As we kick off the new year, we asked our practice group leaders to reflect on the trends they have seen in their industry in 2023 and what may lie ahead in 2024. Lisa Walker, Managing Partner, Industrial Practice,shares her insights on labor trends, globalization, and AI’s impact in 2023 and what business leaders should be thinking about to stay ahead in 2024.
Trends in 2023
Focus on Working Capital: With COVID and disrupted supply chains, many companies were caught short regarding working capital management. A company’s working capital position isn’t just an indication of health; it can be a life-or-death factor. Many business leaders seek to balance reducing inventory levels and not getting caught short because of less efficient supply chains.
Labor Trends: As demonstrated by strikes in the auto and entertainment industries, labor is getting more active. As a result, some business leaders have focused more on the employee experience.
Global Economic Growth: The overlapping trends of rising nationalistic industrial policies, inflation, disrupted supply chains, near-shoring and on-shoring, trade wars, and real wars presented headwinds for the global economy in 2023. Yet, GDP growth was stronger in 2023 than anticipated. So what’s in store for 2024? Inflation seems to be waning, and we have a good chance of avoiding a global recession. The International Monetary Fund’s (IMF) latest forecast called for trade to grow at a 3.5% rate in 2024. And with non-zero interest rates, 2024 could be a “normal” year, whatever that means.
Impact of Climate Regulation, Decarbonization, and Alternative Fuels: By 2050, the goal is to have net-zero emissions globally, which means the industrial sector will be vital in leading decarbonization and transition goals. In the U.S., over 125 new manufacturing facilities for clean vehicle and battery technology have been announced since the Inflation Reduction Act (IRA) was signed into law in August 2022. The IRA has provided more than $270 billion in climate and clean energy incentives, including $40 billion to expand manufacturing EVs, batteries, and various types of clean energy technologies.
As organizations invest in decarbonization and environmental, social, and corporate governance (ESG) initiatives, they add leaders who bring an interdisciplinary approach, think globally, and address technical readiness to support transitioning these processes.
Artificial Intelligence: About a year ago, ChatGPT burst onto the scene. Many business leaders have been working to figure out how best to use and invest in AI. The winners won’t be the ones who use AI but the ones who use AI to improve processes, productivity, and innovation. And many industrial companies with robotics and continuous process improvement history will have an edge.
Resistance to Relocation: Historically, many U.S. employees have been open to relocation. However, one of the consequences of higher mortgage rates has been that many executives don’t want to give up their existing low-rate mortgages. As inflation – and long-term interest rates – start to fall again, we may see more geographic flexibility again.
Predictions for 2024
- Execution and Creativity: In 2024, we will see increasing demand for talent that can both execute today and plan for tomorrow.
- Impact of the 2024 United States Election: The run-up to and results of the U.S. election will have a broad effect, given the different policy positions of the parties and their candidates. The areas affected will include industrial and trade policy, climate policy, labor policy, capital markets regulation, the capital formation process, and potentially even the justice system.
- Be Alert: Surprises happen. There will be things that we don’t expect at all. And this is the only prediction that will definitely prove to be true!
The industrial sector is ever-evolving and challenging, and these factors will affect the way manufacturing, supply chain, and industrial organizations build their workforces and leadership teams. By staying up to date on the latest trends and developments, leaders will be prepared to address these challenges and opportunities for continued success in 2024 and beyond.