US Census Bureau, “Total construction spending: Manufacturing in the United States,” retrieved from Federal Reserve Economic Database, Federal Reserve Bank of St. Louis, Nov. 1, 2024; Ira Kalish and Robyn Gibbard, “United States Economic Forecast, third quarter, 2024,” Deloitte Insights, Sept. 20, 2024.

John Coykendall, Kate Hardin, John Morehouse, and David R. Brousell, “Exploring the industrial metaverse,” Deloitte Insights, Sept. 13, 2023.

The study also indicates that by 2030, AI-based management of employee skills and how people are deployed to meet business needs will be a core capability.26 By tracking and connecting important parameters like employee skills and certifications (that is, using a skills matrix), the number of people and skills required to produce certain products, and accurate demand forecasts, these tools could allow companies to efficiently plan for the specific workforce needed for upcoming production runs. If gaps are identified, companies could offer upskilling opportunities for existing employees, which can increase retention,27 or work within the talent ecosystem to find and develop workers with the requisite skills.28

Deloitte’s 2025 Manufacturing Industry Outlook explores the following trends to help leaders shape strategies and priorities in the coming year:

Another trend to watch in 2025 is the likely continued evolution of manufacturing toward a software-driven industry—not just within the factory but also for connecting to products in the field—similar to what has occurred in the auto industry.77 According to the 2024 Future of the Digital Customer Experience study, industrial manufacturers are increasingly enhancing the digital connection to their products to gather usage and operational performance data that can help improve performance and serviceability.78 As one example, customers can access portals to monitor fleet performance, schedule maintenance, and chat with company representatives to resolve issues.79 Overcoming interoperability challenges between new and legacy systems, prioritizing cybersecurity and data protection, and developing talent with a blend of technical knowledge, digital skills, and soft skills are likely to be important factors for success in these efforts.80 They will also likely be key to supporting the broader evolution toward smart operations in 2025.

John Morehouse is the industrial products manufacturing research leader in the Deloitte Research Center for Energy & Industrials. With more than 25 years of experience in manufacturing-related roles across industry, academia, and government, Morehouse enjoys leveraging his expertise in research, engineering, and business to assist companies in innovating their products, processes, and workforce, and fostering the development of manufacturing ecosystems.

Chris Williamson, “US manufacturing purchasing managers’ index sends warning signals on economic conditions,” S&P Global, Sept. 3, 2024.

Species cross-reactivity must be investigated individually for each product. Many human cytokines will produce a nice response in mouse cell lines, and many mouse proteins will show activity on human cells. Other proteins may have a lower specific activity when used in the opposite species.

John Morehouse is the industrial products manufacturing research leader in the Deloitte Research Center for Energy & Industrials. With more than 25 years of experience in manufacturing-related roles across industry, academia, and government, Morehouse enjoys leveraging his expertise in research, engineering, and business to assist companies in innovating their products, processes, and workforce, and fostering the development of manufacturing ecosystems.

John is a Lead Client Service Principal with Deloitte Consulting LLP. He has nearly 30 years of consulting experience focusing on global companies with highly-engineered products in the A&D, Industrial Products and Automotive industries. Over his career, he has led large-scale transformation efforts to advise companies as they improve business performance, including helping with strategic cost transformation, technology enabled transformation and operations/supply chain improvements.

Kudzai Manditereza, “How unified namespace drives efficiency, quality in manufacturing,” Control Engineering, March 29, 2024.

Wayne Duggan, Farran Powell, and Jenn Jones, “Interest rate forecast 2025: Consumers can expect lower rates,” USA Today, Oct. 29, 2024.

Kate Hardin leads Deloitte’s research team focused on the implications of the energy transition for the industrial, oil, gas, and power sectors and has an experience of more than 25 years in the energy industry. Before that, she led IHS Markit Ltd’s integrated coverage of transportation decarbonization and the implications for automotive and energy companies.

As supply chain pressures have abated since the COVID-19 pandemic, companies have shifted their strategy from a primary focus on resilience to a new emphasis on balancing optimized cost and resilience.59 Techniques such as diversifying sources, pursuing mergers and acquisitions, enhancing partnerships, and building internal capabilities are helping some companies achieve this goal.60 Amid the disruptions and high costs that could characterize supply chains in 2025, these approaches are likely to remain important.

John has an undergraduate degree from Lafayette College in Business & Economics and Government & Law and an MBA from Duke University.

Newmont Corporation, “2023 sustainability report,” accessed Nov. 11, 2024; Newmont Corporation, “Newmont receives first battery-electric large mining truck,” Oct. 29, 2024.

This analysis examines reports from industrial companies, including manufacturers of machinery, electrical equipment, and industrial conglomerates, that include references to either “electrification” or “scope 3 emissions.” Deloitte also analyzed company reports of two sectors that often serve as customers to these industries—engineering and construction, and mining and metals—which mention either “electrification” or “scope 1 emissions.”

US Bureau of Labor Statistics, “Compensation (not seasonally adjusted): Employment Cost Index for total compensation, for civilian workers, by occupational group and industry,” Oct. 31, 2024.

Looking ahead to 2025, manufacturers are expected to continue to face a challenging and uncertain business climate due to a combination of higher costs, potential policy changes following the US and global elections, and geopolitical uncertainty. Surveyed manufacturers in NAM’s 2024 third-quarter outlook expect raw material and other input costs to grow by 2.7% over the next 12 months.12 However, lower interest rates have the potential to fuel investment and business and consumer spending, which could spark higher demand for manufactured goods. On the other hand, while the Federal Reserve has expressed confidence that it can achieve a “soft landing,” there is still a risk that the recent cooling in the labor market could accelerate, potentially leading to an economic slowdown.13 For instance, consumer spending has remained relatively robust through September 2024, but this could slow in 2025 if unemployment accelerates, which might affect the manufacturing industry.14

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The use of simulation in the manufacturing industry could also continue to grow, especially given the potential for business disruptions, the need to control costs, and the continued proliferation of AI tools. For example:

A prerequisite for AI adoption is access to quality data,34 and companies seem to be shifting their focus in this direction: Three-quarters of respondents in a recent Deloitte survey indicated that their organization has increased investment around data life cycle management to support their generative AI strategy.35 However, challenges still exist—in another survey, nearly 70% of manufacturers indicated that problems with data, including data quality, contextualization, and validation, are the most significant obstacles to AI implementation.36 To help overcome these challenges and maximize ROI, manufacturers might consider starting with use cases where there is already a strong data foundation in place.

Join host Tanya Ott as she interviews influential voices discussing the business trends and challenges that matter most to your business today.

Manufacturingjob

The authors would like to thank Kruttika Dwivedi, Anuradha Joshi, Rahul Rajan, and Arundhati Das for their key contributions to the research and analysis of this report.

David R. Brousell, “Manufacturers see artificial intelligence as a ‘game changer’ as they ramp up investments,” Manufacturing Leadership Journal, Manufacturing Leadership Council, Aug. 1, 2024.

Manufacturingtechnology

Sydney Ember, Jordyn Holman, and Julie Creswell, “Recession risks rise as consumers turn cautious,” The New York Times, Aug. 7, 2024; US Bureau of Economic Analysis, “Real personal consumption expenditures,” retrieved from Federal Reserve Economic Database, Federal Reserve Bank of St. Louis, Oct. 31, 2024.

Kate Hardin leads Deloitte’s research team focused on the implications of the energy transition for the industrial, oil, gas, and power sectors and has an experience of more than 25 years in the energy industry. Before that, she led IHS Markit Ltd’s integrated coverage of transportation decarbonization and the implications for automotive and energy companies.

Though industrial product manufacturers seem steadfast in meeting company-imposed emissions goals for their products, looking ahead to 2025, there are several factors that could potentially impact further investment in the development and delivery of clean technology products.

Industrial products manufacturing and construction companies can boost organizational performance by enhancing their digital customer experience.

[1]. Muro F, et al. Discovery of trans-4-[1-[[2,5-Dichloro-4-(1-methyl-3-indolylcarboxamido)phenyl]acetyl]-(4S)-methoxy-(2S)-pyrrolidinylmethoxy]cyclohexanecarboxylic acid: an orally active, selective very late antigen-4 antagonist. J Med Chem. 2009 Dec 24;52(  [Content Brief]

Manufacturingcompanies

Elizabeth Molacek, PhD, Benjamin Finzi, and Brett Weinberg, “Summer 2024 Fortune/Deloitte CEO survey,”  Deloitte, June 26, 2024.

Kate Hardin leads Deloitte’s research team focused on the implications of the energy transition for the industrial, oil, gas, and power sectors and has an experience of more than 25 years in the energy industry. Before that, she led IHS Markit Ltd’s integrated coverage of transportation decarbonization and the implications for automotive and energy companies.

John Morehouse is the industrial products manufacturing research leader in the Deloitte Research Center for Energy & Industrials. With more than 25 years of experience in manufacturing-related roles across industry, academia, and government, Morehouse enjoys leveraging his expertise in research, engineering, and business to assist companies in innovating their products, processes, and workforce, and fostering the development of manufacturing ecosystems.

Steve is a principal of Deloitte Consulting LLP, where his extensive expertise and leadership have been crucial in guiding clients through complex challenges and delivering innovative strategies that foster long-term success. He specializes in the development of transformational solutions that enable clients to reduce operational costs, improve productivity and drive growth.

Stay informed on the issues impacting your business with Deloitte's live webcast series. Gain valuable insights and practical knowledge from our specialists while earning CPE credits.

In 2025, the manufacturing industry is likely to face familiar challenges. However, there are new approaches and tools that can be leveraged across the business to maximize efficiency, build resilience, and prepare for a potential new era of industry expansion. In fact, an optimistic scenario in Deloitte’s third quarter 2024 US economic forecast outlines the potential for an uptick in productivity and accelerated gross domestic product growth over the next several years due in part to technology investment.93 To position themselves as leaders in the market, manufacturers might consider taking advantage of targeted investments in their digital and data foundation, advanced technologies, and high-ROI use cases, such as:

Given the need to address elevated material and labor costs, an ongoing skills gap, and potential disruptions from geopolitical factors, investments in digital technologies across manufacturing organizations—in other words, the push toward smart operations—is likely to continue in 2025. Falling interest rates and the potential for growth could even accelerate investment. Manufacturers will likely continue to prioritize investments in their digital core and data foundation that can enable targeted, high-ROI use cases for cutting-edge technologies such as AI, gen AI, and extended reality (XR). Investments in the following technologies and systems are likely:

Several suppliers to industrial product manufacturing companies continue to strategically transform their portfolios to align with electrification and reduced emission trends, according to Deloitte analysis of company reports.88 These companies are emphasizing electrification as part of their strategic focus, particularly in clean energy and sustainable solutions. Some companies are also expecting growth driven by electrification and the energy transition.89

Given these factors, companies will likely continue making cautious, targeted investments in manufacturing clean technology products that can maximize profitability and help customers meet their net-zero targets.

Deloitte Insights and our research centers deliver proprietary research designed to help organizations turn their aspirations into action.

Manufacturingprocess

John is a Lead Client Service Principal with Deloitte Consulting LLP. He has nearly 30 years of consulting experience focusing on global companies with highly-engineered products in the A&D, Industrial Products and Automotive industries. Over his career, he has led large-scale transformation efforts to advise companies as they improve business performance, including helping with strategic cost transformation, technology enabled transformation and operations/supply chain improvements. John currently leads Deloitte’s relationship with one of the largest Aerospace & Defense companies. In addition to his client service background, John has previously served as Vice Chair and US National Sector Leader for Industrial Products and Construction, as well as the US and Global Aerospace & Defense Leader.  John has an undergraduate degree from Lafayette College in Business & Economics and Government & Law and an MBA from Duke University.

According to Deloitte’s analysis of Clean Investment Monitor data, significant investment in clean technology manufacturing has continued throughout 2024, but there has been a decline since 2023 (figure 2). In 2024, some automakers have also reduced investment in electric vehicles in response to slower-than-anticipated passenger electric vehicle adoption.81 For example, some companies’ goals to create 100% electric model lineups are stretching further into the future, while others are shifting toward hybrids for the models initially planned for 100% electrification.82

John Morehouse is the industrial products manufacturing research leader in the Deloitte Research Center for Energy & Industrials. With more than 25 years of experience in manufacturing-related roles across industry, academia, and government, Morehouse enjoys leveraging his expertise in research, engineering, and business to assist companies in innovating their products, processes, and workforce, and fostering the development of manufacturing ecosystems.

John Coykendall, Kate Hardin, John Morehouse, Victor Reyes, and Gardner Carrick, “Taking charge: Manufacturers support growth with active workforce strategies,” Deloitte Insights, April 3, 2024.

Learn about Deloitte’s offerings, people, and culture as a global provider of audit, assurance, consulting, financial advisory, risk advisory, tax, and related services.

Steve is Vice Chair and US Industrial Products & Construction Sector Leader. With more than 26 years of experience in the industrial products space, he understands and has insight into the trends that can impact highly engineered product manufacturing companies and help drive performance improvements, such as through the use of advanced techniques and technologies. Steve is a principal of Deloitte Consulting LLP, where his extensive expertise and leadership have been crucial in guiding clients through complex challenges and delivering innovative strategies that foster long-term success. He specializes in the development of transformational solutions that enable clients to reduce operational costs, improve productivity and drive growth. He holds an MBA from the Anderson School at UCLA and a BS in electrical engineering from University of Illinois at Urbana-Champaign.

National Association of Manufacturers, “2024 first quarter manufacturers’ outlook survey,” March 5, 2024; Mary Frances Holland, “2024 second quarter manufacturers’ outlook survey,” National Association of Manufacturers, June 26, 2024; Bloom and Frances Holland, “2024 third quarter manufacturers’ outlook survey.”

Deloitte analysis of data from Gartner: Brian Whitlock, “Next moves for supply chain leaders following the US port strike,” Gartner, Oct. 4, 2024.

John has an undergraduate degree from Lafayette College in Business & Economics and Government & Law and an MBA from Duke University.

Victoria Bloom and Mary Frances Holland, “2024 third quarter manufacturers’ outlook survey,” National Association of Manufacturers, Oct. 4, 2024.

Labor market tightness in the manufacturing industry has been declining in 2024, and, in fact, July was the first month since May 2021 that the number of unemployed in manufacturing exceeded the number of job openings (figure 1). The quits rate in manufacturing reached 1.6% in September 2024, marking a 0.2 percentage point drop since January 2024.15 Weakening demand for manufactured goods and labor market loosening seems to have created a better balance, at least in the near term, between labor supply and demand in manufacturing.

Deloitte analysis of data from IDC: John Snow, Aly Pinder, Jan Burian, Mukesh Dialani, Stephanie Krishnan, and Ko Shikita, “IDC FutureScape: Worldwide manufacturing product and service innovation 2024 predictions,” IDC Corporate, accessed Nov. 11, 2024.

ManufacturingIndustries list

The authors would further like to acknowledge the support of Clayton Wilkerson for orchestrating resources related to the report; Kimberly Prauda and Neelu Rajput who drove the marketing strategy and related assets to bring the story to life; Alyssa Weir for her leadership in public relations; and Cintia Cheong, Pubali Dey, and Aparna Prusty from the Deloitte Insights team who supported the report’s publication.

Potential policy changes after the 2024 US elections, as well as elections across the globe, may have impacts on supply chains, demand, and long-term investment in manufacturing. Changes to trade policy and tariffs could drive up raw material and component costs and could have ripple effects throughout the supply chain. Potential adjustments to parts of the Inflation Reduction Act could impact investment in certain aspects of clean technology manufacturing in the United States.

Customers of industrial product manufacturing companies also seem to be maintaining commitments to the adoption of clean technologies to meet their scope 1 emissions goals. For example, a strategic alliance has been formed to develop electric underground mining trucks, aiming for net-zero carbon emissions by 2050, and the first prototype was delivered to a mine for testing in October 2024.87

Erin Spampinato, “Summer shipping costs rise in response to US labor disputes, ongoing route disruptions,” SeafoodSource, Sept. 12, 2024.

L2L, “Manufacturing in crisis: Report uncovers key challenges for manufacturers combatting the skilled labor crisis,” Cision PRWeb, July 9, 2024.

Favorable economic conditions in 2025 such as lower interest rates and continued investment in US manufacturing may reignite demand in the industry, which could intensify labor shortages. Though wages are likely to continue to rise, manufacturers have a cost lever that they can pull: reducing turnover. According to a 2024 survey of more than 300 human resources leaders at US manufacturing companies conducted by the UKG Workforce Institute, 60% of respondents indicate that the average cost to replace one skilled frontline worker ranges from US$10,000 to US$40,000, while 56% say that employee turnover has a moderate to severe impact on their bottom-line finances.21

To help meet workers’ changing expectations, reduce turnover, and plan for demand volatility, companies seem to be increasingly focusing on improving the worker experience,22 taking an ecosystem approach to talent development,23 and leveraging digital tools that offer advanced talent planning and workforce management capabilities. A recent report by Gartner suggests that by 2025 over 80% of large businesses that have hourly employees will have invested in advanced workforce management software solutions.24 In addition to supporting broader digital initiatives to improve operational efficiency, a key goal of these investments is to improve the worker experience, including capturing employee sentiment, suggesting adjustments to shift patterns, enabling flexible scheduling, and improving company communication with hourly workers, according to the report.25

Stephanie Ferguson Melhorn, “Understanding America’s labor shortage: The impact of scarce and costly child care,” US Chamber of Commerce, June 26, 2024.

Clean Economy Tracker, “Clean Economy Tracker – Providing real-time information on the clean energy and technology manufacturing industry in the United States,” accessed Nov. 21, 2024.

Manufacturingindustries

Pablo Valerio, “Supply chains threatened by trifecta of challenges,” Electronics Purchasing Strategies News, Sept. 3, 2024.

In 2025, companies are expected to face continued supply chain risks, disruptions, potential delays, and elevated costs due to several contributing factors:

Berckman, Chavali, Robertson, Nikulin, Hardin, and Morehouse, “The future of the digital customer experience in industrial manufacturing and construction.”

John currently leads Deloitte’s relationship with one of the largest Aerospace & Defense companies. In addition to his client service background, John has previously served as Vice Chair and US National Sector Leader for Industrial Products and Construction, as well as the US and Global Aerospace & Defense Leader.

Identifying targeted opportunities to invest in AI, including gen AI, may be key for manufacturers in 2025 as elevated costs and uncertainty are expected to continue in the coming year. Improved efficiency, productivity, and cost reduction have been identified as important benefits achieved through generative AI implementation.40 In addition, in a recent survey, manufacturers indicated that AI and machine learning have the largest impact on business outcomes relative to other smart manufacturing technologies, and that gen AI or causal AI offer the largest ROI behind cloud and software-as-a-service technologies.41 To support AI use case implementation in 2025 and lay the groundwork for the future, it will be important for manufacturers to focus on building an overall AI and data strategy, including establishing an operating model, setting up governance, and identifying risks. Yet in a 2024 survey by the Manufacturing Leadership Council, only 51.6% of manufacturers indicated that they have a corporate AI strategy.42 A dedicated focus on organizing and structuring data will also be important to create the foundation to facilitate long-term investments in AI and gen AI.

In 2024, US manufacturing experienced continued investment even as higher interest rates and a challenging business environment have created obstacles to near-term industry growth. Deloitte’s analysis of S&P Global data reveals that while 2024 began with the manufacturing purchasing managers’ index (PMI) moving into expansion for the first time since April 2023,1 which continued for the first half of the year, weaker demand nudged the PMI back into contraction in July 2024.2 In addition, the November 2024 PMI report identified an ongoing combination of falling orders and rising customer inventories, which could signal the need for manufacturers to further cut production in the coming months.3 While the rate of inflation has diminished, manufacturers continue to face higher costs: The producer price index for input materials and components seems to have stabilized but remains high,4 while total compensation, which includes wages and benefits, has continued its upward climb.5

Deloitte Insights and our research centers deliver proprietary research designed to help organizations turn their aspirations into action.

Access more insights for the aerospace and defense, chemicals and specialty materials, engineering and construction, industrial manufacturing, mining and metals, oil and gas, power and utilities, and renewable energy sectors.

However, talent challenges are still salient. The Employment Cost Index for total compensation in manufacturing, which includes employee wages and benefits, has continued to climb in 2024, gaining 3.8% year over year as of September.16 Labor participation rates have been declining in the United States for over two decades, due in part to an aging population, and this may continue through at least 2030.17 Challenges such as workers’ access to child care, reliable transportation, and their desire for flexibility also remain.18 A study conducted by Deloitte and The Manufacturing Institute in 2024 showed that 1.9 million manufacturing jobs could go unfilled over the next 10 years if talent challenges are not addressed.19 The study also found that roles that require higher-level skills could grow the fastest between 2022 and 2032, and that a combination of technical manufacturing, digital, and soft skills will likely be required.20

Berckman, Chavali, Robertson, Nikulin, Hardin, and Morehouse, “The future of the digital customer experience in industrial manufacturing and construction.”

Jim Kilpatrick, Lindsey Berckman, Alan D. Faver, Kate Hardin, and Matt Sloane, “Restructuring the supply base: Prioritizing a resilient, yet efficient supply chain,” Deloitte Insights, May 23, 2024; US Census Bureau, “Top trading partners: September 2024,” accessed Nov. 11, 2024.

Staying focused on investment in digital tools that enable advanced supply chain planning techniques, better collaboration with suppliers, simulation, and enhanced visibility may provide an additional boost. In a recent study, 78% of manufacturers indicated that they have implemented or are planning to invest in supply chain planning software.61 Respondents also ranked this software fifth out of 10 technologies that drive the most significant ROI.62 According to another 2024 report, some of the top trends expected to impact industrial product manufacturers’ supply chains by 2027 are big data and advanced analytics, supply chain digitization, and data management.63 The top priority for sourcing and procurement in 2024 for all companies surveyed (across industries) was implementing new technologies and capabilities,64 and this trend is likely to continue in 2025.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

John currently leads Deloitte’s relationship with one of the largest Aerospace & Defense companies. In addition to his client service background, John has previously served as Vice Chair and US National Sector Leader for Industrial Products and Construction, as well as the US and Global Aerospace & Defense Leader.

Manufacturingexamples

[1]. Muro F, et al. Discovery of trans-4-[1-[[2,5-Dichloro-4-(1-methyl-3-indolylcarboxamido)phenyl]acetyl]-(4S)-methoxy-(2S)-pyrrolidinylmethoxy]cyclohexanecarboxylic acid: an orally active, selective very late antigen-4 antagonist. J Med Chem. 2009 Dec 24;52(

Michael Wayland, “Ford delays new electric vehicle plant and cancels electric three-row SUV as it shifts strategy” NBC News, Aug. 21, 2024.

He holds an MBA from the Anderson School at UCLA and a BS in electrical engineering from University of Illinois at Urbana-Champaign.

Steve is Vice Chair and US Industrial Products & Construction Sector Leader. With more than 26 years of experience in the industrial products space, he understands and has insight into the trends that can impact highly engineered product manufacturing companies and help drive performance improvements, such as through the use of advanced techniques and technologies.

John is a Lead Client Service Principal with Deloitte Consulting LLP. He has nearly 30 years of consulting experience focusing on global companies with highly-engineered products in the A&D, Industrial Products and Automotive industries. Over his career, he has led large-scale transformation efforts to advise companies as they improve business performance, including helping with strategic cost transformation, technology enabled transformation and operations/supply chain improvements.

According to Deloitte’s analysis of investor reports of several heavy equipment and engine manufacturers, some companies have continued to make cautious, targeted investments in adding lower-carbon options, such as electric and hydrogen power, to their product lines.84 They seem to be moving toward the goal of meeting previously set scope 3 emissions targets even in a challenging business climate. For example, one heavy equipment manufacturer plans to add over 20 electric and hybrid model options to its lineup by 2026.85A diesel engine manufacturer reports that it continues to make progress on its 2030 goal for a 25% reduction in product lifetime greenhouse gas emissions (scope 3) from new products.86

Jim Rowan, Beena Ammanath, Costi Perricos, Brenna Sniderman, and David Jarvis, “Now decides next: Moving from potential to performance,” Deloitte, August 2024.

As the enthusiasm surrounding gen AI shifts from “…unbridled excitement” to “a more nuanced and critical evaluation of its real impact on business outcomes,”30 manufacturers have already made significant investments in AI and gen AI, and this trend is expected to continue in 2025 and beyond. Deloitte’s 2024 Future of the Digital Customer Experience survey found that 55% of surveyed industrial product manufacturers are already leveraging gen AI tools in their operations, and over 40% plan to increase investment in AI and machine learning over the next three years.31 However, companies seem to be taking a more measured approach toward gen AI and AI implementation by following their traditional, holistic return on investment processes. A 2024 survey of manufacturers by the Manufacturing Leadership Council found that 78% of respondents indicate that their AI initiatives are part of the company’s overall digital transformation strategy.32 And, as is typically the case with technology investments, a primary measure of success for gen AI will be its ability to drive value in the organization.33

Supply chain challenges have eased since the height of the COVID-19 pandemic, but pressures remain. For instance, average lead times for production materials have shown significant improvement since their peak in 2022 but remain stubbornly higher than pre-pandemic levels.43 While global supply chain disruptions persist, such as attacks on container vessels in the Red Sea, costs also remain high. Over 35% of surveyed manufacturers cited transportation and logistics costs as a primary business challenge in the third quarter of 2024.44

Manufacturers are optimistic about the industrial metaverse and are exploring ways it can create value in their talent, supply chain, customer, and production ecosystems, reveals the 2023 Deloitte and Manufacturing Leadership Council (MLC) Industrial Metaverse Study.

Kalish and Gibbard, “United States Economic Forecast”; Robyn Gibbard, “United States Economic Forecast, second quarter, 2024,” Deloitte Insights, June 20, 2024.

From a singular focus on supply chain resilience over the last few years, the focus is shifting to balancing resilience with efficiency.

TCS 2314 (compound 3) is orally active and selective very late antigen-4 (VLA-4, α4β1, CD49d/CD29) antagonist with an IC50 of 4.4 nM[1].

They would also like to thank the following members from Deloitte Advisory Board: Tim Gaus, Victor Reyes, Leticia Camara Roinesdal, Bill Mowen, Patricia Henderson, A.J. Maxwell, Animesh Arora, Kevin Brannon, Jeff Callahan, Julia Tavlas, Akrur Barua, Diana Kearns-Manolatos, and Timothy Murphy.

Meanwhile, weaker demand due in part to the challenging business climate and higher interest rates may have helped to ease talent and supply chain pressures. Data from the US Bureau of Labor Statistics indicates that the labor market has continued to stabilize through 2024 as quits, hires, and job openings in manufacturing have steadily declined, and employment has leveled off at around 13 million as production levels have stabilized.6 However, talent challenges persist. Even as labor markets have loosened, nearly 60% of manufacturers in the National Association of Manufacturers (NAM) outlook survey for the third quarter of 2024 cited the inability to attract and retain employees as their top challenge.7 Supply chains have also improved, with the average delivery time for raw materials dropping to 81 days by October 2024, representing a 2% year-over-year decline.8 However, they still have not returned to pre-pandemic norms.

US Bureau of Labor Statistics, “Job openings and labor turnover summary,” news release, Oct. 29, 2024; US Bureau of Labor Statistics, “Table B-1: Employees on nonfarm payrolls by industry sector and selected industry detail,” Nov. 1, 2024; Board of Governors of the US Federal Reserve System, “Industrial production: Manufacturing,” retrieved from Federal Reserve Economic Database, Federal Reserve Bank of St. Louis, Oct. 17, 2024.

Travis Hill, “Simulation is a window into the future of your manufacturing operation,” US Department of Commerce National Institute of Standards and Technology, Jan. 21, 2022.

Kate Hardin leads Deloitte’s research team focused on the implications of the energy transition for the industrial, oil, gas, and power sectors and has an experience of more than 25 years in the energy industry. Before that, she led IHS Markit Ltd’s integrated coverage of transportation decarbonization and the implications for automotive and energy companies.

Manufacturers are drawing on innovation and an ecosystem approach to help improve the worker experience and to also attract and retain employees.

Manufacturers have continued investing in digital technologies over the last several years despite economic uncertainty, rising costs, and a challenging business climate. For instance, Deloitte’s Digital Maturity Index 2023 survey found that 98% of 800 surveyed manufacturers in four major global economic regions have started their digital transformation journey, compared with 78% in 2019, and respondents reported cost optimization, operational efficiency, product innovation, and improving customer experience as key drivers for the shift.65 Further analysis showed that technology investments made by manufacturing companies accounted for 30% of their operating budget in 2024, compared with 23% in 2023, with cloud, gen AI, and 5G being the top three technologies with the greatest ROI.66

Deloitte analysis of data from Gartner: Josie Xing, Sam Grinter, Ron Hanscome, Kelsie Marian, Ranadip Chandra, David Bobo, and Anand Chouksey, “Market guide for workforce management applications,” Gartner, Aug. 1, 2024.

Manufacturingin Hindi

Berckman, Chavali, Robertson, Nikulin, Hardin, and Morehouse, “The future of the digital customer experience in industrial manufacturing and construction.”

At the same time, 2024 demonstrated continued, albeit cooling, investment in US manufacturing that could lead to longer-term growth. For instance, a total of more than US$31 billion in investment in 192 clean-technology-manufacturing facilities has been announced during the year through October, and these investments are expected to create close to 27,000 new jobs.9 Construction spending in manufacturing—that is, dollars invested to build new or expand existing manufacturing facilities—reached a new record of US$238 billion in June 2024, and this is also likely to continue to spur investment in new equipment and intellectual property.10 However, the year-over-year pace of growth slowed from 41.3% in September 2023 to 20.5% in September 2024.11

Haley Cawthon, “Volvo scales back its EV goals,” ESG Dive, Sept. 9, 2024; Wayland, “Ford delays new EV plant and cancels electric three-row SUV as it shifts strategy.”

John is a Lead Client Service Principal with Deloitte Consulting LLP. He has nearly 30 years of consulting experience focusing on global companies with highly-engineered products in the A&D, Industrial Products and Automotive industries. Over his career, he has led large-scale transformation efforts to advise companies as they improve business performance, including helping with strategic cost transformation, technology enabled transformation and operations/supply chain improvements. John currently leads Deloitte’s relationship with one of the largest Aerospace & Defense companies. In addition to his client service background, John has previously served as Vice Chair and US National Sector Leader for Industrial Products and Construction, as well as the US and Global Aerospace & Defense Leader.  John has an undergraduate degree from Lafayette College in Business & Economics and Government & Law and an MBA from Duke University.

Lindsey Berckman, Ajay Chavali, Pete Robertson, Misha Nikulin, Kate Hardin, and John Morehouse, “The future of the digital customer experience in industrial manufacturing and construction,” Deloitte Insights, Sept. 24, 2024.

Another example is product design. For instance, according to data provider IDC, by 2028, the demand for product innovation will drive 50% of large manufacturers to evaluate engineering archives using generative AI to uncover new opportunities for innovation on legacy products.39 Tying the use cases to critical business initiatives or priorities, such as enhancing customer experience or product innovation, can also be important for securing internal funding and support.

Taking this approach could also enable tailored upskilling that helps prepare employees for future work, for example, working alongside advanced technology such as gen AI. Advanced talent-planning tools can also support manufacturers taking a skills-based approach, which may be increasingly important for broadening the talent pool.29 These investments and a focus on long-term talent strategies may help manufacturers build and retain a skilled workforce for 2025 and beyond.

One example is customer service applications, which are often digital and language-based, and offer access to a wealth of data that typically doesn’t require significant data harmonization or modernization, such as call records, technical documents, warranty data, and claims information. In fact, 74% of surveyed manufacturers in Deloitte’s 2024 Future of the Digital Customer Experience survey indicated that they plan to use or are already using gen AI to enhance their customer experience.37 Example use cases include gen AI–based virtual chatbots that can allow customers to efficiently evaluate product specifications and features during their buying journey, or gen AI–based service manuals combined with augmented reality that can facilitate rapid and efficient remote assistance for maintenance and repair.38

However, while overall investment in US clean technology manufacturing seems to have decelerated in 2024, Deloitte’s analysis of investor reports suggests a sustained commitment to electrification and decarbonization of products made by US industrial manufacturers, which aligns with their customers’ apparent continued focus on reducing operational emissions.83 The number of reports from industrial companies that mention “electrification” or “scope 3 emissions” has increased since January 2020 and has continued to rise in 2024 (figure 3). The same is true for company reports that mention either “electrification” or “scope 1 emissions” from the engineering and construction, and mining and metals industries, which often serve as customers to industrial manufacturers. The data suggest that industrial companies seem to be maintaining their focus on reducing the emissions of their products. The findings also suggest that customers seem to remain intent on lowering their operating emissions, which should continue to drive demand for lower-emission products.

S&P Global, “Manufacturing production continues to fall, but at slowest pace in three months,” news release, Nov. 1, 2024.

Stephanie Ferguson Melhorn, Jenna Shrove, and Isabella Lucy, “Data deep dive: The workforce of the future,” US Chamber of Commerce, Oct. 4, 2023.