What does 2023 hold for manufacturers?

In the midst of macroeconomic concerns, rising energy prices, and volatility in stock and resource levels, many manufacturers see signs of slowing growth. At the same time, the rising focus on sustainability and human-centricity makes a challenging situation more complex.

With two opposing drivers at play: the need to be sustainable leaders of the future on the one hand, and the need to ensure resilience in uncertain times on the other, how can manufacturers move forward with confidence?

The past informs the future

Before we look ahead, let’s recap some of the trends and priorities manufacturers highlighted in the 2022 Voice of Our Clients (VOC).

Our 2022 VOC research revealed that manufacturers lag behind other industries in achieving results from their digital strategies. Only 17% of manufacturing executives say they are at this level, compared to 25% across all industries. For the first time, sustainability emerged as the most impactful industry trend.

We further examined the insights from the 17% producing results who are digital leaders and identified some common attributes. Manufacturing’s digital leaders feel the impact of climate change more keenly, are further ahead in implementing digital processes and have implemented or are in the process of implementing data analytics capabilities. In fact, our research revealed that digital leaders are eight years ahead in implementing their IT strategies. This is particularly notable since that is about the same time frame for manufacturers to deliver on their net-zero pledges.

Manufacturing leaders acknowledge that accelerating digital transformation is their best bet to drive resiliency no matter the market conditions.

Three critical qualities for growth in 2023

Instead of simply pruning assets, forward-looking manufacturers are looking to advance digital transformation and use technology to improve efficiency, innovation and agility for more holistic revenue growth.

1. Agility

Being agile will be critical for manufacturers to weather a year that promises no dearth of challenges and opportunities. Agility comes in many forms. The crucial focus for C-suite executives is to be strategically prepared for multiple scenarios to ensure they recognize where these impacts may come from and what actions they can take to ensure resiliency. This is true as much for supply chain issues as it is for costing, personnel management and regulatory compliance.

Knowing how to respond in both favorable and unfavorable circumstances will give manufacturers a real competitive edge. Yet putting that response into action also requires a certain amount of flexibility and agility across the value chain that is not present in many manufacturing environments. In fact, our latest research shows that only 15% of manufacturers feel their business model is highly agile, magnifying the competitiveness of any manufacturer able to achieve true agility.

2. Efficiency

The goal of efficiency is not only to bring costs down, though that is a core focus. Efficiency also has strong implications for sustainability, supply chain management, organizational alignment, transportation and customer engagement. Efficient factories are more likely to meet upcoming sustainability regulations as manufacturers are looking at ways to improve environmental, social and governance (ESG) awareness, cut waste and improve processes. Efficiency in customer engagement leads to higher customer loyalty. Efficient supply chains keep all participants content, while an efficient organization enjoys better alignment across the business.

Efficiency is about avoiding duplication, taking the right action at the right time supported by data and streamlining processes for ease and fluidity. When manufacturing plants run smoothly, they are better positioned to tackle any kind of external disruptions.

3. Innovation

Undoubtedly manufacturers will require product innovation. But they also need to focus on business innovation to explore new ways to generate new revenues. As all industries move forward with their digital transformation, data-as-a-service (DaaS) concepts and monetizing digital platforms are key success criteria for manufacturers.

Having a “digital” front end is not enough. Manufacturers who will prosper already have (or are putting in place) digital platforms that generate new business for them. This is not only a customer experience “must have” but a crucial way of staying relevant. Who and how manufacturers partner with other ecosystem players can help manufacturers think outside the box, bring together different data (and business) streams, and shape the market—not be shaped by it.

Becoming data-driven to address new market realities

The ability to become a data-driven manufacturer underpins all three qualities. Data transparency is essential. Everything from machinery and customer data to delivery and product life cycle management (PLM) units needs to become data-led and data aligned with the shop floor, business and IT coming together to harness the power of this data. In particular, manufacturing execution systems (MES) are one of the biggest sources of manufacturing-related data.

I’ll sum up with the example of one of our clients who manages an industrial park with numerous companies on the site. The client’s vision is to have a single source of operational data for the entire park. With strong collaboration across multiple organizations and interconnected data gathering, our client is focused on driving forward sustainability initiatives and achieving efficiencies of scale for all. This is a strong example of true collaboration to achieve data-driven outcomes.

What other critical drivers for growth do you see in 2023? I invite you to contact me to continue the discussion.