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Reshoring and Near-Sourcing: Leading Manufacturing Trends for 2023 to Boost Resilience

Updated: Jan 7


Reshoring and Near-Sourcing: Leading Manufacturing Trends for 2023 to Boost Resilience in the US and Canadian Economy


Despite facing challenges in the form of inflation and economic uncertainty, US manufacturing has remained strong in 2022, with Deloitte projecting a 2.5% growth in GDP in the industry for 2023. However, manufacturers need more skilled workers and supply chain issues such as sourcing bottlenecks, global logistics backlogs, cost pressures, and cyberattacks. According to a recent National Association of Manufacturers survey, these disruptions have impacted manufacturers' optimism and business confidence. To navigate these challenges and drive success in the coming year, manufacturers should focus on managing uncertainty, addressing workforce shortages, improving supply chain resiliency, leveraging innovative technologies such as the metaverse, and prioritizing sustainability. Policy initiatives such as the America Act (CHIPS Act) and Inflation Reduction Act (IRA) can support the industry's recovery.


Deglobalization


As the world becomes increasingly complex, analysts predict that deglobalization will be the primary trend for financial markets and the global economy in 2023. This trend, which began long before the COVID pandemic and the conflict in Ukraine, was exacerbated by former US President Donald Trump's introduction of tariffs and trade barriers on China. These actions, which aimed to alter Beijing's trade policy, led to a trade war that was ultimately viewed as a failure in American society. Deglobalization also implies de-westernization, with Russian President Vladimir Putin claiming that Western countries are attempting to preserve their hegemony by igniting old conflicts and containing the rise of a multipolar world. According to Russian Foreign Minister Sergey Lavrov, the world is becoming more complex, with different centers of power emerging. In the UK stock market, cheap valuations and affordable bid targets for dollar buyers due to a weakened sterling are expected to lead to opportunistic dealmaking in 2023. However, private equity may face a reckoning as the leveraged-loan market has seized up and ended the deal boom of 2022. In the future, the main challenge will not be in reviving deals but in maintaining the viability of past buyouts struggling with cost inflation and declining customer demand.


Emotional intelligence (EI)


EI is the ability to understand and manage your emotions and the emotions of others. It's a crucial skill for leaders because it allows them to effectively navigate difficult conversations, build strong relationships, and create a positive work environment. EI has four components: self-awareness, self-management, social awareness, and relationship management. To improve your EI, focus on regularly examining your own emotions, regulating your emotions, being attuned to the feelings of others, and building solid relationships based on trust and respect. Emotionally intelligent leaders are better equipped to manage difficult situations, motivate their teams, resolve conflicts, and achieve their goals. So, to enhance your leadership skills, start by increasing your emotional intelligence.


Predictive Maintenance


Predictive maintenance involves using data analysis to identify equipment performance anomalies and determine their root cause, which has been a critical trend in manufacturing for some time. However, in 2023, manufacturers are beginning to adopt a new approach called predictive resolution. This involves offering technicians insights on resolving issues with greater certainty, increasing the likelihood that problems will be adequately addressed on the first try. Predictive resolution can help manufacturers improve equipment efficiency, reduce costs, and increase their first-time fix rate. Recent advancements in AI, machine learning, and natural language processing (NLP) have enabled manufacturers to extract unstructured data from documents and use it to build predictive models. As the Technology behind predictive resolution becomes more sophisticated and affordable, manufacturers can leverage it in conjunction with the Industrial Internet of Things (IIoT) to proactively address issues before they lead to unplanned downtime and extend the machinery's life. Product as a Service will also play a role in this trend. Customer usage data can provide manufacturers with valuable information for building machine learning models and engaging in predictive resolution.


People Recruitment


As of September 2022, the manufacturing industry had at least 835,000 open positions, and if the high turnover rate persists, the shortage could reach 2.1 million by 2030. While the pandemic led to thousands of manufacturing job losses in 2020, the economy's rebound and consumer spending helped replace those jobs. However, more than efforts to raise employee wages and attract more applicants are needed to close the gap. Manufacturers are turning to automation and AI to increase productivity and compensate for lost workers, but the industry still relies on human labor. To ensure the success of their employees and remain competitive, manufacturing companies must invest in employee training and development, including hard skills like data gathering and analysis and soft skills like critical thinking, problem-solving, collaboration, and communication.


Differentiation in a saturated market


Companies need to stand out in a saturated market like metals, steel, and manufacturing.

  • They can stand out by focusing on the following:

  • Target specific niche or market segment,

  • Having a unique offer

  • Offering personalized or customized products

  • Understanding why they do what they do

  • Compelling offers

  • Providing exceptional customer service

  • Prioritizing sustainability

  • Not being afraid to be different

  • Going the extra distance to show their employees their care, forming strategic alliances and joint ventures

  • Having a long-term sustainable plan

  • Implementing innovative technologies in all business areas, not just the equipment.


By differentiating themselves in these ways, manufacturing companies can appeal to specific groups of customers, offer a better overall customer experience, implement a better pricing strategy, engage employees, and provide more efficient and effective products and services.


Decrease risk with Technology


Manufacturers are increasingly investing in advanced technologies to reduce risk and increase agility. Digital strategies, including data and analytics, robotics and automation, and artificial intelligence and machine learning, can help improve forecasting, secure profitability, and enhance efficiency. The pandemic has highlighted the importance of digital capabilities, as companies with higher digital maturity were able to pivot more quickly and maintain momentum. As uncertainty is expected to continue in the coming months, manufacturers should consider how they can use technology to protect their long-term profitability and broaden their advanced manufacturing capabilities. This may involve implementing automation to improve productivity and address labor shortages or using artificial intelligence and machine learning to gain a competitive edge.


For example, some companies have implemented data and analytics capabilities to improve forecasting and better understand the impact of supply chain shortages. Others have adopted robotics and automation to enhance efficiency or utilized artificial intelligence and machine learning to gain a competitive edge. In the face of labor shortages caused by the pandemic, some manufacturers have even accelerated warehouse automation.

These investments in digital technologies have helped manufacturers pivot more quickly in response to uncertain conditions and have improved efficiency and profitability in the long term. However, it is essential to note that adopting these technologies can also lead to changes in the composition of the manufacturing workforce. Manufacturers must consider the impact of these changes and provide necessary training and support to their employees as they adapt to a more advanced manufacturing environment.


The Industrial Internet of Things (IIoT) makes more sense now.


The Industrial Internet of Things (IIoT) continues to be a significant trend in the manufacturing industry for 2023 and beyond. By allowing manufacturers to connect unique devices within their existing internet infrastructure, IIoT enables them to make informed, strategic decisions using real-time data and achieve a wide range of goals, including cost reduction, improved efficiency, enhanced safety, product innovation, and more. The market value of IIoT in manufacturing is expected to reach $399.08 billion by 2026, with a Compound Annual Growth Rate (CAGR) of 14.5%. This trend is driven by the numerous applications of IIoT, including real-time equipment performance monitoring, predictive maintenance, remote analysis of equipment, production monitoring, traceability, and data integration and analysis. In addition, the Product as a Service model, which involves embedding IIoT sensors in equipment to gather customer usage data, has contributed to the continued popularity of IIoT in the manufacturing industry.


Digital Twins


Digital twins are virtual replicas of real-world assets or components made possible by the Internet of Things (IoT). These simulations allow manufacturers to model and test scenarios, conduct training, and see how equipment performs under different conditions without physically handling the assets. Digital twins can be used in various aspects of a manufacturing business, including optimizing production, prototyping new products, proactively monitoring equipment, training new hires, and modeling new business opportunities. One example of the successful use of digital twins is Rolls-Royce, which collects data from its aircraft engines using IoT and telemetry to create digital twins on the Microsoft Azure platform. These digital twins enable the company to optimize maintenance, update products, monitor in-flight performance, and provide recommendations to its airline customers. Given the wide range of applications for digital twins, it is expected to be a significant trend in the manufacturing industry in 2023.


Reshoring


The reshoring trend, which involves bringing imported goods or materials back to domestic production, has gained significant momentum in recent years. In 2021, the number of reshoring and foreign direct investment (FDI) jobs announced reached 261,000, an increase of 46% from the previous year. This trend is driven by several factors, including the strengthening economies in offshoring countries, which have led to rising wages, and the lack of infrastructure in some low-cost labor countries to support complex manufacturing operations. The COVID-19 pandemic also highlighted the manufacturing industry's reliance on offshoring facilities when critical supply shortages caused production issues. Additionally, global port congestion, high shipping rates, as well as the ability of manufacturers to utilize advanced software and robotics to automate processes have contributed to the trend. In 2023, we can expect reshoring and near-sourcing, which involves sourcing raw materials from domestic suppliers, to remain leading trends as manufacturers seek to reduce or eliminate dependencies on foreign materials and increase resilience in the face of supply chain disruption. These trends will also provide a boost to the US economy.


Conclusion


In 2023, the manufacturing industry is expected to continue building on its momentum 2022, though it will face challenges such as supply chain issues, labor shortages, and economic uncertainty. Energy price volatility, rising labor costs, and inflation concerns could also impact the industry. As manufacturers navigate these challenges, they should consider implementing digital Technology to increase supply chain visibility and connectivity, attracting and retaining top talent, mitigating supply chain risk, implementing intelligent factory initiatives, and adapting strategies for the future of work. Innovations and solutions that gained traction in 2022 are likely to continue gaining momentum in the coming year, potentially disrupting traditional business practices and driving growth and productivity.


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