Manufacturing Challenges 2024: Defining and Dealing with Them

Manufacturers are grappling with a number of significant challenges in 2024. Some of them are new, some are left over from the pandemic, and some have been around for years. Here we list the top challenges facing manufacturers and our executives’ recommendations for dealing with them.

Labor Shortages

Identifying, recruiting, and hiring skilled workers is often cited as the No. 1 manufacturing industry challenge for 2024. Baby boomers hitting retirement age, a skills gap in areas like automation, and millennials’ demand for flexibility and remote work options all contribute to the challenge of hiring the right people for the manufacturing jobs of the future.

Interim CEO Tony Evers says companies can overcome this challenge. “Always focus on capability potential as this is the basis for growth – personal and business,” he says.

There are some tried and true ways to do that, says Ed Trevisani, an interim executive with extensive experience in business strategy, operations, and transformation.

Those include:

• a robust on-boarding process that helps new employees learn the company culture.
• a mentorship program that fosters a team spirit and improves retention rates.
• strong upskilling initiatives that are “centered on building new skills in employees based on their individual desires but also help the company assess internal shifts needed and better positions the company for new hires based on skill needs.”

Supply Chain Issues

When the giant container ship, the Dali, crashed into the Francis Scott Key Bridge in Baltimore on March 26, 2024, it sent ripples throughout the manufacturing sector and global supply chain.

Certainly, the impact of a one-off accident is not on par with the supply chain disruption caused by the pandemic. However, when a major US port closes unexpectedly, supply chain management becomes more challenging for real-time manufacturing processes and inventory management.

How can companies ensure they get the raw materials they need in an unpredictable world?

“Communicate, communicate, communicate!” says Evans. “Up and down the line.”

Inflation

Inflation is driving the cost of raw materials, energy, and other essential input. This can squeeze profit margins and make forecasting a challenge, especially for U.S. manufacturers that cannot easily pass on increased costs to customers.

Managing manufacturing costs is essential to remain competitive, but it can be challenging to balance cost-cutting measures with maintaining high product quality and meeting customer expectations.

The solution, Trevisani says, is two-fold. “First you have to gain efficiencies to lower cost internally and get rid of non-value-added activities, mitigate waste and eliminate obsolete inventory. Then partner with customers to streamline the flow of goods that would help both the company and the customer – so each activity is a win-win.”

Ongoing Economic Uncertainty

The overall economic climate is unpredictable, making it one of the biggest challenges as manufacturers strive to plan and invest. Factors like geopolitical tensions, fluctuating customer satisfaction, and unpredictable customer demand can create uncertainty.

That uncertainty in private markets is offset somewhat by anticipated government investment, noted Deloitte in its 2024 Manufacturing Industry Outlook report.

“In 2023, the US manufacturing industry capitalized on the momentum generated by three significant pieces of legislation that were 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). Together, these laws prioritize rebuilding infrastructure, advancing clean energy initiatives, and building out the domestic semiconductor industry, while also aiming to foster job growth, workforce development, and equity. By introducing an infusion of funds and tax incentives into US manufacturing across various sectors—including semiconductors, clean energy components, electric vehicles, batteries, and the constituent parts and raw materials of these products—the IIJA, CHIPS, and IRA have already spurred record private sector investment in the manufacturing industry,’ the report says.

”As of July 2023, annual construction spending in manufacturing stands at US$201 billion, representing a 70% year-over-year increase and setting the stage for further industry growth in 2024.”

Technological Advancements

Keeping pace with rapid advancements in new technologies and the need for digital transformation across the company is hardly a new challenge. But updating everything from automation to cybersecurity to smart manufacturing can feel overwhelming, especially when there is little money available for upgrading tech.

Trevisani says companies can do more with less by implementing an IT strategy that considers technology replacement versus upgrade.

“It may be more cost-effective, for example, to upgrade select technology platforms and eliminate current outdated IT—the cost eliminated can mitigate the expense of bringing in new technology.”

He also recommends thinking more creatively about technology. Look at possible savings in customer-focused IT upgrades that could result in increased revenues or increased margin. And look for ways to replace manual work with technological advancements such as artificial intelligence, robotics, and the Internet of Things, “thus lowering costs which may be even lower than the cost of purchasing and implementing new technology.”

Social Pressure

Manufacturing businesses are facing increasing pressure from consumers and investors to focus on environmental sustainability and achieve net-zero emissions goals. This can necessitate further innovation and investment in new technologies and processes.

Meeting this challenge can range from simple changes such as replacing traditional lighting with more energy-efficient LEDs (an environmentally friendly approach that also saves money) to the electrification of products and production processes.

Deloitte points to t strategies manufacturing companies are employing to meet this challenge, including:

• Forming external partnerships and joint ventures to meet ambitious emissions goals for their products.
• Targeting net-zero emissions by investing in electrification as well as other low-carbon or renewable fuel technologies for their products.
• Forming specialized divisions dedicated to the electrification of their product portfolio.
• Making strategic investments in adjacent markets to align with electrification trends.

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