In our growth strategy work, we look for market growth forces shaping the future. We define a growth force as a market trend or dynamic outside of a firm’s control that would significantly impact future prosperity. Once identified, we then ask, “Are growth promoters or growth restrainers (or both?). Strategically, we want to leverage positive growth promoters and reduce impacts of negative growth restrainers.
In 2022, market projections for the manufacturing sector growth are promising overall. Trading Economics, using Federal Reserve data, sees 2021 industrial production growth to be around 4% by year’s end, and a solid 3.6% in 2022.
Yet, while a growing manufacturing pie is nice, most companies want to grow by a lot more than 3.6% next year. To position to do that, integrate these four growth forces into 2022 strategic planning.
The Great Renegotiation (Force #1)
Your firm may will be experiencing the “Great Resignation.” But that’s only one part of what’s reshaping the labor market. What we call the “Great Renegotiation” takes a broader view of the wholesale shrinkage and Covid-induced restructuring of the labor market.
According to the US Bureau of Labor and Statistics, a record 4.3 million Americans left their jobs in August, while there were also 10.4 million open, unfilled job openings. In September, a new record 4.4 million Americans left their job.
Tight labor is here to stay for a while. A couple of sobering data points:
The American civilian workforce was 2.6 million fewer in September 2021 than September 2019, and the number of civilians employed were 4.5 million fewer than 2 years earlier.
The Federal Reserve has recently suggested full-employment is possible by mid-2022, according to US News Report.
Not surprisingly, expect wages and salaries will keep rising. According to SHRM, projected growth in salary and wage budgets are running about 10% higher in 2022 than for 2021 (3.3% in 2022 vs. 3.0% in 2021).
Furthermore, employee expectations will also keep rising. Plan on continued remote work for instance. Between millions preferring to work from home and the sometimes-unexpected productivity gains experienced by many companies as work went remote, expect more ‘hybrid’ arrangements as companies and employees figure out how to better leverage the workspace at home and the office and the plant floor.
The Great Renegotiation will continue to evolve. While many have resigned due to burn out or looking for a “better situation,” many may also reappear asking for their job back next year. As millions continue to move out-and-in the job market, the Great Renegotiation will continue to reshape who’s available, compensation, and how work gets done (accomplished) in 2022.
Ask your team...
How can your company best reduce its exposure to the Great Renegotiation?
How can your company take maximal advantage of the Great Renegotiation’s churn?
Smarter Manufacturing (Force #2)
Manufacturing is becoming “smarter” at an accelerating rate. COVID-19 interruptions and labor and supply constraints are forcing manufacturers to be more responsive, agile, efficient and less people-dependent. Enter “Industry 4.0” and the deployment of “smart” technologies and processes that make manufacturing more automated, digital, connected, intelligent and virtual. IIOT (Industrial Internet of Things), robotics, virtual/augmented reality, big data, 3D printing, sensors, machine-to-machine (M2M) communication, artificial intelligence and the data mining are all fundamentally changing how products are designed, made, packaged, shipped, and used.
Manufacturers are investing in Industry 4.0 to increase capacity, expand capabilities and lower costs pay off. More are also hearing from OEM and Tier 1 customers asking suppliers to get “smarter” along with them.
Fortunately, many manufacturers that continue to invest to further improve connectivity, productivity, integration, tracking, and customization, will also be creating new streams of customer value -- and bottom-line profits. For the Shepherd Advisors’ team, we’re especially excited by the new product, market and business opportunities that Industry 4.0 enables.
Ask your team...
What would you consider to be your top Industry 4.0 investment
opportunities in 2022?
How can smart manufacturing investments fundamentally create new product,
market, and business opportunities in 2022 and beyond?
Going Greener (Force #3)
In the US, manufacturers consumed 33% of the nation’s energy in 2020, according to EIA.
With rising costs for fossil fuels, declining costs for solar and wind, and significant Federal and state investments in “decarbonizing” manufacturing on the way, going greener is going to become easier and more strategic. A few data points speak to the sea-change underway:
Renewable energy surpassed coal in electricity generation in 2020, and 80% new capacity is renewable. (SP Global Report)
EV sales up 20% over 2021 – and GM has committed to XX% EV fleet by 2035. .(EV Adoption Report)
The clean energy sector employed about 3 million people at the end of 2020, nearly three times as worked in the fossil fuel extraction and generation sectors.(e2 Report)
Despite climate change politics, expect sustainability to be increasingly operative in 2022 – and for decades to come. Options for manufacturers to become ‘cleaner and greener’ are numerous, and include improving energy management systems, adopting more energy efficient processes and equipment, using Industry 4.0 technologies to reduce wastage, and making products that are less energy intensive or (overly) consuming.
Ask your team...
Which customers might reward your firm going greener?
What steps will your firm make in 2022 to reduce its energy footprint?
How will you leverage your investments in going greener to grow market share?
Economic Gyrations (Force #4)
Well, 2021 has been an economic doozy! As COVID-19 infection rates have moderated (again), it’s tempting to think that 2022 can’t be any crazier than 2021. But the ‘new normal’ is still emerging, and 2022 will feature many of the same gyrations of 2021, including:
Demand-Supply Crunches. While volatility may lessen, demand is still pent up and supply chain hiccups and shortages will continue to wreak havoc on production and deliveries for many.
Inflation. Will 2021’s boost to inflation moderate or are we entering a new inflationary cycle? The Federal Reserve says the former. Yet, Federal spending will be up next year. Be prudent and plan how to best operate in an inflationary market – just in case.
International Trade Disruptions. Things should get easier next year, but going into 2022 COVID continues to rage on across the globe, China continues to be uncomfortably bellicose, and re-shoring continues to be more attractive to US OEMs.
Ask your team...
Which economic gyrations would be particularly helpful – and harmful – in 2022?
What is your plan to take mitigate the most harmful potential gyrations?
More Growth & Resiliency in 2022
As you prepare for 2022, it’s a great time to ask:
Which of the four growth forces will most affect your firm in 2022?
And, how the firm can best …
Thrive during the Great Renegotiation?
Be a smarter and more profitable manufacturer?
Go greener and win new customers because of it?
Do well regardless of economic gyrations?
There are many reasons to be optimistic about 2022. Integrate your best thinking around these four growth forces and you’ll have even more!