The Future of Business Resilience in the American Manufacturing Sector

In 2023, the US manufacturing industry benefited from the momentum created by three major pieces of legislation signed into law in 2021 and 2022: the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA). These laws prioritize rebuilding infrastructure, developing clean energy efforts, and expanding the domestic semiconductor industry, all while promoting job creation, worker development, and equity. The IIJA, CHIPS, and IRA have already spurred record private sector investment in US manufacturing by infusing funds and tax breaks into various sectors such as semiconductors, clean energy components, electric vehicles, batteries, and the constituent parts and raw materials of these products.1

Outlooks for 2024 in energy, resources, and industries

Read more in the Deloitte Center for Energy & Industrials' 2024 forecast collection. Take me to the 2024 energy, resource, and industrial outlooks. For example, investments in semiconductor and clean technology production are roughly double the pledges made for these industries in 2021, and about 20 times the amount allotted in 2019.2 Since the adoption of the IRA, about 200 new clean technology manufacturing facilities have been announced, totaling $88 billion in investment and estimated to produce over 75,000 new employment.3 The manufacturing industry's construction spending has increased significantly after the passage of the IIJA, CHIPS Act, and IRA (figure 1). As of July 2023, yearly construction spending in manufacturing was US$201 billion, a 70% increase year on year and paving the way for greater sector expansion in 2024. Table of contents. Navigating talent hurdles. Smart factor Supply chain digitizatio Aftermarket services. Product electrification Future ahead Nonetheless, the manufacturing industry continues to confront difficulties. In 2024, manufacturers are likely to experience economic uncertainty, a persistent skilled labor shortage, lingering and targeted supply chain disruptions, and new problems driven by the requirement for product innovation to fulfill company-set net-zero emissions targets. Deloitte's examination of Purchasing Managers' Index (PMI) data shows that the manufacturing sector contracted for the majority of 2023.5 So, what measures could manufacturers explore to address these persistent issues, help scale up production, increase competitiveness, and fully capitalize on the industry's unprecedented influx of capital? To help businesses begin to address this issue, the 2024 manufacturing industry overview examines the following trends: Navigating persistent talent obstacles Smart factories and the path to the industrial metaverse

Supply chain digitization to improve performance and resilience.

Aftermarket services as a possible differentiator Product Electrification and Decarbonization

Technology is positioned to play a crucial role in assisting manufacturers in addressing the issues that may arise in 2024. With a constant pursuit for efficiency and an emphasis on strengthening resilience across the organization, many manufacturers want to continue pursuing their digital transformation goals—even if some may contemplate delaying investments due to the current business environment. Companies appear to be adopting a smart factory strategy, exploring the industrial metaverse, and looking into the potential of generative AI, one of the most recent additions to the armory, as tools for adding value to their operations. According to a recent Deloitte survey, 86% of manufacturing executives believe that smart factory solutions would be the key drivers of competitiveness over the next five years.6 According to another recent survey, firms believe that the industrial metaverse will result in a 12% increase in labor productivity, which could help address the existing labor shortage. Generative AI is predicted to have enormous promise in fields including product design, aftermarket services, and supply chain management. It might lower costs across manufacturing groups and provide another tool for negotiating a difficult labor market. Given the vast reach of this technology, we've included generative AI use cases for each trend. Labor market pressure has persisted into 2023 (figure 2), and the similar pattern is projected in 2024. According to a recent survey done by the National Association of Manufacturers (NAM), nearly three-quarters of manufacturing executives believe that hiring and keeping a qualified workforce is their primary business concern.

7 Manufacturers have been proactive in altering their personnel policies to increase employee attraction and retention. Some recent modifications include:

Keeping flexibility in mind: According to a recent NAM poll, 46.8% of manufacturing executives reported that their organization provides flexible scheduling to production workers. Other types of flexibility available to production workers include remote work, reduced workweeks, and the ability to swap or split shifts.8 Rewarding the workforce: According to Deloitte, employees' average hourly salaries increased by 4% between Q1 FY2022 and Q1 FY2023. Notably, there has been a 19% decrease in the average number of voluntary separations throughout the same period.9 Using digital tools to improve talent acquisition: Many manufacturers confront difficulties in attracting the proper people to meet current and future demand. Companies frequently no longer regard site selections purely as real estate decisions, but rather as strategies for maximizing talent and efficiency while reducing risk. When deciding on a new manufacturing location, organizations might benefit from increased "locational awareness" to balance market access, talent pools, and total cost.10 Companies are looking into the use of digital tools like artificial intelligence to quantify the requirement for people in both new and existing production plants. These tools might help you sense the local labor market and build marketing strategies for possible hires. Digital technologies have also been used to enhance access to temporary labor. Working with firms that use new technologies like mobile applications that leverage AI to engage and undertake basic screening of possible employees, some manufacturers have been able to grow their pool of difficult-to-find, higher-skilled personnel.11 This includes engineers, maintenance technicians, and machinists, who appear to prefer the flexibility and higher money that on-demand jobs may provide. 12