Manufacturing Outlook for Year End 2024: Turn Intelligence into Opportunity

After the go-go months following Covid, headwinds that kicked up dust toward the end of 2023 strengthened to gale-force winds in the first half of 2024.

We believe the shift from driving revenues to driving profits will dominate the manufacturing landscape for the second half. Here are seven actions to consider as you execute strategy and round out a successful finish in 2024.

1. Soft demand in manufacturing

• Intelligence: In recent months we’ve heard from manufacturers demand has softened; however the Purchasing Manager’s Index did show slight improvement as the second quarter came to a close. From April to June, new orders rose slightly month on month but are down compared to levels we saw in the first quarter.
• Opportunity: Amid uncertainty, many are taking a hard look at ways to cut costs to maintain profitability. Professionals at CLA can help with a quick profitability analysis which drives out strategies to improve profitability in three key areas: customers/markets, costs, and utilization. Check out this example: Manufacturer Drives Up Capacity Utilization, Revenues 15% – 20%

2. Labor trends

• Intelligence: After a couple of months of decline, the number of manufacturing job openings bounced up from 488,000 in April 2024 to 603,000 in May 2024 (roughly on par with the same period last year). In some areas of the country (notably in some urban areas) we’re hearing labor shortages are easing. However, retention is still a problem. In rural markets, labor shortages continue. We expect we'll see demand for interim labor in rural markets.
• Opportunity: Is it time for a culture checkup? Check out this video about “creating stick” and three words to use less and two words to use more in communications with your team. Also, consider the technologies your workforce expects, especially younger workers you’d like to attract: Case Study: New Accounting Software Saves Manufacturer 60 Hours a Month 

3. Manufacturing inventories

• Intelligence: Covid-era inventories are largely burned off, and while many supply chain issues have popped up this year (bridge collapse, Red Sea piracy, etc.). These disruptions have had minimal impact in the first half of 2024.
• Opportunity: If you haven’t refreshed cost accounting since Covid, now’s a good time to confirm your costing methodology is current. You’ll need to validate the counts and validate the valuation. These fundamentals are key to overall profitability and your business valuation. Check out this case study: Manufacturer Increases Turns 50% with Key Operational Changes 

4. The impact of tariffs on manufacturing

• Intelligence: Tariffs as bi-partisan diplomatic tools continue to be used from one administration to the next, which translates to higher cost for everyone. Most recently, the Office of the United States Trade Representative also announced it will increase the tariff rate on select imports from China over the next two years.
• Opportunity: Re-tooling supply chains takes time. In the meantime, pressure will be high to find cost savings in other areas as material costs on tariff goods continue to rise. Squeeze out costs wherever you can to sustain profits. A nice example: Manufacturer Uses Automation to Cut Order Intake Time By 75%

5. Localization

• Intelligence: According to the U.S. Census Bureau, private manufacturing construction spend is up 20% year-on-year from $15.8 billion in 2023 to $19.0 billion in 2024. It’s driven by three major legislative initiatives: The Infrastructure Investment and Jobs Act (IIJA) a.k.a. Bipartisan Infrastructure Law signed into law in November 2021, as well as the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors and Science (CHIPS) Acts signed into law in August 2022.
  
• Opportunity: Each of these is a game changer for investments, offering new tax incentives and financing opportunities. Check out CLA’s resource hub to unlock ways for your hard-earned profits to work smarter. Find out how: CLA Helps Manufacturer Win $12M in Green Energy Credits 

6. Is Mexico the new China?

• Intelligence: According to the Kearny report, imports from China into the U.S. dropped 20% in 2024 compared to 2023, and for the first time since 2013, Mexico surpassed mainland China as the largest exporter to the U.S. We’re also seeing manufacturing shift south of the border — John Deere recently announced moving manufacturing of skid steer loaders and compact track loaders from Iowa to Mexico.
• Opportunity: It’s not as easy as ABC (Anywhere but China) when the pressure to contain costs (labor, material, everything) is intense to stay competitive. A digital strategy has never been more critical to achieve scale while containing costs. A great example: Metal Products Manufacturer Cuts Scrap 75%, Saves Millions

7. Owner transitions in manufacturing

• Intelligence: Owner transitions are going to be with us for at least a decade as 12 million businesses worth over $3 trillion are experiencing the aging out of ownership — and the kids (or employees) aren’t necessarily interested to run the business. Private equity and family offices have over $1 trillion in “dry powder” ready to invest.
• Opportunity: If you are considering a transition in the next 24-48 months, there are steps to take now to improve your business valuation. Consider this example of how CLA helped these owners do just that: Case Study: Manufacturer Doubles Company Sale Price 

As you consider key strategic changes in the second half of 2024, we’d love an opportunity to brainstorm with you. We’ll round up a team of manufacturing professionals with deep experience in your particular segment of the industry and share fresh ideas you can infuse in the coming days for quick impact and coming months for bottom line impact in 2024.