Growing supply chain complexity, emerging next-gen technologies and other compelling forces will continue to challenge the manufacturing sector. Here's a look at what's ahead for 2020.
2019 has not been an easy time for manufacturers. 2020 promises to only get more difficult.
Widespread reports of a manufacturing slowdown and growing expectations of a recession only serve to heighten the manufacturing challenges that already exist. Manufacturers should get proactive, and that requires first understanding the issues.
Here are seven manufacturing challenges that top the list.
1. Lack of supply chain collaboration
To succeed with global supply chains that are only becoming more complex, supply chain collaboration is a must. And yet, for most manufacturers and other supply chain stakeholders, such collaboration is elusive.
While growing complexity, increasing customer pressures and persistent technical obstacles will continue to create big challenges for manufacturers next year, human nature is likely to be a top issue among manufacturing challenges, said Steve Pillsbury, principal at PwC. Lack of trust throughout the supply chain is throttling collaboration efforts and technology deployments.
"Relationships are still held at arm's length," Pillsbury said.
Reasons for mistrust throughout the supply chain boil down to unanswered questions pertaining to data ownership, data monetization and pricing pressures, he said.
Further complicating matters is what may seem to be an ironic fear of efficiency.
"Supply chain partners and manufacturers fear that if customers can see costs drop through added efficiencies, they'll demand the savings be passed on to them," Pillsbury said.
2. Trade war effects
Narrow profit margins are particularly worrisome to manufacturers as they face continuing trade wars, Pillsbury said.
Current geopolitical pressures affect nearly every industry sector, and manufacturing is no exception, given that raw materials and finished products are sourced and sold globally.
Manufacturers are considering strategic changes to the supply chain to soften the impact of a trade war that only seems to be heating up.
"Companies are now considering second-tier strategies," said Jason Jackson, a supply chain management and operations management faculty member in the School of Business and Information Technology at Purdue University Global.
These include bringing their supply chains back to the United States and looking beyond China to other countries as outsourcing possibilities.
2020 is also an election year in the U.S., which adds uncertainty on top of the trade issues and regulatory environment.
"It is not uncommon for manufacturers to curtail capital expenditures and hiring until there is a better sense of who the president will be, what policies they will push and how it will impact industry," Jack Ellenberg, associate vice president of Corporate Partners and Strategic Initiatives at Clemson University, wrote in an email.
3. Manufacturing skills gap
A growing manufacturing skills gap will continue to add to manufacturing challenges.
The manufacturing sector overall is "graying" as leading talent ages out to retirement and institutional knowledge is lost in the process.
"In 2024, the baby-boom cohort will be ages 60 to 78, and a large number will already have exited the labor force," according to a U.S. Department of Labor Bureau of Labor Statistics report.
But manufacturers are facing more staffing problems than just the graying of the existing workforce.
They are also "dealing with a massive talent and skills shortage even as it pushes to bring together greater efficiency, increasing mass personalization and new business models," Steve Silver said in an email. Silver is vice president of manufacturing, automotive and high-tech at Pegasystems.
"As China continues to move towards being a white-collar economy, many large multinational firms are moving to lower-cost geographies like Vietnam and Bangladesh," John Pabo said in an email. Pabo is founder and chief advisor at Fulcrum Strategic Advisors. "For some, this is like starting fresh as they have to train new and often inexperienced labor forces, deal with new government structures and stakeholders, as well as offload assets in China."
Some manufacturers are enticing older workers to stay on the payroll longer, training staff internally to take on other jobs in the company and training local workers externally for hard-to-fill positions.
4. Stalled industry 4.0 efforts
Thanks to the talent shortage and other factors, the move to industry 4.0 -- and manufacturing digital transformation more generally -- may have hit a few speed bumps.
"The industry needs to do more with less of everything, which has led to a glut of pilot transformation projects trapped in 'pilot purgatory,'" Silver said.
Stalled transformation projects and botched innovative tech deployments couldn't come at a worse time given the projected annual manufacturing GDP growth of only 1.3% for 2020, based on the Oxford Economic Model, according to a Deloitte report.
Senior and mid-level supply chain executives struggle with the Amazon effect.
Steve PillsburyPrincipal, PwC
Against this dour backdrop are additional social responsibilities that require additional investments and employee buy-in to avoid backlash and curtail employee activism.
More than a quarter of manufacturers surveyed said they are committed to doing social good by delivering on sustainability goals, said Paul Wellener, Deloitte's U.S. Industrial Products and Construction practice leader and the author of the above cited report. Forty percent of respondents said corporate social responsibility initiatives have helped them generate new revenue streams.
"Modern supply chains are dynamic, there's a lot of change taking place and a lot of stakeholders involved, so it's not easy to identify the correct technology path to take, or what order to deploy technologies," said Andrew Stevens, senior research director of supply chain at Gartner.
5. Robotics and automation effects
The manufacturing sector is already seeing the effects of automation and robotics -- from AI to IoT sensors to robots on the floor to greater use of robotic process automation -- and that trend will only continue.
For example, robots are interviewing candidates, helping out in the warehouse and working in the factory. AI and IoT are increasingly being used to create efficiencies and to help create smart factories as part of digital manufacturing efforts.
The technology-people collaboration will only grow, and that means yet more change. Besides forcing the development of new processes, all of these serve to heighten the current skills gap and affect future training.
Preparing a workforce for jobs that don't yet exist, and yet are foreseeable, is challenging, although some can see this in a positive light.
"Automation, artificial intelligence, robotics and machine learning will create new opportunities for people on the factory floor -- as trainers of the machines," PR Krishnan, global head of Enterprise Intelligent Automation and Artificial Intelligence at Tata Consultancy Services, said in an email.
6. Amazon effect fallout
"Given the precise engineering that goes into manufacturing … translating that precision to a customer focus would be relatively easy," PwC's Pillsbury said. "But senior and mid-level supply chain executives struggle with the Amazon effect."
Customers now expect instant gratification and precise, dependable information and visibility from the order to delivery of the product. That level of agility has never been the forte of manufacturer supply chains, despite just-in-time vendor supply models and Six Sigma manufacturing best practices.
Manufacturing involves "only a handful of variables" in stamping a part or mapping a 3D printing design, whereas building an Amazon comparable customer experience "adds a magnitude of complexities and variables to an already complex supply chain," Pillsbury said.
Even so, rising customer demands are forcing manufacturers to rethink how they can deliver a better customer experience.
"Manufacturers are starting to apply more of a systems thinking approach rather than think of the plants and vendors as separate, unrelated entities," Pillsbury said.
That is an innovative approach using a tried-and-true methodology.
7. Need for supply chain visibility
If manufacturers are to meet soaring customer demand for more transparency throughout the product lifespan and the customer experience, then there must be more real-time and granular visibility throughout the supply chain.
"Manufacturers need to know that their trucks are stuck at the border or a ship is stuck at a port for inspection ... before it happens," Pillsbury said. "If manufacturers can know those situations are coming up, ... then they can do something to rectify or adjust to the problem."
GPS trackers are not enough, as more critical data must be incorporated, and more processes combined and integrated to make the supply chain completely transparent and totally efficient. But that's not likely to occur until the supply chain partner trust issues are also resolved, Pillsbury said.
