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3 things manufacturers must focus on to thrive in 2023

Manufacturing and supply chains are the beating heart of industrial societies.

Manufacturing and supply chains are the beating heart of industrial societies. Image: Getty Images.

Francisco Betti
Head, Global Industries Team; Member of the Executive Committee, World Economic Forum
Ian Cronin
Community Curator, Advanced Manufacturing and Supply Chains, World Economic Forum
Maria Basso
Digital Technologies Portfolio Manager, World Economic Forum
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This article is part of: World Economic Forum Annual Meeting

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  • Manufacturers must adapt at speed and scale to the Fourth Industrial Revolution.
  • Public-private collaboration will be key to the future success of the world’s industrial economy.
  • We've identified three core areas that manufacturers must embrace if they are to thrive in 2023.

To date, the Fourth Industrial Revolution has been marked by a deluge of new, and disruptive, technology innovations. In many cases, manufacturers have merely tried to survive this onslaught by either adapting to the changing environment, or piloting and adopting these solutions at speed when possible.

As we head into 2023, however, we are seeing that the ability of industrial players to realize the potential offered by the Fourth Industrial Revolution will depend on how effectively they can embrace three core tenets: 1) a new long-term focus on resilience as the primary driver of productivity, growth, sustainability and inclusivity; 2) technology adoption and workforce empowerment at scale; 3) ecosystem collaborations that unlock new avenues for capturing and delivering value to a much broader stakeholder community.

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1. Resilience enables growth, sustainability and inclusivity

Manufacturing and supply chains are the beating heart of industrial societies, so we need them healthy and resilient to tackle the challenges we face today – including poverty, the climate crisis, and current geopolitical tensions. Resiliency is the new foundation for the future and health of our industrial systems, which can then enable growth, sustainability and inclusivity. If we want to fix inequality and sustainability, we need to fix manufacturing’s ability to be resilient and contribute to the well-being of our economies.

Central to any industry’s ability to manage shocks, is the structure of its supply chains. While reactive calls for protectionist policies continue to rise, value chains are – and will likely remain global – but this doesn’t mean they won’t change. We are already seeing a restructuring of these global value chains as companies seek to find a new balance between manufacturing in the places where they can produce the highest quality at the lowest price, with the risks that come from being over-reliant on single supplier sources.

This rebalancing won’t happen in one massive shift, but rather in the form of degree-shifts as global companies reinforce their local manufacturing networks. Companies will find a new way to leverage both macro supply chains that allow for all the benefits that come with scale, and the need to invest in local partnerships that allow for regionalization of supply to enhance resilience, as well as the ability to meet consumer demand for more personalized product offerings.

As manufacturers look to make these shifts, the long-term ability of these efforts to truly drive more resilient production systems will be equally dependent on public sector leaders. In parallel to these private sector actions, governments must rethink their industrial strategies [insert link] to bring their local manufacturing sectors back to life and ensure the workforce is prepared to meet the needs of companies hoping to expand their local capacity.

Beyond this restructuring, future resilience will also require companies to have a better understanding of the global trends that may disrupt their operations, and how to best navigate those disruptions. To this end, the World Economic Forum has developed the Global Value Chains Barometer [insert link], a new tool to monitor, on a quarterly basis, disruptions affecting global value chains along the three mega-trends: climate change, geopolitical tensions and emerging technologies. The barometer also provides an outlook on the expected implications for operations over the next six months and highlights winning strategies to navigate those – derived from the Resiliency Compass strategy playbooks.

2. From speed to scale: the next step in technology adoption and workforce empowerment

Adopting technologies has always been a tricky balancing act for manufacturers. They must constantly weigh the potential that could be unlocked through current technology innovations against the resulting need to upskill their workforce and put it at the centre of the transformation [insert link], all while being prepared for the innovations of tomorrow.

While most manufacturers are still focused on looking at specific use cases and how they might roll them out as quickly as possible in a single location, we are seeing some manufacturers who seem to have been reading ahead to a new phase of the Fourth Industrial Revolution. Over the last four years, the Forum’s Global Lighthouse Network has sought to identify the most advanced manufacturing facilities and value chains in the world – there are now 114 Lighthouses [insert link] – including 10 Sustainability Lighthouses.

Of those 114 Lighthouses, we are beginning to see front-runners that have not only one, but multiple Lighthouses in this network as they recognize the multiplier effect that accompanies digital transformation of their facilities around the world. Johnson & Johnson, for example, has 10 Lighthouses in eight different countries. P&G and Unilever each have six lighthouses in the network spanning an additional eight countries.

As global manufacturers embark on the next phase of their digital transformation journeys, it is critical that they also embrace the potential of this multiplier and aim not only to transform a single site, but rather multiple nodes and functions across their production ecosystem.

3. Collaborations of the future

As the world becomes increasingly digitally interconnected, the ability to thrive in the future will be intrinsically linked to a company’s ability to collaborate in new and more effective ways across three critical stakeholder groups: 1) their core supply chain partners; 2) their broader industrial ecosystem, including supply chain partners, but also competitors and complementary industry players; 3) public sector stakeholders.

Most companies, even those who have been successful at scaling new technologies across multiple production sites around the world, still struggle to effectively drive collaborative innovation and share relevant data with their supply chain partners. We are however seeing new collaborations forming that enable collective action on shared ambitions like achieving net zero value chains [insert link]. One such example is the ESTAINIUM Association, that, among other things, is helping to build an infrastructure that would allow companies to securely share carbon data with supply chain partners without putting their intellectual property at risk.

Beyond collaborating only with existing supply chain partners, we are also seeing that companies who are concretely demonstrating the positive potential of the Fourth Industrial revolution are building partnerships with their broader industrial ecosystem. A clear example can be seen in a recent collaboration between the Forum, Ralph Lauren, Vestiaire Collective, Digimarc Corporation and Bain & Company wherein the group launched a pilot to demonstrate how emerging technologies can deliver value far beyond their originally intended scope – specifically, the pilot showed how digital traceability technologies, originally used for supply chain management, could be extended to resale marketplaces to drive greater circularity [insert link] in the fashion sector.

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How is the World Economic Forum contributing to build resilient supply chains?

Finally, if the last three years have shown the world anything, it is that public-private collaboration will be key to the future success of the world’s industrial economy. This does not mean, however, doing more of the same. Instead, we need to find new frameworks for public-private collaboration as well as gain a better understanding of the industrial policies and strategies that will ensure a more productive, sustainable and inclusive future for all.

To this end, following a call from Ministers and CEOs during the Forum’s Annual Meeting 2022 to build a global network of Centres focused on shaping the global agenda on the future of production, while contributing towards strengthening the competitiveness regional manufacturing sectors, we have built on the Forum’s existing network of 15 Centres for the Fourth Industrial Revolution to launch the US Centre for Advanced Manufacturing. The hope is that this will be the first of many such national Centres focused on Advanced Manufacturing that better advance national industrial interests, while creating a new mechanism for global collaboration.

In addition, while it is clear that no industrial policy or strategy can be simply copied and pasted across global regions, there is a recognition that nations need a better understanding of how others are looking at their industrial development plans, as well as a common set of tools that policy-makers can use to understand the most effective industrial strategies for their specific needs.

Public and private sector industrial stakeholders must work together to foster a continuous collaboration mechanism to share best practices, discuss challenges and find partners to catalyse efforts in to create stronger and more resilient manufacturing sectors.

We look forward to continue working with the global manufacturing community to support the transformation of production systems and value chains for growth, resilience, sustainability and inclusivity.

This article originally appeared on CGTN Opinion.

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