2023 Global Manufacturing Industry Outlook

The manufacturing industry enjoys growth despite labor shortages, supply chain problems, and economic woes. 2023 holds many opportunities for the sector to capture more growth and turn risks into positives. Following the COVID-19 pandemic, supply chain issues are finally on track to ease this year. This is due to improved production and transportation capacity and replenishing inventories.

Also, expanding shipping capacity is expected to lower transportation costs, which helps reduce supply chain issues. But the industry still faces challenges, including rising energy costs, inflation, geopolitical factors, labor shortages, cyberattacks, and China’s strict COVID policies. Even so, the manufacturing industry is expecting to stay positive in 2023. Manufacturing companies must focus on several areas to remain competitive and create growth. 

Supply Chain Agility

Supply chain disruption is not an isolated incident stemming from the pandemic. There will always be global issues that can impact supply chain flow, from increasingly severe weather disasters to trade wars and actual wars such as the one in Ukraine. For these reasons, manufacturers have learned that agility is crucial and must prioritize strategies that diversify suppliers and offer solid contingency plans. The companies that are better prepared for any scenario will be more resilient in the face of adversity than those that think the pandemic was the worst and is over. In addition, staying focused on agility will aid in reducing delays, maintaining profits, and keeping key customer relationships intact. 

Some manufacturers eliminate intermediaries by acquiring their own logistics companies or creating their own logistics operations in-house. Thanks to more streamlined logistics networks, these strategies allow for greater supply chain visibility, better quality control, lower shipping costs, and reduced time constraints.

Manufacturers are also replacing traditional multi-tiered channel sales models with direct-to-consumer models. This approach gives source manufacturers more control over their brand and pricing, enabling them to develop stronger relationships with their original equipment manufacturer customers. As a result, more manufacturing companies expect to adopt this model in 2023, as well as other ways to innovate their business models, such as investing in new technologies and building redundancies to become more resilient.

The Rise of Outsourcing

More manufacturing companies are turning to outsourced manufacturing to cut operating costs and increase focus on core competencies. In 2022, nearly half of manufacturing companies reported an increase in outsourced manufacturing. Also, almost 75% of them said they viewed outsourcing positively, citing quality, speed, and pricing as the primary benefits of doing so.

Yes to Reshoring

Reshoring, also known as near-shoring or local sourcing, brings imported goods or materials back to domestic production. This practice was already becoming more common in the U.S. before the COVID-19 pandemic, and the pandemic just reinforced the need to do so even more. According to the Reshoring Initiative, in 2021, the total number of reshoring and foreign direct investment (FDI) jobs announced reached 261,000. This number was up 46% from 2020 and more than 4000% from 2010.

Companies realize the many benefits offered by reshoring. Reshoring can strengthen a country’s economy by increasing wages for its citizens. It can also improve manufacturing in a crisis that leads to supply chain shortages and production issues. There has also been a rise in port congestion and high shipping rates, so reshoring helps mitigate these problems' impact. Some companies still rely on China for materials, but they are adding a plus-one near-shoring strategy to bring operations closer to home. Both reshoring and near-sourcing will remain among the leading manufacturing trends in 2023. 

Digitalization is the Future

The pandemic gave manufacturing companies a wake-up call regarding digitalization. It is more important now than ever, which is unlikely to change. Companies will continue seeking ways to increase efficiency and productivity through evolving technological innovation. Acquiring or merging with a digital manufacturing partner can empower a company through new digital tools that streamline workflows and boost productivity.

The industrial Internet of Things (IIoT), the extension of the IoT to industrial applications, will remain a leading manufacturing trend in 2023. It entails the interconnection of unique devices within an existing IT infrastructure. By adopting this digital strategy, companies can make informed, strategic decisions using real-time data and reach several goals, such as lower costs, improved efficiency and safety, and enhanced innovation. Creating these “smart factories” is beneficial because doing so enables manufacturers to:

• Remotely monitor equipment performance in real-time 
• Compare metrics against established key performance indicators to gauge equipment effectiveness
• Establish a baseline for normal equipment behavior and use it to identify abnormal activity for predictive maintenance
• Monitor production in real-time to find hidden inefficiencies and areas for improvement
• Conduct remote analysis on equipment to spot potential issues before a malfunction occurs
• Enhance traceability using barcodes and radio frequency identification (RFID) to track supplies and goods
• Integrate complex systems and compare equipment performance data against enterprise resource planning systems
  

Manufacturers are implementing the IIoT in key areas such as logistics, employee and customer experiences, predictive maintenance, and asset management. Projections state that IoT in manufacturing will reach up to $399.08 billion in market value by 2026, growing at a compound annual growth rate (CAGR) of 14.5%. In fact, in the automotive manufacturing industry alone, it is estimated that smart factories could generate $160 billion in value in 2023.

Predictive maintenance and predictive resolution are also evolving areas of manufacturing technology. Predictive maintenance uses data analytics to find anomalies in equipment performance and determine the root cause. The predictive solution offers technicians insights on resolving these issues with improved certainty. Recent advancements in artificial intelligence, machine learning, and natural language processing (NLP) have made it much easier for manufacturers to gather data from PDFs, Word documents, Excel files, and others to convert them into usable formats for predictive engines.

Employees Dictate Working Conditions

Manufacturing workers have more leverage than ever due to labor shortages, so they are starting to call the shots, from higher wages and more flexible hours to more opportunities for advancement and workplace wellness. In addition, manufacturers are implementing new programs and policies to accommodate employees to attract new talent and retain their existing talent by creating a healthier work-life balance.

The Carbon Neutrality Push

EPA data shows that industry and manufacturing significantly contribute to greenhouse gas emissions. But today, there is a robust global push toward sustainability, and the world’s largest companies are committing to changes that lead to lower carbon emissions now and in the future. Going all in on sustainable practices can benefit companies in several ways. It builds public trust, increases efficiency by creating less waste, and invests in long-term business viability.