When I was young, the holiday season brought the kind of pure, unadulterated joy that is unique to childhood. As an adult, I still love this time of year, but the magic is dulled by the pressures of shopping, decorating, baking, parties and general busy-ness – and often, trying to fit the last two weeks of the year’s work into one. It’s work in and of itself to slow down and make time to enjoy it.
Much like the season, 2023 has been a generally positive yet stressful experience for many U.S. manufacturers. This has been a year of tremendous opportunity via legislation like the Chips & Science Act, nearshoring trends and high demand in industries like electronics, energy, automotive and even food. But it’s also been marked by layoffs, strikes and an insurmountable talent shortage that’s led to pressure on productivity and the capital costs that come along with automated workarounds.
And while I wish I could say that we expect the challenges to swing from cost to benefit, it appears 2024 may be more of the same, but with an added wrinkle – the economic softness that’s been lurking in the shadows might become less of an uncertainty and more of a reality.
Forecasts suggest that economic growth is on track to slow in 2024 – a global economy the IMF characterizes as “limping along, not sprinting.” For the U.S., the result will more than likely be a quick, shallow recession.
On the surface, this will pose challenges – bigger for some industries than for others — but conversely, and as always, there is a silver lining. Alan Beaulieu, president of ITR Economics, recently told a room full of manufacturers and distributors that 2024 would serve as an opportunity for improvement. Companies need to fix their problems – whether those are operational issues, bottlenecks, staffing or marketing – because “in 2025, you won’t have time,” said Beaulieu.
Speaking at this year’s STAFDA convention, Beaulieu added that corporate profits have been at record highs and that although this mild recession would mean erosion there, many businesses would still see profitability.
If industrial businesses take this to heart – and it seems many already have – we expect to see acceleration of the digitizing that began in earnest during the pandemic and has been propped up since due to labor challenges. Ernst and Young recently pointed out some tailwinds for the adoption of robotics as we head into the new year — one being that the price of an industrial robot has gone down by half in the past decade with further drops expected in the coming years. This shift may be enough to change the mindset of manufacturing executives who still feel this type of technology is too capital-intensive for their businesses and, therefore, off the table for the near future.
In its recent 2024 forecast, Deloitte pinpointed other opportunities for industrial manufacturers to capitalize on current and impending trends. These include a broader emphasis on aftermarket services as well as targeting, if applicable, products designed to address customer spending on ESG goals. Development in this area has been vast on everything from electrical components, batteries and alternative energy all the way to biodegradable lubricants and VOC-free chemicals.
Other investment categories of note, says Deloitte, are supply chain solutions to help bolster resilience and enhance performance. We see some turning to AI tools for this, and expect that the business case for AI in supply chain management – including for forecasting and route optimization – will provide further momentum for the technology’s use in other areas.
So while 2024 might wind up being equal parts naughty and nice, there is an opportunity for manufacturers to prepare themselves for a tempered economy and assess which solutions could be the most impactful in both the short and long term. And since this is your window, consider a full throttle analysis of your business, not just the low-hanging fruit – because you might find opportunities hiding in plain sight.
Let us know how it’s going. Email me at [email protected] to share your experience as you embark on business year 2024.