The global economy is again changing, but hopes that 2024 would bring a respite from the inflationary and cost-of-living crisis sparked by the invasion of Ukraine and the pandemic could well be dashed for many manufacturers by further conflict in the Middle East.
Either way, manufacturing businesses need to be ready to face the new challenges of 2024 and beyond, not still fire-fighting the problems from 2023, and the focus CEOs need to bring to their management team throughout the year is a drive for optimization, efficiency and cost-control, despite the turmoil in the world.
The pillars for achieving this in the coming year are ensuring the maximum visibility of your whole end-to-end supply chain (not just what is in the manufacturing warehouse), you are using AI in your planning and decision-making systems, and that sustainability is at the heart of decisions, not a veneer added afterwards.
Of course many management teams will say they would love to be focusing on strategy, but they have too many operational problems to sort first. Many manufacturers are good at handling unexpected problems. After all, we’ve had plenty of practice in the past decade. But teams should be putting more effort into seeing the issues in advance and ensuring they are resolved before they become an event to manage
No matter how skillful your business is, or isn’t, at managing sudden problems, their occurrence should be viewed as the outcome of a poor process. For a successful 2024, your focus needs to go beyond how well you deal with supply chain and operational problems, and additionally emphasizes better planning processes so the frequency and impact of problems that might throw you off course is minimized.
Part of this is through improved integration of demand and portfolio plans, and part is from the resultant improved visibility of the end-to-end supply chain, right from critical suppliers through to your logistics. Without this, you will always find operational problems and ‘unexpected events’ a drag on your growth. You need your whole SLT on board with this, and key to this is that CEOs push for improved visibility and predictability of business plans across a minimum 24-month horizon to at least the end of 2025.
Better use of AI is also part of this. We all know that in 2024 manufacturers are going to start using AI to deliver benefit. Senior management need to be using AI as quickly as possible to understand customer behavior as markets change.
Everything that can be done to better understand market changes gives greater insight and accuracy to your plans and assumptions behind them. CEOs must ensure their business is implementing AI to better achieve this, that the insights are being fed throughout the decision-making process, and that management at all levels is learning how best to use AI to give the best possible demand picture. In 2024, CEOs must ensure that demand plan quality is a priority for commercial leaders and teams.
However, AI is not just for crunching data.Typically manufacturers improve efficiency by improving processes and reducing material costs. But now manufacturers can use tech to also take out essential but straightforward human decision-making that can be done non-manually by machine learning (ML). For instance, many decisions in a manufacturer’s systems are binary: should we reschedule; do we cancel this; do we raise an alert when supplies are low; raising alerts when orders do not meet planned demand, etc.
Implementing AI and ML to achieve this next round of people-efficiency is a key priority for 2024 to drive speed and cost savings, with clear thought too on whether employees displaced will be redeployed into higher value roles or let go of.
Regardless of the problems in the world, sustainability is a megatrend that is still important (in fact still of growing importance), and not a luxury that can be put aside when ‘something important’ pops up.
The whole environmental piece is bigger than ‘whether you put a bit of extra plastic in the box’ and covers every area of the business and every stage of your processes, from energy footprint to the start and finish of your whole end-to-end supply chain. CEOs need to be ensuring their business is genuinely changing to as low an enviromental footprint as is feasible, not just greenwashing, or customers will drift away.
In conclusion, and to paraphrase a Trotsky quote on war, regardless of whether you and your team want to change or not, change is interested in you. Given its inevitability and immediacy, CEOs and their teams need to embrace change and recognize that any improved visibility that realigns plans before an issue that causes a problem hits, will reduce costs whilst optimizing service and overall business performance. True leadership that moves teams away from traditional business models is required to ensure teams can embrace these changes in 2024 and not be pulled back to the short-sighted approach of the traditional budgeting mentality.
For a list of the sources used in this article, please contact the editor.
Les Brookes is a partner at business transformation consultants Oliver Wight EAME. Over the past 23 years he has led and advised dozens of manufacturing businesses on large transformation and Integrated Business Planning initiatives.