U.S. manufacturing companies are dealing with an unprecedented confluence of challenges: the highest inflation — 8.2% in September 2022 — in more than 40 years, ongoing supply chain disruptions and the war in Ukraine (and the broader geopolitical instability overall) along with labor market shortages.
To understand how manufacturers are addressing these challenges and planning for the future, L.E.K. Consulting surveyed some 160 U.S. industrial equipment and technology (IE&T) company executives — including those from some of the industry’s biggest players — and conducted in-depth interviews with senior executives at top manufacturing companies.
While all IE&T companies face a unique set of challenges depending on the primary end markets they serve, supply chain disruptions, material costs and inflation, labor shortages and automation are having the most profound impact on the strategic priorities of the companies represented in our survey.
Eight key market trends are impacting U.S. IE&T companies, starting with supply chain disruption as well as material costs and inflation in the immediate term and labor shortages and automation in the near term. The IE&T companies we surveyed are already undertaking numerous initiatives to address these trends, from increasing the use of onshoring and nearshoring and expanding their supplier base to creating more staff retention initiatives and replacing manual processes with automated ones. To mitigate the impacts of supply chain disruptions, for example, more than 75% of the surveyed company executives reported accelerating investments across a range of activities such as inventory buffers and monitoring systems.
Over the long term, the risks are environmental, social and governance (ESG) issues, electrification, and digital and AI. And in the long-term category of any expanding risks are those related to geopolitical issues. More than half of IE&T executives surveyed said their companies have been investing more in ESG initiatives over the past three years, for example, while more than 80% expect to significantly accelerate their investments in sustainable products and operations, workplace safety and equity, diversity and inclusion initiatives through 2025. Longer term, over the next five years, IE&T companies expect to place a greater emphasis on revenue growth and profitability and less emphasis on current issues related to reducing costs, managing the supply chain and facilitating digital ways of working.
As we ultimately determined, manufacturing companies that aggressively invest today in long-term strategic goals (i.e. ESG, electrification, automation and digital) can enable significant competitive advantages.
To learn more about the issues impacting U.S. IE&T companies and how they plan to address them, please download our analysis.
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