Next in industrial products 2024

An era of smarter – and more sustainable – manufacturing unfolds

US manufacturing is undergoing tremendous transformation. As companies rebound from the global pandemic, they’re facing challenges on numerous fronts, including measuring and reducing greenhouse gas emissions footprints, enlisting and retaining talent, managing disruptions in supply chain, reinventing their business model, and protecting operations and customers from cybersecurity attacks — to name just a few. We believe that these trends will likely intensify in 2024 and that manufacturers of many stripes may need to increasingly adapt to compete.

Still, US manufacturing also seems on the cusp of a renaissance. The nation’s becoming a more viable and attractive location for onshoring and nearshoring by both US and foreign-inbounding manufacturers. Indeed, many manufacturers are rethinking their global supply chain footprints to make them more resilient and durable. Additionally, the sector is redoubling efforts to recalibrate business models, particularly through the adoption of digital technologies across the overall business from supply chains to operations to the customer experience.

Here are six increasingly important trends we believe can impact industrial products sectors through 2024 and beyond — and what manufacturers should do to stay ahead of them.

The new manufacturing employee experience: Why creating one now is so important

As manufacturers look to refill their ranks in the wake of pandemic disruptions, they’re rethinking how to make the industry more attractive and meaningful to help increase retention and lure new hires. Doing so hinges on improving the employee experience.

As we look into 2024 and beyond, the need to hire new recruits and retain existing employees in the industrial labor force is increasing. According to a recent PwC Pulse survey, seven in ten industrial products companies agree that talent acquisition and retention pose a risk to their organizations. Indeed, with about a half million manufacturing jobs unfilled, it’s crucial that the industry find ways to improve persistently low retention rates and lure more talent. Adding to this sense of urgency is the fact the US is experiencing an historic wave of investment in new factory construction.

A perennial challenge has been to change the industry’s workplace image from one that many view as consisting of repetitive and physically taxing work to one that offers industry leading technology adoption and career growth and advancement.

The push to change the employee experience in manufacturing jobs — especially those on the front line — means expanding total rewards and other initiatives that support well-being and purpose in the workplace while providing upskilling and training that can promote upward career mobility. This can be achieved in many ways and play out differently among manufacturers. If the manufacturer develops internal use software to effectuate these initiatives and meets certain IRS tests, the cost of developing the software may be offset in part by the research and experimentation credit.

In order to begin — or progress — along these paths, many players in the industry will likely need to improve how they assess just what workers want and then closely monitor and improve the employee experience in ways that can make employees want to stay and attract others to join their ranks. If this doesn’t happen, then US manufacturing’s growth may continue to be thwarted by an insufficient talent pipeline.

Manufacturing employee experience

Where should executives look to build a stronger, more sustainable workforce?

CHRO

In order to attract a new generation of talent — and to retain valuable existing employees — human resource leaders should take stock of what their workers want, especially frontline employees. Regular surveying of workers is critical to knowing what to offer both existing workers and to lure new employees, especially those with the technology skills that are increasingly needed by most manufacturers.

CEO

Promoting a culture of meaningful and satisfying work throughout the organization is both a bottom-up and top-down process. It’s important for the CEO to advocate attractive working conditions and nonfinancial benefits to address needs and raise morale for employees.

How manufacturers can strengthen cybersecurity as attack surface widens

Cyber threat actors are increasingly targeting manufacturers. In 2022, there were over 600 ransomware attacks on the industrial sector, nearly double those in 2021. And there’s no sign of this trend abating.

While attack entry points have long existed within enterprise IT environments, cyber attackers are increasingly expanding the attack surface, particularly across operational technology (OT) networks, as industrials adopt new connected technologies (including AI, machine-learning, 5G, IIoT, and quantum technologies) on their factory floors. Meanwhile, the mainstreaming of internet-connected products and services and digitized supply chains also can be vulnerable entry points for bad actors. Connected supply chain networks also can expose cyber vulnerabilities.

Such increasingly pervasive threats and vulnerabilities have further heightened alarm in most C-suites in the industrial sector.

As we look forward into 2024, here are some top-of-mind imperatives for manufacturers to amp up cyber controls.

  • Close the gap between OT and IT teams. Extend OT cyber protection initiatives across the organization (including cyber-attack mapping, OT asset management, OT security monitoring, vulnerability management, and reporting and recovery initiatives and protocols).
  • Invest in and master cyber technologies and skills.
  • Certify connected products with an industry cyber standard.
  • Keep up to date on and involved in cybersecurity policies and regulations.

A company’s investment in cybersecurity may qualify for the research and experimentation credit and could be used to help pay for increased internal development costs.

Manufacturers cybersecurity

Where should executives look to bolster cybersecurity?

CISO

As manufacturer attack surfaces widen, CISOs should confirm that employees are apprised of — and trained to limit — cyber risks. In particular, they should take special efforts in closing the collaboration gap between IT and operational technology teams that often exists at many plants.

COO

Making sure that internet-connected assets are tracked and cyber-proofed is increasingly becoming the COO’s responsibility. COOs also should see that factory floor workers receive continual cybersecurity training, and work closely with IT teams to collaborate on cybersecurity initiatives and protocols.

Back in the USA: A new golden era for US manufacturing?

A factory build-out boom is underway in the US. As of June 2023, annualized investment in factory construction hit $195 billion, more than double the $78 billion invested in June 2021. Just $22 billion was invested in new factory construction two decades ago. And there’s little sign of this trend slowing. According to the most recent PwC Pulse Survey, one in five (19%) US manufacturers say they plan on reshoring or nearshoring production over the next 18 months.

A number of federal and state policies and incentives, chiefly the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS Act, are making domestic production a more attractive, viable and secure option for many manufacturers across sectors, especially given provisions that can provide tax credits and rebates to customers.

This investment dovetails with another upward and persistent trend: a reassessment by some manufacturers of their global footprints in some countries, notably China, a concomitant reshoring and nearshoring of production by US manufacturers and inbounding by foreign companies. Geopolitical risks (trade tensions, global energy concerns and unrest) and rising labor and shipping costs have changed the calculus of far-flung sourcing. Indeed, manufacturers have already been realigning global footprints for several years. The tax considerations of the reimagined value chain structure can amplify the financial impact of changes to a company’s global footprint.

Digital supply chains are one path manufacturers and builders are exploring as they look to create a more agile and resilient supply chain for their businesses.

Meanwhile, the global shortage of powerful microprocessors, especially given the rise of generative artificial intelligence, will likely continue as a persistent supply-chain challenge for US manufacturers as chips become increasingly integral to their products.

There are numerous financial and nonfinancial considerations to weigh before expanding production in the US, including:

  • US federal and state incentives
  • Supply-chain implications, including resiliency and close-to-market strategies
  • Labor cost arbitrage and logistics trade-off
  • Geopolitical risks and government policies
US manufacturing

The new AI wave: Are manufacturers ready to dive into GenAI?

Manufacturers continue to implement a growing suite of digital solutions — including data analytics, artificial intelligence (AI) and machine learning (ML) across their organizations — through their operations, supply chain, and the customer experience.

Manufacturers are seeking generative AI (GenAI) use-case applications. According to PwC’s August 2023 Pulse survey, more than two-thirds of industrials plan to invest in new technologies over the next 18 months, with about 40% of those saying they plan to invest in GenAI over that period.

Indeed, there’s a proliferation of ideas and prospects surrounding GenAI use cases. Some use cases, however, undoubtedly can yield better outcomes than others. GenAI’s real advantage is that it can accelerate or enhance the digital transformation of processes, functions and business models by securely (as well as more quickly, easily and more economically) accessing and leveraging a company’s unique data and intellectual property. Getting GenAI precise can usher in many benefits, including cost-savings on repetitive or tedious tasks, product development, improved product quality, and competitive strength. GenAI — as with many AI solutions — can also carry risks and, therefore, should be applied responsibly.

Considering the number of possible use cases, identifying the ones that can provide significant return is no easy task. We believe the first foray into GenAI should be a solid vetting process to help develop a rationale supporting what could be a considerable investment in time and resources. At the start, many manufacturers will likely need to improve their data collection processes, acquire the right talent to help identify the most effective use cases and confirm that relevant cybersecurity protections are in place.

AI and manufacturing

Electrification of transportation: A long and bumpy road

The inexorable push toward the electrification of transportation is creating entirely new businesses. At the center of this change are automakers, which our Next in Auto 2024 report finds on a fast-track to build new business models to support the connected, autonomous and electric vehicle side of the business, while still operating their traditional internal combustion engine businesses. Indeed, EV penetration is expected to rise from about 2% currently to 30% in 2030, according to a PwC analysis. Some of that growth is expected to be driven beyond passenger vehicles, with many companies and governmental entities adopting commercial EV fleets. The road to launching new EV models has not been smooth, though, with delays as a persistent — and costly — challenge. Incumbent automakers endeavoring to make the EV transition also face competition from the new and growing generation of EV-only companies emerging not only in the US but also globally.

Meanwhile, the potential for EV mainstreaming is closely tied to the successful development of a coast-to-coast EV charging network to support widespread EV adoption.

A number of federal and state policies and incentives, chiefly the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS Act, are subsidizing the increased electric vehicle purchase costs and certain production plant investments made by manufacturers.

Electrification of transportation

Measuring, reporting and reducing manufacturing's GHG footprint: How to get it right

US manufacturers are looking for ways to help create and prepare for a net-zero future. Indeed, many have already set greenhouse gas reduction target goals and are creating green operating models to help meet those goals. Yet more than half (52%) of industrial products companies say that “not meeting sustainability requirements” poses a risk to their businesses, according to a recent PwC survey. One area that may prove especially challenging is monitoring and reporting Scope 3 emissions. But manufacturers can take a lead in showing how other industries can measure and report emissions. With the built environment accounting for 30% of global CO2 emissions, the engineering and construction industry is well-positioned to demonstrate how asset owners can track, cut and report emissions by providing net zero as a service while building sustainable operating models for their own businesses.

Many countries are often adjusting their tax systems to influence climate impacting business decisions. Current and pending legislation should be considered when revising business locations or processes.

Manufacturing's GHG footprint

Where should executives look to ramp up efforts to monitor — and reduce — GHG emissions?

CSO

Most chief sustainability officers should focus squarely on getting Scope 3 emissions monitoring and reduction right. The ability to do so well will likely become an increasingly important differentiator among many business stakeholders.

COO

Companies should intensify efforts to scrutinize emissions footprints of many supplier tiers in order to consistently track and reduce Scope 3 emissions. Likewise, they should account for emissions produced upstream in the value chain. For many manufacturers this can add a new layer of complexity to supply chain due diligence.

Contact us

Michael Thiessen

Vice Chair, Trust and Consulting Solutions, Fairfield, PwC US

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Greg Rowley

Consumer & Industrial Products Sector Leader, PwC US

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