., a device that acts as a bridge between two networks) transmit data to communication systems, which then process it into actionable insights. Engineers can analyze this accumulated data over time to discern patterns, aiding in the identification of broader issues and their underlying causes. Additionally, this information can inform strategic business decisions and foster advancements in operational processes.
  • AI: The abundance of data generated daily by industrial IoT and smart factories presents a variety of opportunities for the application of AI in manufacturing. To navigate and leverage this vast data landscape, manufacturers are increasingly adopting AI technologies like machine learning and deep learning neural networks for enhanced data analysis and decision-making.

Light bulb icon with text underneath that says AI in action: predictive maintenance.One prominent use case of AI in manufacturing is predictive maintenance. Downtime can become increasingly costly for a manufacturer. To avoid this, manufacturers have traditionally used preventive maintenance based on set schedules—not the actual condition of the equipment. Using aggregated sensor data, AI algorithms can now analyze production data to foresee potential failures and optimize maintenance schedules, leading to more efficient and cost-effective maintenance strategies for production lines. Still, the potential for AI in manufacturing extends beyond predictive maintenance, offering advantages like improved accuracy in demand forecasting and reductions in material waste.

  • Smart factories—Smart factories are advanced manufacturing sites that extensively use automation and a network of interconnected devices. Specifically, a smart factory employs networks of connected systems and equipment that produce data, frequently in real-time, to enhance the entire production workflow. This data aids machine operators, line supervisors, engineers, company executives and others in making more informed decisions. Additionally, the machines and devices within a smart factory generate information about their operational status, allowing for preemptive maintenance to prevent breakdowns.

Currently, the market for smart factories is projected to expand to $322 billion by 2032.2 The implementation of these automation technologies may help compensate for talent shortages and enhance the efficiency of sales processes to reduce lead times. Additionally, smart factories are valued for their ability to rapidly collect and analyze data pertaining to manufacturing operations.

  • Digital twins—Testing products to ensure their proper functionality is crucial, particularly when manufacturing components for heavy machinery where the reliability of parts is key to the operation of the equipment. However, the iterative process of creating and testing prototypes can be expensive. Digital twins offer a solution to this challenge. A digital twin involves scanning a physical product to create an exact virtual model in simulation software. This virtual model possesses the same characteristics as its physical counterpart, allowing for extensive testing under various conditions within the simulation. This approach eliminates the need for repeated physical prototypes and the operational costs associated with testing, leading to significant savings.

Sustainability in manufacturing

Sustainability in manufacturing encompasses a wide range of practices, from reducing waste and conserving natural resources to adopting renewable energy sources and minimizing environmental footprints. As global awareness of environmental issues grows, sustainability has become a key focus for manufacturers seeking to align with consumer values and regulatory requirements.

The following are manufacturing sustainability trends of note:

  • Renewable energy—Social responsibility is driving more manufacturers to embrace renewable energy sources, such as solar, hydro and wind. One benefit is renewable energy sources can reduce a manufacturer’s dependency on more traditional sources, which are susceptible to shortages, price fluctuations and other negative trends.
  • Electrification—Electrification refers to the shift from using technologies and processes that rely on fossil fuels, such as internal combustion engines and gas boilers, to those powered by electricity, like electric vehicles and heat pumps. This transition not only enhances efficiency and reduces energy consumption but also plays a crucial role in lowering emissions. In the context of clean energy transitions, electrification stands out as a key tactic for cutting down CO2 However, realizing the complete decarbonization potential that electrification offers requires substantial changes. First, the production of electricity must increasingly rely on low-carbon and renewable energy sources. Additionally, to support the heightened demand for electricity that electrification brings, power grids must enhance their capacity and improve their ability to manage variable loads. These challenges underscore the need for strategic planning and investment in clean energy infrastructure to fully harness the benefits of electrification for a sustainable future.

Customer relationships in manufacturing

Manufacturing is witnessing a significant shift from business-to-business (B2B) transactions toward direct-to-consumer (B2C) engagements. Notably, technological advancements and innovative supply chain strategies are empowering manufacturers to bypass traditional intermediaries, opting to sell directly to consumers via e-commerce platforms and other channels. As online shopping continues to grow in popularity, this trend of moving from B2B to B2C is expected to gain further momentum, reshaping the way manufacturers interact with their end-users.

This approach not only fosters stronger connections with customers, but also cultivates loyalty and establishes steady revenue streams. By incorporating value-added services, manufacturers can stand out from the competition, enhancing the overall customer experience. Additionally, engaging closely with customers provides manufacturers with insightful feedback, aiding in product innovation and boosting customer satisfaction.

Reshoring manufacturing

Reshoring refers to the practice of relocating manufacturing activities back to a company’s home country from abroad. In recent years, reshoring trends have accelerated due to labor shortages, interruptions in the supply chain, geopolitical uncertainties and escalating labor expenses in foreign countries. In general, reshoring allows for lower transportation expenses, enhanced oversight of quality and greater operational agility. Moreover, by bringing production home, companies can contribute to job creation and bolster the domestic economy.

Moving forward

Industry trends, such as technological advancements, shifting consumer relationships and more, directly impact manufacturing operations, cost structures and market opportunities. Staying aware of these trends, manufacturers can anticipate shifts, adapt their strategies accordingly, and leverage new technologies or processes to enhance efficiency, product quality and competitiveness.