Welcome back to another installment of New Year, New Challenges, where we lay out some of the biggest changes our clients and readers can expect to see in their given field as our planet starts its next lap around the Sun. Our topic this week: manufacturing trends.
Back in 2019, we took a look at each of the major industries our clients deal in, such as HVAC, building materials, and so on. This time, we’ve gone a bit more general and have divided our focus between two major camps: people who sell stuff and people who make stuff. Also known as distributors and manufacturers, if you want to get all technical about it.
Last month, we covered the first group, whose outlook moving forward is a bit uncertain to say the least. But we’ll come back to distributors later—let’s take a look at trends for manufacturers: what kind of stuff is being made, how it’s being made, and who’s selling the stuff.
Here’s what I imagine the U.S. Patent and Trademark Office looks like right now.
If there’s one thing we don’t need to tell you, it’s that innovation is the name of the game. As the world plunges headfirst into the Fourth Industrial Revolution, or Industry 4.0 to use its more modern name, the pressure is on for manufacturers to continually evolve and upgrade their products to fit end user demands, expectations, and manufacturing trends.
Whether your end users are businesses or individual consumers, that means ever-rising standards for UX and UI. Everything should be streamlined, integrated, and easy to understand. An increasing number of the products in our everyday lives and work spaces are connecting to one another on the Internet of Things (IoT), that digital infrastructure that allows you to turn the temperature in your house down from your smartphone.
In a 2019 survey, PwC found that 70% of manufacturers have IoT projects in some stage of development, and 93% of executives feeling that IoT’s rewards outweigh its economic risks. That’s not to mention the predicted rollover from 4G connections to 5G, the next generation in wireless tech. The International Data Corporation (IDC) predicts 5G connections to grow from 10 million to over 1 billion in the next four years.
If all of that sounds intimidating, it’s because it is, but consider the horizon that stretches ahead of us. We live in an era of ingenuity: 2019 saw more patents filed in the United States than ever before, with well over three hundred thousand patents granted, a 15 percent increase from the previous year.
Consider, too, the opportunities within these manufacturing trends. While the proliferation of IoT and Industry 4.0 might seem like a nonstop marathon of avoiding obsolescence, the new technologies offer the stuff-makers at least one major new advantage: data. You might think of data analytics as a distributor’s game, but IoT systems also provide invaluable information to manufacturers about how their end users are buying and interacting with their product. This allows them to more quickly adjust to market demands and changing tastes, rather than having to simply go off last year’s numbers. Just make sure to use all that information responsibly, or it can lead to some major discomfort among your end users.
Even more significant than what’s being made now are the changes in how it’s being made. No industrial revolution is solely about the end product—it’s also about the process of making that product. And major changes are afoot in the manufacturing plants of 2020.
Just as the stuff that’s being made is getting smarter, artificial intelligence and IoT are finding their way onto the factory floor. I know in the past this blog has engaged in some lighthearted panic about how the robots are definitely taking over the world, and while I’m still one hundred percent terrified about that, some aspects of this evolution are undeniably positive for businesses and workers and creating helpful manufacturing trends.
Incorporating AI and other “smart” tech into manufacturing processes helps maximize efficiency and safety on the job, and even offers predictive maintenance for machinery. In its 2020 Manufacturing Industry Outlook, Deloitte noted that manufacturers are increasingly adding digital technologies that help them adapt more quickly to unpredictable external forces such as trade uncertainties.
As always, this change is a process, not an overnight transformation. In its Annual Manufacturing Report, the British manufacturing publication The Manufacturer noted that many smaller and mid-size companies acknowledge the importance of going digital, but are reluctant to take the expensive plunge.
But there’s another side to this coin, the one you probably thought of as soon as we said “trends:” labor. Talk of the labor shortage is everywhere these days throughout both distribution and manufacturing. A 2019 Microsoft report on IoT trends found that only 33 percent of IoT adopters felt their companies had enough workers and resources to fully realize their digital aspirations.
It comes down to two major issues: training current employees and hiring new ones.
As the baby boomer generation continues to trend toward retirement, jobs continue to open up that are not being filled by millennials. Industry leaders are in agreement: something needs to change, and with hope the incoming tech-savvy Gen Z are just the people for that job. Businesses may need to revamp how they hire and recruit, working to combat any perceived stigma around manufacturing work.
It shouldn’t be hard: Zoomers have spent years observing the generation above them overburdened with student debt and struggling to find a job even with a college degree. They might decide they’re better off elsewhere.
You’ve already read about this part last month, just from a different perspective. After decades and decades of rock-solid partnership, the relationship between manufacturers and distributors is starting to get…complicated.
That’s because many manufacturing trends today are defined by one word: Amazon. Amazon changed the game when it redefined eCommerce into a streamlined, all-in-one, irresistibly convenient option for consumers and then for businesses with Amazon Business. We’ve talked a lot in the past about the rise of eCommerce and direct-to-consumer (DTC) selling and what they mean for distributors, but what does it mean for manufacturers?
Manufacturers have a choice to make moving forward: stick with what’s always worked, or dump distributors and connect directly with end users. Going DTC can seem like an attractive option moving forward for a number of reasons. Cutting out the third party doesn’t just have the potential to raise your profit margins, it puts you in direct contact with your end user, which can offer you major insights into how your product is being bought and used. Sounds like a pretty good deal, and, in fact, Forrester predicts that indirect sales will decrease every year for the next decade in favor of the marketplace model like Amazon’s.
At the same time, though, deciding to go DTC involves dramatic investment in new resources, people, and tech. And developing an online presence so your customers can read up on you prior to buying. And potentially redesigning your entire eCommerce infrastructure, if you even have any.
Oh, you want to go through Amazon Business? Enjoy competing with Amazon’s own original products. These challenges might be easy to overcome for industry giants like Tesla or Nike, but if you’re a small or midsize company you might decide the risk isn’t worth it and you’d rather work within your current distribution channel.
It’s impossible to talk about any one country’s economy and businesses as if they don’t touch those of dozens of other countries. The story of the world is one of increasing globalization. That means, for better or for worse, industries are affected by global events such as Brexit or the U.S.-China trade war.
Take the recent coronavirus outbreak: not simply a public health crisis, the epidemic has forced the closure of factories across China, which in turn forces plants in the U.S. to stall as they wait on imported parts and supplies. Just this week, we saw global stock markets take a nosedive as the virus continued to spread to new countries.
The ultimate impact that coronavirus will have on the world’s economy and health remains to be seen, as the thing hasn’t run its course yet. But one thing is certain: as we head further into Industry 4.0 the world’s economies will only become more interconnected, more reactive to one another’s internal events.
For whatever reason, everyone seems to be entering the new decade with a sense of slight caution. Maybe it’s the labor shortage, or the constant technological disruption, or the global one-two punch of a trade war and a pandemic. Or maybe it’s because we all know what happened at the end of the last century’s Roaring Twenties.
After several years of continued growth and historically low unemployment, everyone’s kind of holding their breath a bit on how 2020 will turn out. In November the National Association for Business economics predicted muted growth, 1.8% in 2020 compared to 2.3% in 2019. They also predicted the odds of a recession to rise to 43% by the end of the year, up from 5% in November.
That may sound bad, but of course economic downturn is natural in the business cycle, a constant inevitability in some way or other. And in spite of those less than reassuring predictions, there’s plenty for manufacturers to look forward to in the months and years to come. Data analytics and enhanced “smart” tech in shop floors allow manufacturers to adapt more quickly and smoothly to market volatility and changing end user tastes.
There will always be new challenges that arise within a given industry as time goes on. But there are steps manufacturers can take to help move their employees, channel, and product into the new Industrial Revolution.
Worried about communicating the technological complexities of your product? Consider setting up a channel enablement program with your distributors. Or maybe you’re thinking about adopting the DTC model—consider how an incentive program can give valuable insights into end users’ buying habits. It’s a new decade: the world is your oyster.
If you’re interested in finding out more about trends in manufacturing, or in learning more about how an incentive program can benefit your business in changing times, don’t hesitate to contact us to find out more.