As seen in the Boston Business Journal

The United States (U.S.) manufacturing and distribution industry is in a state of perpetual evolution, currently driven by technological advancements, economic shifts, and global challenges. Manufacturing and distribution business leaders are constantly asking themselves how they can improve efficiencies, meet strategic objectives, and attract and retain skilled employees to remain competitive.

As 2024 comes to an end and business leaders begin planning for 2025, they should consider these five trends that are shaping the manufacturing and distribution landscape.

1. Digital transformation and Industry 4.0

   The integration of advanced technologies, often referred to as Industry 4.0, is revolutionizing the manufacturing sector. This trend towards digital transformation was reflected in Citrin Cooperman’s 2024 Manufacturing and Distribution Pulse Survey Report, where 43% of leaders in the industry reported that they are currently implementing advanced technology programs and policies at their company. When evaluating digital transformation, business leaders should consider the role of:
   
   • Artificial intelligence (AI) and machine learning (ML): These technologies are being used to optimize production processes, predict maintenance needs, and enhance quality control.
   • Internet of Things (IoT): IoT devices enable real-time monitoring and data collection from machinery and equipment, leading to improved efficiency and reduced downtime.
   • Robotics and automation: Advanced robotics are increasingly used in manufacturing for tasks ranging from assembly to packaging, reducing human error, and increasing productivity.

2. Sustainability and green manufacturing

   Sustainability is a pressing issue as industries face increasing pressure to reduce their environmental impact. According to our survey, 22% of manufacturing and distribution leaders stated that the implementation of environmental, social, and governance (ESG) strategies is a top challenge. Business leaders should assess:
   
   • Renewable energy integration: Manufacturers are investing in renewable energy sources, such as solar and wind, to power their operations.
   • Circular economy practices: Companies are adopting practices that emphasize the reuse and recycling of materials to minimize waste.
   • Eco-friendly materials: The use of sustainable and biodegradable materials is gaining traction, particularly in packaging.
   • Additive manufacturing: Additive manufacturing is transforming production processes by allowing for the creation of complex, custom parts with reduced material waste.

3. Supply chain resilience

   Significant vulnerabilities in global supply chains have been exposed over the past several years, prompting a focus on resilience. Manufacturing and distributions leaders should carefully evaluate:
   
   • Diversifying suppliers: Companies are reducing reliance on single suppliers and sourcing materials from multiple regions to mitigate risks.
   • Domestic production: There is a renewed emphasis on bringing manufacturing back to the U.S. to reduce dependency on international supply chains.
   • Advanced analytics: Utilizing data analytics to forecast demand and manage inventory more effectively.

4. Workforce development and skills gaps

   As manufacturing becomes more technologically advanced, the need for a skilled workforce is more critical than ever. There are several effective ways that businesses can develop their workforce, including:
   
   • Upskilling programs: Providing current employees with training in advanced manufacturing technologies and processes. This allows employees to be involved in the long-term goals of the company and provides a level of transparency, trust, and loyalty.
   • Public-private collaborations: Developing collaborations between educational institutions and industry businesses to develop relevant training programs.
   • Apprenticeships: Offering the opportunity for technical skill development and career advancement through intensive, multi-year long programs to help fill skills gaps and attract qualified workers.

5. Global trade dynamics

   The manufacturing industry is significantly impacted by global trade policies and tariffs. Important considerations include:
   
   • Tariff uncertainties: Fluctuations in trade policies can affect the cost of raw materials and components. Current global trade policies and tariffs impacting the manufacturing and distribution industry include ongoing U.S.-China trade tensions with tariffs on various goods, the European Union's carbon border adjustment mechanism (CBAM) targeting high-emission imports, and shifting trade dynamics due to supply chain diversification and regional trade agreements like the United States-Mexico-Canada Agreement (USMCA) and the Regional Comprehensive Economic Partnership (RCEP).
   • International competition: Navigating the competitive landscape with countries that have lower production costs.
   • Regulatory compliance: Adhering to different regulations and standards across various markets.

Focused on the future

The U.S. manufacturing and distribution industry is at a pivotal juncture, driven by rapid technological advancements, a focus on sustainability, and the need for resilient supply chains. Addressing the skills gap and navigating global trade dynamics are also crucial for maintaining competitiveness. As these trends continue to evolve, they will shape the future of the industry, driving innovation and economic growth through 2025.

Citrin Cooperman’s Manufacturing and Distribution Industry Practice leverages specialized knowledge to provide a full range of professional services and industry insights, helping companies achieve their strategic objectives. Access our year-end planning guide to obtain a full checklist of items your business should consider when planning for 2025.