Forecasting the future can feel like a fool’s game.
After all, between pandemics, quarantines, the Great Resignation, labor force changes, climate change, social unrest, social media and TikTok, new technology, and ongoing supply chain disruption, who could have forecasted the current state of the world even three years ago?
That doesn’t mean tracking trends and analyzing market shifts isn’t useful. If you aren’t planning ahead and speculating for future success, then you aren’t leading. You’ll be (at least) a few steps behind the competition if you aren’t forecasting the future and taking steps to prepare.
Let’s take a look at the trends and market forces we see impacting manufacturing in 2022.
Adjusting to Global Disruption
Global disruption continues to impact manufacturers, which has led many companies to re-evaluate their purchasing and supply chains. Higher taxes, trade wars and tariffs, and climate change are no longer speculative, and manufacturers are having to plan how to overcome these challenges.
Businesses are prioritizing onshore suppliers, especially in manufacturing. In addition, suppliers in countries with a friendly trade agreement with the U.S., such as Mexico and Canada, can help protect and strengthen the supply chain. Rather than making offshore purchases to reduce costs, companies are more likely to prioritize more reliable onshore suppliers.
Supply Chain Resilience
While the extent and speed of supply chain disruption shocked many manufacturers in the past year, it’s unfortunately a problem that doesn’t look to have an easy solution. Disruption is having an impact on businesses across verticals, and it’s happening from a conflux of issues. Even though we see promising signs of supply chain relief, manufacturers can still expect higher costs, late shipments and supply problems next year even as suppliers look to ramp up production to meet the increased demand.
Moving forward, prioritize suppliers that have taken steps to prevent late and missing orders, rather than prioritizing the lowest cost. Build a relationship with your key suppliers and distributors. Consider them a partner, rather than just a vendor, and work with them to implement long-term solutions. Consider using distributors rather than purchasing direct.
Rework Your Inventory Strategy
While manufacturers need to evaluate their strategy for supply chain resilience, they’re also rethinking their inventory strategy. Before COVID and the supply chain disruption that has roiled business and manufacturing, just-in-time (JIT) purchasing was a tenet of lean manufacturing and a cost-saving measure, helping to reduce on-hand inventory and reduce storage costs.
Today, JIT has become an unacceptable risk. Rather than ordering just in time, manufacturers are ordering and stockpiling parts and materials just in case. You should keep as much inventory on hand as possible to protect against a late shipment or ensure you can fulfill a rush order. The cost of keeping that inventory on hand will provide an ROI when you see orders start shipping late, or a delivery is delayed.
Now is the time to update your inventory strategy. Forecast for future needs for every project and order. Determine what critical supplies and materials are at risk of delivery delays. Work with experienced purchasers and distributors who can help you update and refine your strategy.
Automation and Digital Transformation
The worker shortage is impacting manufacturers. That impact is being felt beyond production and operations. Even the front office — analysts, purchasing agents and marketing — is finding it difficult to hire workers. There are many factors behind the worker shortage, including the Great Resignation, COVID and life/work balance in the wake of quarantining.
One way that companies are compensating is through automation. Especially in manufacturing, technologies like artificial intelligence and machine learning are tackling error-prone and time-consuming tasks. Companies that leverage automation in production are seeing increased quality and consistency as well as improved uptime. Data and insight provided through these systems are helping companies make better decisions.
Looking ahead, manufacturers should review their current processes and systems to evaluate where there are opportunities for improvement. With recent advances in technology, even manual processes that seemed sacrosanct in the past should be considered an opportunity for improvement.
Workplace Improvements and Recruitment Strategies
It used to be, finding a new employee was as simple as posting the job in the local newspaper. Today, there’s an arms race for workers, especially skilled workers. As manufacturing has embraced technology, you need tech-savvy employees to make it work. Finding those employees may require adapting your hiring process.
Consider how you market your manufacturing business to prospective employees. Do research into what a prospective employee is looking for, and then make sure your job descriptions are telling the story you want to tell. Look at recruiting and promoting current employees, which means creating a workplace that supports employees so they remain rather than leave for the next opportunity. Employees are your most valuable resource; manufacturers need to do what they can to protect them.
Sustainability and Environmental Stewardship
In the past, sustainable operation was a goal for businesses, but it wasn’t always a goal worth investing in. Today, with rising energy costs and material shortages, sustainability has become a priority. It’s not only a cost-saving measure, but a business imperative. With rising costs, waste will bite even deeper into profits.
Manufacturers that embrace sustainability will likely see additional benefits. Consumers, customers and investors are seeking out businesses and brands that not only deliver an exceptional product or service, but also align with their values.
What was once an aspirational goal — responsible manufacturing and environmental stewardship — has become a competitive advantage. Make it a corporate initiative that involves multiple departments with the support of senior leadership. While you need to focus on long-term outcomes for your sustainability efforts, start small with achievable, yet visible, goals. Over time, even the goals that once seemed impossible will be in reach.
Seeing the Rewards of a Forward-Thinking Strategy in 2022
The rapid changes and global disruptions of the last few years have given many companies a bad case of weary resignation. Many manufacturers are worn out, and rather than planning ahead, they’re waiting for the next disaster to hit.
Instead of waiting, look ahead. Disruption can be challenging, but it can also unlock opportunities. What may not have been possible before, like automation and sustainable manufacturing, is now within reach. Rather than waiting, now is the time to act.
If you have questions, or want to see what opportunities are out there for you, then contact the team at GO2 Partners. Our experts are helping businesses grow across the country and in multiple industries. Let’s see what we can do for you.