The manufacturing industry is building back in 2022, but many businesses are still navigating new challenges and elevated risks. Here are some of the critical trends to expect this year, and some tips for how organizations can best navigate the ongoing challenges.
As we emerge from the pandemic and the manufacturing industry is building back after two particularly turbulent years, manufacturers are navigating new challenges in 2022.
In some places industrial production and capacity utilization is back at pre-pandemic levels and new orders remain strong, pointing to ongoing growth. However, in many parts of the world the market remains highly volatile with ongoing risks including workforce shortages, continual supply chain instability, and the war in Ukraine adding a lot of uncertainty.
As we look ahead to the rest of 2022, the impact of the pandemic continues to have an effect on manufacturing and some of the trends in 2021 will carry over. However, there also are some new challenges and opportunities to consider. If anything has become clear over the past couple of years, it’s that business agility is critical for organizations that want to operate, compete, and continue to drive growth through market turbulence. This means investment in technology and embracing digitized tools from corporate functions to the factory floor.
With this in mind, here are six important trends in the manufacturing industry to consider in 2022.
Supply chain uncertainty
Supply chain challenges are ongoing in 2022 and manufacturers will continue to face disruptions globally—adding costs and requiring businesses to adapt quickly. We live in the new normal of volatile supply-chains with increasingly higher demand, rising costs of raw materials and freight, and slow deliveries. Transportation challenges are likely to continue in 2022, including driver shortages and congestion at critical ports. As demand outpaces supply, higher costs are more likely to be passed on to customers.
The traditional ways of managing supply chain risk by calculating a minimum inventory buffer have been ineffective given the wildly unpredictable swings in supply. Managing long chains of relationships using traditional enterprise resource planning (ERP) systems has become problematic since the underlying architecture isn’t optimized for modeling relationships and dependencies.
Companies do, however, have a huge amount of supply chain relevant data and can make better use of it. Digital supply networks and data analytics can be powerful enablers for more flexible, multi-tiered responses to disruptions. For instance, a graph database can be built to visualize the supply chain and essentially create a digital twin you can use to anticipate and scenario plan for disruptions.
As Harry Powell points out, “the sooner we can appreciate the fact that modern supply chains are a data problem that require a modern approach, the better prepared we will be for the next global disruption.”
Learn more about how KREATIZE has built its manufacturing data graph in order to make the manufacturing of parts worldwide more resilient.
Many manufacturers have begun to move production closer to home in recent years. The push for reshoring started long before COVID-19, but it accelerated during the pandemic as supply chain resilience became critically important. In 2020 and 2021, being able to do business closer to home was an essential way to bolster continuity. While reshoring has been a feasible supply chain solution in the short run, it’s not a perfect solution and presents other risks and considerations. The ongoing labor shortages in local markets will continue to push the costs of production (and thus the costs of goods) increasingly higher.
In 2022, intelligent reshoring needs to be the priority. This means evolving beyond a response to temporary challenges and using new models of operating to help businesses be more flexible and more resilient overall. Upgrading to an automated smart factory infrastructure at local manufacturing facilities should be a priority for manufacturing businesses. As should creating a diverse supplier network that future-proofs operations in terms of acquiring raw materials and producing components.
For companies to meet demand and maintain product quality, profitability, and efficiency after reshoring, hardware companies need to adopt technologies that can assure their resilience despite sudden changes. One such technology is cloud manufacturing, which bolsters resiliency by providing reliable access to high-grade, on-time manufacturing. Find out more about some of the most important challenges that can be addressed with cloud manufacturing technology.
Ongoing talent shortage
The manufacturing industry is facing a critical skills gap in the wake of the COVID-19 pandemic. The “Great Resignation”—the widespread trend of workers leaving their jobs during the pandemic—is continuing to make its impact on the industry. Attracting and retaining new talent is one of the biggest challenges for manufacturers today. Record numbers of unfilled jobs are likely to limit higher productivity and growth in 2022.
In the US, the manufacturing industry is facing the biggest surge of workers quitting in history, a nearly 60 percent increase from before the pandemic. Europe is showing similar trends in resignations, with a recent study by German-based company, Personio, revealing that 46% of workers are planning to quit their jobs in the next 6 to 12 months. Europe also faces a much larger problem in the long-run with its aging population. According to an extensive study conducted by the United Nations, Europe will have 95 million fewer working-age people (between 20 and 64) in 2050 than in 2015.
Despite leading the charge in automation, Germany is set for the biggest shortage of workers, according to ToTalent, with the Center for Global Development projecting a worker gap of 7 million by 2050. From 2021 to 2030, Cedefop data projects Germany to have nearly 20 million job openings. This is way above the 792,000 openings the BAA reported in January (nearing the all-time high of open jobs in Germany, which was 891,000 in the 1970s).
As the talent shortage continues, the industry must make a concerted effort to address this skills gap and labor shortage, including using Industry 4.0 technology to do so. The only way forward will be to embrace digitalization. Businesses will need to develop new capabilities, invest in human capital, and look for ways to radically improve processes using technologies that increase productivity through automation. Many organizations are seeking out platforms such as KREATIZE to reduce their reliance on labor and talent, and help them meet the challenges that lie ahead.
Acceleration in digital production technologies
Digital transformation continues to be a priority in 2022, and adoption of tools and technology that enable agility is more critical than ever for manufacturing businesses. Many organizations are already making progress and seeing results from more connected, reliable, and efficient processes. As the world enters new phases of unpredictability, hardware companies must shift spending towards digital solutions and technologies that can assure their resilience in the wake of tough times.
When it comes to supply chains strained by COVID-19 shocks, protectionism, and most recently the war in Ukraine, the right technologies can help companies alleviate some supply chain challenges. For instance, a study by AlixPartner from 2020 showed that around 7% of the wire harnesses for the automotive industry in the EU are manufactured in Ukraine. This drastically increases the risk that car manufacturers will need to halt production due to material shortage (this is already happening at Audi, Mercedes, VW). The actual risk of a loss in production might be up to 650,000 automobiles in Europe, according to a study by LBBW. This is about a 4% drop in European car production.
This illustrates how important it is to drive digitalization in all processes in order to not be caught by such dramatic changes. In this case, cloud manufacturing technology could offer stability by providing access to a global manufacturing network of many suppliers. With the effects of the pandemic and the Great Resignation being felt in many industries worldwide and increasing supply chain risks, there’s even more need to digitize to remain competitive and to keep costs down.
Investment in sustainable solutions
With an increasing appetite for sustainably produced products, environmental accountability needs to be a focus for businesses today. Environmental, social and governance (ESG) issues are becoming more important for consumers, thus elevating sustainability in manufacturing as never before.
In 2022, more companies are starting to measure and reduce the carbon emissions created by their manufacturing processes and supply chains. This means sustainable processes and the pursuit of carbon-neutral practices are all the more important for manufacturers to consider.
Companies will use increasingly accessible manufacturing and supply chain data to better evaluate their products’ carbon footprints and assess opportunities to manufacture and transport goods more sustainably. Many organizations are dedicating or redesigning sustainability roles and initiatives and quantifying efforts and results around energy consumption. The cost of capital today can even be tied to ratings on ESG, making it a priority for organizational financial health and competitiveness.
Find out more about KREATIZE’s road to ethical manufacturing.
The rise of digital technologies brings a new level of complexity to the manufacturing industry, requiring adequate cybersecurity programs to prepare for expanded risks. Many manufacturing companies are seeing an increase in cyber-related incidents associated with the control systems used to manage industrial operations.
A cyber attack can shut down operations and disrupt entire supply networks, compromising safety and productivity. This is not only an issue within your own organization—a threat at one of your suppliers can also cause major interruptions. As different industries continue to create regulations to protect critical infrastructure, businesses need to be thinking about their own preparedness for crisis response.
With access to a global supply network, KREATIZE can help ensure continuity if one of your suppliers faces a cyber attack. Find out more about security at KREATIZE.
KREATIZE would love to work with you, and wants you to benefit from the very best of today’s technology without having to completely overhaul your business or further invest in managing your supply-chain.
Start now by creating your account for KREATIZE Manufacturing Services today, and allow your hardware business to make a leap into the future of manufacturing.