Today, October 6, is Manufacturing Day 2023—a day dedicated to celebrating the inventive minds and creative ingenuity that have brought this centuries-old industry into the future.
As we reflect on the innovation and resilience of our industry, this is also an ideal opportunity to consider the profound ways manufacturing will continue to evolve.
From government investments to the rise of artificial intelligence, these trends are poised to reshape the landscape. Here are six major trends impacting the manufacturing sector:
1. Government Investment: A Catalyst for Transformation
According to the US Treasury, manufacturing construction spending has witnessed an unprecedented surge, doubling since the end of 2021.
This dramatic upturn is largely attributed to three key legislations: the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act, all of which introduced tax incentives to jumpstart domestic investment in modern manufacturing industries.
This infusion of capital and tax advantages has ignited a wave of investment, setting the stage for significant growth in the sector. Perhaps most profoundly, construction spending in the realm of computer, electronic, and electrical manufacturing has grown exponentially (shown in the figure below).
While historically representing a relatively small share of US manufacturing construction, these sectors have now emerged as dominant players, representing a major thrust to bring these critical manufacturing capabilities back to the US.
This investment is translating into increased production capacity, with a sharp focus on high-technology industries. High-tech manufacturing will ramp up modern manufacturing practices by necessity, which in turn will cause a huge increase in spending on solutions in this space, including product lifecycle management (PLM), enterprise resource planning (ERP), and manufacturing execution systems (MES).
The impact of this capacity expansion is poised to be profound, promising to reshape the manufacturing landscape in favor of those who’ll leverage their investment by turning around and putting it back into digital innovation.
2. Cloud-Powered Facilities
For several years now, the era of on-premise software has been giving way to cloud-based solutions. Now, considering the major influx in spending from government investment, modern manufacturing plants will be built with cloud capabilities in mind.
Historically, modern technology meant new and improved assembly lines or new and improved robots. Now, we could be looking at structural changes to factory blueprints. Most conspicuously, modern manufacturing plants won’t need the once-ubiquitous big data centers.
Suddenly we’re likely looking at an entirely new facility: the software-powered factory. A physical space that’s inherently cloud-first: agile, collaborative, and redefining the means of production by unlocking efficiency and responsiveness that older manufacturers can only dream of.
3. The Seismic Impact of AI
If the cloud is the driver of progress, artificial intelligence (AI) is the fuel. In every industry, AI has already infiltrated business processes, enhancing decision-making, automation, and predictive capabilities.
What’s next? Enterprises harnessing their own data through AI. The integration of secure AI-powered solutions will optimize operations, enhance quality control, and revolutionize the supply chain.
Geoffrey Moore, best-selling author of Crossing the Chasm and other business titles, believes AI could potentially empower businesses to accurately predict customer demand:
“In enterprise systems—in the whole log file—there are these signals. They're like digital footprints. They're not easy to catch; it's an enormous amount of noise. But if we could take AI capabilities and apply it to this log data, we could extract signals which would allow us to be more predictive and more proactive in creating products and services."
To date, the manufacturing industry has largely been left out of the AI party. Product data is rightfully considered a crown jewel that requires rigid security—which up until now hasn’t meshed well with AI, primarily driven by open sources of public data.
Now, with Salesforce’s recent release of Einstein AI, this will shift. Digital solutions built for enterprise users can harness the power of their AI platform, trusting the underlying and famously formidable security of Salesforce itself.
Finally, engineering and manufacturing can join in the AI revolution, innovating the way we develop and deliver products faster than ever before.
4. Geopolitical Risk Mitigation: Production is Coming Back Stateside
“Globalization is no longer widely embraced as a universal good.”
Political analyst Bruce Mehlman puts a fine point on this trend that we’ve all seen coming for a while now. The aforementioned US Treasury research is demonstrable evidence that production is moving away from China, with more companies opting for onshoring and nearshoring whenever possible.
Beyond the spending incentives, this pattern is driven primarily by risk mitigation. As export controls continue to intensify, more hurdles for international trade will crop up. Manufacturers are keen to mitigate risk by reducing over-dependence on foreign countries that may not share their customers’ views on environmental or social business practices, opting to expand their North American supplier base instead.
These geopolitical issues are increasingly driving consumer decisions. As Mehlman puts it:
"CEOs are being told, don't just focus on shareholders. Think about broader stakeholders as well. That may make companies run in a more societally beneficial way, but it's inflationary. It's not only just in time, it's also just in case. So companies are having deeper inventories, they're looking for multiple suppliers, not just the lowest cost one, but one that maybe has less climate risk or less geopolitical risk."
5. Supply Chain Risk Mitigation: Diversify or Die
Of course, we can’t talk about risk mitigation trends without talking about supply chain diversification.
It’s no longer an option to mitigate the vulnerabilities linked to dependency on a single supplier. Along with geopolitical uncertainties, manufacturers today have to worry about potential risks like supplier financial instability, disruptions caused by severe weather conditions, and unforeseen occurrences that might disrupt the flow of vital components or services (like another global pandemic).
Luckily, the distributed supply chain benefits enormously from cloud-based solutions for manufacturing. Complicated processes like supplier onboarding, certification audits, and collaboration can be automated and simplified through cloud-native PLM solutions and dedicated supplier portals.
6. Leading the Market with Sustainability
For years now, sustainability has become increasingly prominent in the conversation around manufacturing—and for good reason. It's not just a trend, it’s an imperative for the future of production.
In addition to regulators, consumers and shareholders are now scrutinizing a company’s every move when it comes to environmental impact. One false step, and it’s not just the planet that feels the impact, it’s your bottom line. With this in mind, what’s changing now is that companies put their money where their mouth is. They can’t simply slap a green sticker on their packaging—they need to drive real change at the earliest stages of the product cycle.
After all, 80% of a product's environmental impact is influenced by decisions made at the design stage, according to the Ellen MacArthur Foundation, the world’s leading circular economy network.
Echoing this, Michelle Stone, Senior Product Manager for Propel and a 25-year veteran of the PLM industry, explained that digital solutions can help. “Sustainability can't just be an afterthought. It's not something that comes later. You can use modern systems to think about green requirements earlier in the development cycle.”
It’s true that digital transformation, fueled by AI and cloud-native solutions, and potentially even the construction of new more efficient manufacturing facilities will each help manufacturing move in the right direction.
The key is to make sustainability top of mind and construct these processes intentionally by empowering those who are in the best position to lead the charge at your company—the IT leaders.
"With digital transformation, sustainable strategies are already among its responsibilities,” says Ralph Loura of SustainableIT.org.
“Automation of labor, automation of work process, migration to the cloud, consolidation, simplification, removing tech debt, hybrid/remote work enablement. All these things are already driving toward the goals of sustainability and they're already in the remit for CIO."
Manufacturing Month & Beyond
Although Manufacturing Month 2023 technically ends after October, these trends will continue to shape the industry for years. From government-backed investments to AI integration and sustainability initiatives, the industry is undergoing a comprehensive digital makeover, setting the stage for a more agile, efficient, and eco-conscious future.
Extensible solutions like Propel Software are empowering businesses to navigate this digital evolution seamlessly and lead the charge toward a sustainable and innovative future. See how.
