Charting the Future: 6 Key Trends for Industrial Companies

In the industrial world, change isn’t just coming. It’s already here.?

Driven by a deep-rooted curiosity about “how things work”, I’ve enjoyed a varied career in the industrial sector. From quality assurance roles in digital decoder and telephone cable manufacturing to managing assembly plants for tubes and computer displays, I thought I’d seen it all. My journey led me to executive roles, as a Managing Director for a major B2B contract manufacturer and a leading steel company in Central Europe.?

Before transitioning into my current position as an executive search and leadership consultant, I scaled the corporate ladder in the industrial sector, collecting invaluable insights into the sector’s finest details and overarching global trends. I’ve seen firsthand how the industrial sector powers the world.?

The industrial sector is our global powerhouse. It’s the force that launched men to the Moon and still propels modern rockets. It ensures food finds its way from farms to our plates, and raw materials are transformed into everyday products like cars and cell phones.??

Without the industrial sector and its manufacturing arm, our world would look drastically different. To ensure its continued prosperity, the sector’s leaders must stay ahead of emerging global trends. And to make this easier, I’ve put together a list of the top six trends set to shape the future of the industrial sector.?

The Top 6 Trends in the Industrial Sector: Mid-2023 Update

1. Economic Uncertainty??

The global industrial sector is navigating choppy waters due to shifting economic dynamics, political unrest, changing trade policies, and market unpredictability. These elements can profoundly impact industrial businesses by influencing aspects like supply chains, market entry, and global operations. For example, the ongoing war in Ukraine triggered significant global upheaval, especially in the realms of energy and food supplies, leading to a spike in prices, inflation, and soaring interest rates.??

One of the main economic concerns in the industrial sector in 2023 is the steep cost of capital, which poses a significant stumbling block for new investments in products, equipment, facilities, and the modernization of outdated infrastructure. Based on our?2023 Global Executive Survey , a scarcity of available funding is a reality for some industrial companies, with a third of the survey’s respondents expecting a decrease in the available funding over the next 12 months.?

Despite this,?our survey ?also indicates that businesses are not standing idle but strategizing their responses. The focus has shifted to business development and cost reduction in view of inflation, cost of capital, and the burdened global supply chains. Half of the respondents pinpointed cost reduction as the linchpin for growth in the next 12 months.?

The survey also brought to light a thread of economic optimism, however. A substantial?43% of respondents ?expect an increase in investment and funding in 2023.??

One thing is clear: The industrial sector isn’t free from the impacts of the global economic downturn, but it’s confident in its ability to thrive despite it.?

2. Supply Chain Disruptions

The COVID-19 pandemic was a litmus test for the resilience of global supply chains, sending shockwaves through industries worldwide. Supply chain disruptions, once an anomaly, have become the new norm, with a staggering?11,642 disruptions ?recorded worldwide in 2021 alone.?

The automotive and transportation industries, in particular, have been hit hard. Approximately 41 percent of supply chain decision-makers in these sectors reported losses ranging from?$50 to $100 million ?due to pandemic-related supply chain issues.?

This crisis has prompted industrial companies to reassess and reconfigure their supply chains. According to our?2023 Global Executive Survey , a significant trend has emerged. As many as 70% of these companies are now implementing or considering reshoring or nearshoring their operations in a bid to mitigate supply chain risks.?

In parallel, companies are ramping up their efforts to strengthen supply chain resilience. They are working to improve end-to-end visibility, build domestic production capacity, plan for business continuity, and foster international collaboration.??

However, amid these strategic shifts, cybersecurity remains a critical concern. A single cyber breach along the supply chain can cause significant financial damage or even halt operations.?Nearly a ?quarter (24.8%) of all global cyberattacks aimed at businesses in 2022 were aimed at manufacturing companies. Thus, manufacturers are doubling down on their efforts to enhance cybersecurity measures. To delve deeper into this critical issue, cybersecurity will be thoroughly discussed in the fifth point of this list.?

In spite of these efforts, challenges persist. Factors such as labour shortages, strong demand, and transportation issues continue to drive supply chain disruptions, even as the pandemic has come to an end. As a result, in 2023 the industrial sector is still grappling with increasing costs, longer lead times, and a scarcity of raw materials.?

3. Advanced Robotics

The global landscape is also witnessing a boom in industrial robotics, with a record?2.7 million industrial robots ?operating in factories around the world?

Robot adoption is not just about numbers but also about productivity. A?1% increase in robot density ?correlates with an increase in productivity of 0.8%. The?highest productivity gains ?were seen in industries where companies were in the preliminary stages of adopting robots. Interestingly, the number of employee working hours?decreased by 2.7% ?when robot adoption increased by 1%.??

The warehouse robotics market, which accounted for up to $6.1 billion in 2022, is expected to reach around?$16 billion in value ?by 2030. In fact,?over 50,000 global commercial warehouses ?will have industrial robots “working” in them by 2025. The utilization of robotics for tasks like inventory management, purchasing, sales, and deliveries is helping industrial businesses become more efficient.??

Industrial robots and automated systems are also becoming more sophisticated and capable of performing complex tasks while collaborating with humans and driving increased productivity and safety. Industrial robotics now includes Collaborative Robots (Cobots), designed to work alongside humans, and Autonomous Mobile Robots (AMRs), self-guided robots that can navigate and perform tasks without human intervention.?

The shift towards human-robot collaboration focuses on developing systems that promote seamless collaboration. This necessitates designing interfaces and control systems that are intuitive and easy to use, allowing workers to interact with robots effectively.?

Looking ahead, future advancements in robotics (particularly automation and human-robot collaboration) will escalate industrial productivity and profits. You can expect a rise in industrial robot density and higher adoption of automated systems in warehouses for everything from inventory to purchasing, sales, and deliveries. The operational stock of industrial robots will also continue to set new records, with Cobots and AMRs becoming more and more prevalent.?

4. Digital Transformation and Artificial Intelligence

As we move into the era of Industry 4.0, CEOs are leading the charge in embracing digital transformation. With?80% of them ?increasing digital technology investments in a bid to offset current economic pressures, it’s clear that the digital wave is sweeping across the sector. However, the transformation journey is far from uniform, with only?24% of manufacturers ?currently having a digital transformation strategy in place.??

The COVID-19 pandemic has undoubtedly played a role in this journey, pushing?18% of manufacturers ?to accelerate their digital transformation process. Conversely,?35% were forced to decelerate ?their implementation due to the crisis, while a?significant 47% remained unaffected .??

Manufacturers are looking to reap several benefits from digitizing their processes. The most common expectations include?reduced costs (50%) and improved data visibility (39%) . To navigate these complex waters,?almost half of the manufacturers ?are turning to consultants for guidance on their digital transformation journey.?

In spite of the perceived benefits, there is still a long way to go in the adoption of advanced technologies like artificial intelligence (AI) and machine learning in the industrial sector. In fact, according to The AspenTech Industrial AI Research,?only 20% of large industrial organizations ?have adopted AI, even though four out of five (83%) believe it leads to improved outcomes. But overall, the future of AI in industry looks promising, with?Markets and Markets ?estimating that the AI in manufacturing market will be worth USD 16.3 billion by 2027.?

In terms of practical application,?Capgemini’s research ?indicates that the most common AI applications in manufacturing are in maintenance (29%). However, in my opinion the most attractive AI perk is its ability to improve a company’s operational efficiency. A noteworthy real-world example is Danone. Danone uses machine learning to increase the precision of its demand forecasts. And it has paid off.?This approach ?resulted in a 20% decrease in forecasting errors, 30% decrease in lost sales, and a substantial 50% reduction in the workload of demand planners.?

Moving forward, we can anticipate further integration of digital technologies in the industrial and manufacturing sectors. Smart factories, equipped with IoT, AI, data analytics, AR, and VR technologies, will continue to evolve and will become more prevalent, enabling real-time data collection, remote monitoring, and optimisation of operations. But there is a catch. Mature operations and businesses, transitioning to these new technologies will need to overcome challenges related to legacy systems and ensure interoperability.?

5. Cybersecurity Threats

Last year the threat of cyberattacks became increasingly prevalent, particularly for the manufacturing and industrial sectors. Accounting for?around a quarter of all detected cyberattacks ?globally in 2022, these industries also saw a sharp escalation from 2019 to 2020, where the share of manufacturing and industrial cyber-attacks soared from a mere?eight percent to an alarming 18 percent .??

It’s clear that the manufacturing and industrial sectors have become a favoured playground for cybercriminals, with approximately?250 data violation incidents ?recorded in the United States alone in 2022. This onslaught impacted nearly?23.9 million U.S. users , underscoring the need for a more robust defence against these digital predators. The attackers, once successful, often demand payment in cryptocurrencies for the stolen data points, or they peddle the pilfered data on the dark web. The fallout from these breaches is severe, with the average cost per industrial data breach globally hovering around?$4.47 million. ??

The severity of the situation is not lost on industrial companies, with?77% ?ranking cybersecurity as a major priority. However, there is a significant gap between awareness and action. Only?24% ?of manufacturing firms have completed operational technology (OT) security projects and upgrades, even as they generate?56.8% ?of all IoT traffic. The lack of sufficient cybersecurity expertise in 49% of organizations further complicates the situation.?

A divide in approach between CEOs and CISOs also exacerbates the issue. While?58% ?of CEOs lean towards a proactive and risk-focused approach to cybersecurity,?54% ?of CISOs favour a reactive, incident-driven approach, creating a fertile ground for conflict.??

However, there is a silver lining.?75% ?of industrial organizations have reported no major breaches post-completion of Industrial Internet of Things (IIoT) and OT cybersecurity projects.??

In the future, we can anticipate a broader adoption of cybersecurity projects across the manufacturing and industrial sectors. The key to success will be to keep pace with the ever-evolving threat landscape and invest in the right technologies and expertise to safeguard critical infrastructures and sensitive data.?

6. Environmental, Social, and Governance

The industrial and manufacturing sectors are increasingly recognizing the importance of Environmental, Social, and Governance (ESG) initiatives. According to our?2023 Global Executive Survey , 75% of industrial organizations have started implementing ESG programs, with an overwhelming 89% of respondents regarding ESG as important, and 32% viewing it as extremely important.?

This trend is driven by various factors, including the harsh realities of environmental degradation. For instance, the U.S. Environmental Protection Agency (EPA) reports that?23% of greenhouse gas emissions ?(GHGs) result from burning fossil fuels for industrial purposes. Similarly, in Europe, the manufacturing industry emits?880 million tons ?of carbon dioxide annually.

Despite these daunting figures, business leaders are stepping up. A significant?71% of CEOs ?believe it’s their personal responsibility to ensure that the organization’s ESG policies reflect the values of their customers. This is likely partially fuelled by the fact that only?20% of consumers ?trust the statements companies make about environmental sustainability, down from half just two years ago. As such, businesses are under pressure to make ESG a higher priority.?

The focus of sustainability spending is primarily on supply chain and climate risk, with?25% of industrial companies ?naming “improving supply chain sustainability metrics” as their top priority. This is closely followed by the analysis of climate change risk to physical assets, a priority for 22% of industrial companies. These initiatives are critical, as effective ESG execution can combat rising operating expenses such as raw-material costs and the true cost of water or carbon, which research has found can affect operating profits by?as much as 60% . A testament to this is how a major water utility was able to achieve cost savings of almost?$180 million per year ?through lean initiatives.?

The benefits of ESG compliance are not just environmental. According to more than?2,000 academic studies , around 70% find a positive correlation between ESG scores and financial returns, whether measured by equity returns, profitability, or valuation multiples. In fact,?10% of industrial companies ?that have already implemented ESG initiatives report that it increased their market share, and 35% anticipate future market share growth due to ESG initiatives.?

ESG compliance is also addressing the labour shortage.?Nearly a quarter (24%) ?of industrial companies reported that ESG initiatives are enhancing their ability to attract and retain talent.?

Given the data, it’s reasonable to predict that ESG initiatives will significantly shape the industrial and manufacturing sectors in 2023 and beyond. As more organizations experience the benefits of ESG compliance, from cost savings and increased market share to attracting and retaining talent, the adoption of ESG programs will likely accelerate. Plus, enhancing ESG performance is becoming a prerequisite for securing funding, as investors increasingly scrutinize companies’ commitment to sustainability.??

Leadership Talent is a Pressing Concern for 70% of Industrial Companies

In my many years entrenched within the industrial sector, I’ve weathered storms that have reshaped, redefined, and restructured the industry as we know it. Remember the seismic shift in 1990 when the internet and emerging technologies transformed the way businesses operated? Or the ripple effects of the 1997 Asian Financial Crisis and the 2007 Global Financial Crisis that rocked export-focused industries? And who can forget the recent COVID-19 pandemic that rattled the industrial sector in 2019????

Yet, the current hurdles we face are in a league of their own. This is, without a doubt, a demanding and testing period for anyone in the industrial business sector. As we navigate these unprecedented challenges, they may, in fact, shape the new norm for the future.?

Despite these upheavals, the gears of industry have relentlessly churned forward. As long as human civilization thrives, the industrial sector will continue to evolve, innovate, and triumph over adversity. So, the emergence of new industry trends shouldn’t be seen as threats but as opportunities for smart businesses to take advantage of.?

Just like the industrial sector has been resilient in the face of past economic downturns, we will navigate the current one too. Progress is unstoppable, and it is better to ride the wave than be swept away by it.?

No matter what the challenge – be it robots or climate change – the secret to a successful industrial business is the calibre and agility of its leadership. Our recent?2023 Global Executive Survey ?revealed that 70% of industrial companies identified leadership talent as a pressing concern.?

“No matter what the challenge – be it robots or climate change – the secret to a successful industrial business is the calibre and agility of its leadership.”?

That’s where I come into play. I’ve spent a good part of my life in the industrial sector, and now my passion lies in helping businesses find the right leaders to steer them through any storm. That’s why I’m part of the Stanton Chase team; to help industrial businesses find the leadership they need.?

At Stanton Chase, we’re excited to delve deeper into the unique challenges faced by various industrial subsectors, including:?

• Automotive?
• Aviation, Space, and Defence?
• Chemical and Plastics?
• Engineering, Construction, and Building Materials?
• Industrial Equipment and Components?
• Maritime, Port, and Infrastructure?
• Paper, Pulp, and Packaging?
• Railway?

If you need a helping hand, whether it’s navigating ESG or finding your next CEO, don’t hesitate to reach out. Our team at Stanton Chase is not only experienced but also well-versed in understanding the nuances of your industry and the era we’re operating in.?

Click here ?to contact one of our consultants.?

About the Author

Jan Duniec, a Partner at?Stanton Chase Warsaw , serves as Stanton Chase’s Global?Industrial Sector ?Leader. Jan specializes in consulting for the industrial, technology, consumer products and services, and SCC/BPO business sectors. He brings to the table a wealth of international experience in business and plant management, gained through his work in the UK, France, and Poland.??

With a 17-year career spanning multiple industrial executive management roles, Jan has a deep understanding of diverse work cultures, including those of Britain, America, France, Denmark, Sweden, and Poland.??

Jan’s expertise lies in leadership, change management, business development, key account management, business turnaround, performance improvement, lean manufacturing, and cost reduction. These skills make him a valuable asset as a consultant, providing significant added value to businesses.??

Born with dual Polish and British nationalities, Jan is fluent in both languages. He holds an honours degree in Physics from the University of Manchester.??

Click here ?to learn more about Jan.?