9 Trends Manufacturers Need to Know About For 2023 (and how to manage them)
The past few years have presented some of the biggest challenges for manufacturers in living memory. Not since Spanish Flu, the Great Depression and the World Wars has there been so much insecurity and instability which could hinder manufacturing. Unfortunately, we are still riding the wave of uncertainty into 2023, meaning there are only more challenges to come. However, this doesn’t need to be all doom and gloom. Where there’s a threat, there’s an opportunity. We have put together our top 10 trends for manufacturers in 2023 to help them make the most of what 2023 has to present and turn these challenges into opportunities to gain a competitive advantage.
The Outlook for Manufacturing in 2023
Due to economic pressures, supply chain issues and unpredictability of overheads, the forecasted growth of the manufacturing sector in 2023 is uneven. Aside from Air Travel and Defence, manufacturers can expect progress to slow throughout the supply chain- from supplier materials to sales. But rather than looking at this as a bleak year to hunker down and make cuts, it could be treated as an opportunity to reassess business operations and invest to an industry becoming an intelligent enterprise. Advances in digitalisation are a key player in keeping the industry competitive and an effective way to stabilise the value chain to provide some continuity for businesses.
What are the future trends in manufacturing?
The future of manufacturing is digital. Innovations with the Internet of Things and AI now mean businesses can optimise and monitor when and how machinery is run. AI and Machine Learning provide a pathway to greater insights and acquire further insights for better decision-making, as well as having applications for improving customer services. The buzzword that underpins all of these trends is automation- automation through technology. It allows businesses to do more with less, which is exactly what is required to combat looming trends. Below we have listed some of our top trends for 2023 and how to mitigate or take advantage of them:
Digital transformation is an area which has been on the rise for a couple of years now. It’s proved its case through the likes of COVID which forced the hands of many businesses to adapt. This can sound like extreme changes to a business but all it means is integrating digital technologies throughout each part of a business.
The success to date has been down to two things. Firstly, aspects such as cloud services and data governance tools help to reduce on-site costs, cost in inefficiencies and weaknesses across an organisation. Secondly, digitisation unlocks new potential in business processing, analytics and customer service.
In 2023, business agility- which stems from business processes, decision making and strength of data, will be essential to business success. Not only will digital transformation help mitigate inflation and supply chain risks, but it will also help manufacturers grow their competitive advantage over analogue organisations.
Supply Chain issues
COVID-caused backlogs and lack of raw materials from the war in Ukraine have had disastrous consequences for manufacturers. It’s estimated that by 2023, supply chain issues would have cost the Eurozone close to £1 trillion. These significant losses aren’t just monetary. Should customers fail to get an order on time, this may cause a loss in reputation. Consequently, mitigating supply chain issues in 2023 must be a key focus. To do so, we suggest the following:
Supply chain visibility
Using Analytical and Business Partner Management tools can produce key insights into which suppliers are key to operations and which there could be overreliances on. Analysing the supply chain in this way is helpful to create a redundancy strategy in case one supplier is hit with a shortage.
Work on supplier relationship
With certain materials being in high demand and shortages becoming a common occurrence, foresight of this, communicated between supplier and buyer will be very important for optimising the manufacturing process in 2023. The utilisation of stock automation and Business Partner Management systems, such as BPX are some of the best ways to achieve this. Not only does this reduce overheads, but it also increases responsiveness to immediate supply changes. However, this method does rely on the supplier being open and reliable to sharing information.
One of the key themes of 2022 was inflation across the board- partly due to COVID and the illegal Russian invasion of Ukraine. Economists and business leaders all agree that inflation is set to continue into 2023- although there are wildly different forecasts for what this could look like. Regardless of how long it continues for, it means pressure on manufacturers and rising costs of goods and materials. It’s easy for manufacturers to feel stuck in this position as they will be forced to pay more for materials but may lose business from raising prices for the end customer. Here’s how we suggest addressing this issue in 2023:
Optimise business processes
In simple terms- get more from less by improving how you do things. Processes with inefficiencies may be costing a business more than is necessary. Legacy systems or on-prem infrastructure may be outdated or unable to deliver processing and analytical needs to make decisions in times of uncertainty. Migration to newer technologies such as S/4HANA or Cloud services open manufacturers to smarter processing and accelerated production.
Invest in reporting capabilities
The better visibility a manufacturing company has of its end-to-end expenditure, the better it can be with analysing where it can reduce spending or reallocate resources. If sharp rises in inflation occurs in 2023, manufacturers will need the analytical capacity to overcome associated challenges. This could be looking at machinery capabilities, overheads, average supply delivery time, labour productivity and other aspects which influence competitive advantage. Design concepts such as Fiori can be paired with S/4HANA here to provide this information in real-time for maximum agility.
With the cost of living rising, it’s forcing consumers to get the most bang for their buck. Getting consumers- whether B2B or B2C, is becoming more difficult as they become more cautious over the limited funds available to them. The implied pressures of this mean manufacturers must be at the top of their game, producing products which meet customer expectations every time or risk consumers walking away. One great way to inexpensively rise to expectations without costs rising with it is innovation of the value chain with technology and automation. Applications available on the Business Technology Platform or even our own solutions, such as Maextro have the ability to improve the accuracy of products being produced through greater governance and automation of manual, monotonous processes. The result is fewer errors, optimised production and maximising the quality of output, all of which feed through as ways to add value to manufacturing which can be passed on to consumers.
In 2023 we can see capacity constraints becoming a topic of importance for manufacturers due to a balance between maintaining or increasing production and keeping costs down. With the recent innovations of the SAP Business Technology Platform, digital infrastructure no longer needs to be on-site and can be run via the Cloud either by the manufacturer or through a Partner Managed Cloud service. This frees up resources in several ways. Physical space can be freed for more machinery or production purposes and staff which historically needed to maintain these on-site systems can be reallocated to monitoring production machinery or reduced depending on the situation. The release of pressure and resources are key ways to making manufacturers more agile in 2023.
Manufacturing companies can also utilise automated technologies like AI and Machine learning to monitor and accelerate production. This is referred to as Smart manufacturing and can reduce labour costs or effects of a limited labour market and enables a manufacturer to re-shore and offshore manufacturing with lower costs and higher quality. In principle, this increases production capacity without correlating in overheads.
Labour Shortage & Skills war
Another capacity constraint expected to hit the manufacturing industry in 2023 is a shortage in skilled workers. Unfortunately, with the rising cost of living it’s going to be increasingly difficult to attract workers with the right skills. As we saw at the end of 2022, workers are no longer tolerating profit-first approaches towards business operations, resulting in many strikes across various industries.
Through digital transformation, there are ways for manufacturers to mitigate any loss in operations quality or essential skills. Software being released on the Business Technology Platform and many Cloud Suite Applications are designed to be low-code. This makes implementation, adoption, use and maintenance drastically simpler than full-code counterparts. The benefit to manufacturers? Manufacturers can recruit staff with less specialised skill sets to the same results. A talent strategy of this type also works for recruiting lower-paid but motivated job seekers, such as graduates and apprentices. Low-code solutions require limited training and are intuitive, reducing the challenges of recruiting a specialised skill set. Operational staff can also be trained to operate and monitor automated production, making business more efficient and needing fewer hands on deck.
Another reason why recruiting talent for manufacturing is becoming more competitive in 2023 is due to working conditions. A secondary benefit of digital innovation is improvements in working conditions. When competitors can offer this, it does become a factor of consideration for employees taking one job over another
An example of digital innovation improving working conditions can be from day-to-day monitoring and control of aircon using IoT. Considering the recent heatwave where temperatures rose to 40 degrees, many manufacturers stopped operations due to safety concerns. Automated air conditioning is a great way to overcome issues like this and continue operations when competitors cannot.
Further to this, automation and digital technologies also have safety applications for monitoring noise levels, promoting compliance for safe lifting and sensing when foreign elements are stuck in machinery- preventing any physical injuries.
As employees become ever more aware of their value to a company, in 2023 one of the questions will be “what are you doing to invest in your workforce”. Digitisation is a great answer to this to demonstrate how you protect and encourage worker safety but also how this helps them to be more productive and do their job with greater efficiency.
As the climate crisis becomes increasingly one of the top priorities of the social consciousness, so it is as well in manufacturing. The industry’s most forward-focusing companies have already demonstrated that this can be a great source of competitive advantage and can help the environment as well as profit levels.
In 2023, on top of the Environmental reporting mandate, we might see some new legislation around sustainability for businesses which would affect manufacturers. Becoming compliant with these policies could be difficult to adapt to but there are ways to aid adoption and protect the business’s value chain.
A good way to support this is through implementing cloud applications for business processes to analyse where materials are being wasted in the supply chain. Utilising A business partner experience tool can help to analyse which suppliers are providing the most unsustainable materials- packaging for example. This provides a manufacturer with the information needed to start a conversation with the said supplier or look elsewhere.
Adoption of automation technologies such as IoT can account towards cutting carbon footprints as well as energy usage via setting machinery to only run being used, remaining off or on standby otherwise. With rising energy costs, this is a great way to be environmentally conscious and sidestep the energy crisis.
Finally, the adoption of data governance tools, such as Maextro can help organisations to encourage employees to adopt environmental and social changes into operations with built-in compliance. Business reporting tools, such as Fiori design can make collecting and reporting environmental metrics an instant, automated process instead of manually calculating figures. This creates reports with greater accuracy and frees employees to focus on other tasks central to operations.
2023 will be a year that will affect each area of a business. But that doesn’t necessarily mean it’s going to be a difficult year. It’s going to be a year of opportunity for manufacturers to upgrade business operations and create a culture for innovation. Data and automation will be the key themes, unlocking analytical information that will be key for navigating an uncertain landscape and optimising business processes to ensure the most is being made from the resources it has.
For more information on how to digitally transform your organisation, get in touch with one of our data and automation experts here to begin your journey to digital transformation.
To discover what Manufacturers need to do in order to improve data quality, read our blog about making data quality a New Years Resolution here
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