Manufacturers have faced intense challenges in 2023, from increased market competition, complex customer demands to tightening regulations. To maintain a competitive edge in 2024, the adoption of new technologies to enable manufacturers to alleviate volatility will be key to their competitive differentiation, and will be crucial to help them manage increased volatility.
In their predictions for 2024, Maggie Slowik and Andrew Burton take a deep dive into the market insights and point to 4 predictions that will drive business resilience in manufacturing.
Prediction #1: Within the next 3 years, investment and demand for AI and data pattern recognition is expected to rise by 40%
In just a few years, AI spending in IT is expected to rise by 40%. This rise in investment will help manufacturers improve efficiency through AI data pattern recognition. By using historical data, AI swiftly analyses real-time production data, identifying patterns and anomalies. The long-term value of AI and data pattern recognition will provide manufacturers with ongoing root cause analysis, streamlining work, and predicting potential product quality issues by comparing various data points.
As manufacturing systems becoming more complex, AI-driven data pattern recognition is crucial for sharpening quality control, predicting equipment issues, and optimizing production for fewer defects, higher OEE, and significant cost savings. With Industry 4.0 and the emerging Industry 5.0, there will be too much data being generated every second for the human mind to cope with– AI will become an indispensable tool for manufacturers.
Prediction #2: In the next 2-5 years, digitally mature manufacturers will adopt dynamic planning, integrating AI powered technology to enhance their EAM and ERP systems.
The traditional, static planning approach is no longer sufficient for modern manufacturing. According to McKinsey using AI pattern recognition tools can lead to 4% increase in revenue, up to 20% reduction in inventory, and a decrease in supply chain costs up to 10%.
Recent IFS research has shown that manufactures continue to face ongoing supply chain challenges. However, by leveraging AI, ERP and EAM, manufacturers can optimize their inventory, resources and with real-time machine data. With the addition of AI-powered tools, manufacturers will have the ability to respond swiftly to demand shifts, supply chain disruptions, and market changes.
For example, using AI embedded within ERP manufacturers will be able to swiftly adapt to unexpected raw material changes, predicting potential supplier delays. By doing so, manufacturers can enhance their adaptability, reduce lead time, and minimize the impact of supply chain disruption for efficient production.
Prediction #3: By 2026, 60% of manufacturers will invest in new technology to transform the shop floor worker experience to mitigate attrition and productivity losses.
The manufacturing industry globally is facing a talent crisis so deep it could threaten its growth and recovery. The British Chambers of Commerce (BCC) reports that at least 78% of firms in multiple sectors spanning construction, production and manufacturing, and logistics sectors are facing significant issues recruiting new staff and skilled workers.
Aging workforces and “disintegrating behaviours” inclusive of a change in work ethics and demands are key causes of the talent crisis. Workers increasingly expect more flexibility and other non-monetary rewards, a phenomenon likely accelerated by the COVID-19 pandemic. Meanwhile, increasing employee turnover has significantly disrupted shop floor productivity, schedules and workflows.
However, as highlighted in a recent IFS Customer Advisory Board meeting, “capturing the right skills is only half the battle, training and retaining talent is the bigger one.” Moreover, new hires may not be as efficient or experienced as departing employees, resulting in lower productivity and potential quality issues.
To address this, manufacturers have called for the integration of technology to improve productivity. Indeed, a recent study has shown that almost two-thirds 62% of the participants said that they could get more work done if they had better tech tools, with more than half 58% claiming that their technology needs have increased in the last five years.
An IDC study commissioned by IFS revealed that 45% of manufacturers have made it a priority to augment the worker experience with the help of technology. Embedding technology by involving workers in the process – a concept also known as the ‘connected worker’ – will enable manufactures to drive productivity, efficiency and improve the shop-floor worker experience.
Utilizing connected worker technology and digital collaboration has the potential to unlock more than $100 billion in value for the manufacturing industry. In addition, it could lead to boosts of productivity boosts of 20- 30% within intensive work processes.
As people remain a company’s most critical asset, connected worker tools and platforms can enhance engagement, boost productivity, and improve job satisfaction – driving competitive differentiation. In the future, AI will also play an important role in further empowering the connected worker, by providing insight and accuracy to improve efficiency.
Prediction #4: In 2025, 30% of manufacturers will have embedded circularity strategies into their business models, initially to help reduce waste and use resources more efficiently.
It’s becoming increasingly evident that manufacturers’ “take-make-waste” linear business models have become unsustainable, unpopular, and exposed to more business risk.
Nealy half, 42% of global manufacturers are worried about the lack of key supplies, with the same percentage expressing concerns about the increasing costs for raw materials. To reduce the dependence on the availability and cost volatility of raw materials and make their business more resilient in the future, manufacturers must rethink their existing business models to embrace circularity.
Meanwhile, Bain & Consulting found that 33% of executives expect their industry to be disrupted by circularity start-ups that put products or materials back into the supply chain. By re-using materials over and over again, such companies not only create resilience through a decreased dependence on virgin materials but also yield more profitability out of the same product.
For manufacturers, there is increasing urgency surrounding the circularity as the regulatory landscape and circular economy policies evolve rapidly in the UK, Europe and the US. These already are, or shortly will, have a profound impact on the ways manufacturers can operate, both in the near and long term. As various regulations come to fruition, such as the European Green Deal, the transition to the circular economy has been accelerated.
To ensure manufacturers are prepared for their transition to a circular business model, they need to be enabled by the right technology.
Manufacturers must design for circularity. Indeed, approximately 80% of all product-related environmental impacts are determined during the design phase of a product. At this stage, manufacturers need to think about the choice of their and their suppliers, but also how redesigning their products them can make them easier to disassemble, repair and recycle in the future to enable circularity.
Going further, the industry at large needs the ability to handle returns and incorporate reverse logistics. A strategy that Gartner recognizes as a key engine to drive circularity strategies. Using a circular business model, reverse logistics allows manufacturers to return goods at their end-of-life, creating an efficient flow of goods and reducing waste.
Finally, traceability is another key capability needed for circularity, as it enables manufacturers to track and trace materials, parts and products throughout their lifecycle. That way, manufacturers never lose sight of a product’s journey and environmental impact.
Accelerating innovation resilience and circularity into 2024:
Manufacturers are no strangers to coping with rife and demanding challenges. As an industry, their resilience continues to drive forward innovation by adopting key technologies to enhance their operations. As they navigate their way into 2024 and beyond, prioritizing their efficiency and optimizing their operations will be key to their competitive differentiation.