Manufacturers create everything, from construction materials to technology components to pharmaceuticals. While the industry is currently enjoying a strong growth phase, continued success will depend on addressing labor shortages, trade uncertainty and automation. Our latest report examines 5 Trends in Manufacturing.
# 1. Labor shortages
With consumer confidence high,1 one of the biggest challenges for manufacturers has been keeping up with new orders. A tightening labor market poses the challenge of finding skilled workers, particularly in the construction sector.2 3 Meanwhile, higher global living standards are limiting access to inexpensive overseas workers, even as U.S. immigration policy is putting a strain on manufacturers who rely on immigrant labor.4 Although factory automation is providing some relief, many manufacturers are adopting a variety of steps to staff their factories, from raising wages to hiring part-time “gig” workers.
# 2. A still-strong U.S. economy
The U.S. economy expanded for 18 straight quarters in late 2018,5 capping nine years of economic growth. Recent tax legislation and import tariffs may also be responsible for additional factory expansion. As consumption growth is expected to remain strong,6 manufacturers have an opportunity to break ground on new domestic factories7 while tariffs could incentivize companies to create domestic supply chains—though it’s unclear how long the tariffs favoring this will be in place.
# 3. Challenging global markets
Expanding markets have created opportunity for manufacturers around the world.8 But slower growth expected from China,9 the largest U.S. trading partner, and mounting trade tensions between the two countries threaten to disrupt supply chains and damage economic growth.10 Closer to home, the 2018 United States-Mexico-Canada Agreement eased concerns about a North American trade war, but many details remain unclear that could still affect supply chains.11 Addressing these concerns, manufacturers have adopted a range of strategies, from moving overseas factories home to avoid tariffs or, conversely, shifting U.S. factories overseas if their primary markets are outside the country.
# 4. Technology and innovation
Factory automation is moving ahead but the U.S. ranked fourth in the top five global markets for industrial robots and only seventh for installed robots per 10,000 employees.12 However, as the cost of automating decreases, manufacturers of all sizes may increase their use of robots. In addition, new modeling technology has enabled small and midlevel manufacturers to develop tailored products for larger companies to assemble, making them more valued partners.13
# 5. Regulation and the environment
Amid loosening regulations, midsize manufacturers continue to operate under strict guidelines — especially if they serve larger suppliers. Beyond regulatory requirements, manufacturers and other busineses have strong incentives for becoming environmentally minded. A recent report noted that 87% of Americans favor products that advocate for an issue they care about14 and a 2017 consumer study found that a third of consumers prefer to purchase products from sustainable brands.15 More than 90% of CEOs cite sustainability as important to their company’s success.16