After a long decline, manufacturing in the United States appears to be in the early stages of a renaissance. US manufacturing growth had slowed dramatically in recent business cycles, from 4.9% in the 1990s to 1.4% in each of the past two decades. Meanwhile, the overall total of manufacturing firms and manufacturing plants in the US has fallen roughly 25% since 1997, reflecting an increase in closures and a slowdown in startups.
In 2022, however, US manufacturing growth outpaced the rest of the world. A subset of the market—so-called smart manufacturing, aided by technologies such as artificial intelligence (AI), the Internet of Things (IoT), robotics, and big data analytics—is projected to more than double by 2030.
Along with rapid developments in technology, manufacturers are dealing with a sea change in customer expectations. Widespread surveys show that today’s customers expect to have informed conversations with vendors who demonstrate expertise in their industries, products, and market challenges. As younger buyers rise into purchasing roles, they expect the same conveniences as they enjoy in their personal shopping; they’ll make vendor decisions accordingly. More than 70% of surveyed businesses say they will happily consider other vendors if their core “must haves” are not met or their experience is poor.
To succeed, then, industrial manufacturers must adapt their use of technology not only on the shop floor but in the back office as well. This might include using AI and automation, capturing and processing data in new ways, and investing in new customer service tools to improve the buying journey. Additionally, empowering sales reps to be more hands-off with self-serve purchasing can help efficiently clear plates so that they can better focus on growing the business. Investing in these spaces will be crucial for manufacturers to stay ahead of competition.
Here’s a glimpse of what’s to come, and how successful companies will tap into technological advancements to drive efficiency, lower expenses, and bring in more business.
1. A time of digital transformation
Today’s technology has allowed the digital transformation of almost every part of the manufacturing business, including supply chain management, operations, customer service, and marketing. According to Deloitte’s 2023 outlook survey of manufacturers, 62% of respondents leading companies are investing in robotics and automation to reduce operating costs and alleviate labor shortages.
Other areas of intense investment are data analytics, to improve forecasting and spot upcoming materials shortages, as well as the Internet of Things, to collect and analyze sensor data to improve manufacturing, supply chain tracking, and product maintenance.
The benefits are clear: more efficient processes, increased capabilities, lower costs, and higher quality products and services.
Supporting data
Deloitte reports that manufacturers are investing in three main technology areas: 62% plan to invest in robotics and automation, 60% cite plans to invest in data analytics to improve forecasting and spot supply shortages before they affect the manufacturing line, and 39% plan to invest in the Internet of Things (IoT) to collect data from sensors in the factory floor and embedded in industrial equipment.
Raising your game
At any given moment, some of these markets are going to be more competitive than others. But overall, there seems to be a widespread awareness among manufacturers of the need to raise their game. Recent research indicates that the overarching driver of digital transformation can be summed up in one word: quality. Almost half (45%) of respondents to a recent report on the state of small manufacturing feel that improving quality is driving the need to accelerate digital transformation in their organization.
Improved sustainability is a key goal associated with optimizing quality, which in turn reduces manufacturing waste. Sustainability also contributes to a circular economy, in which economic models are pursued as a means of eliminating waste by designing products and processes to maximize efficiencies. Gartner reports that 74% of supply chain leaders expect the circular economy to increase profits through 2025.
Initiatives focused on the supply chain are also largely driven by efforts to improve product and process quality, which in turn contributes to sustainability. Nearly all consumers (95%), according to a recent Capterra study, consider the sustainability of a product to be important to purchasing decisions. The lack of visibility faced by those without end-to-end digital supply chain solutions will prove problematic, especially when faced by growing pressure from regulators and customers to verify sustainably and responsibly sourced products.
Look before you leap
While manufacturers are willing to invest (sometimes heavily) in new technology, technology itself offers ways to evaluate these investments in advance. In a process called “digital twinning,” data gathered from sensors and IoT devices in the real world can be used to create a digital simulation of a system—anything from an individual part to an entire factory—in the virtual world. Here, teams can measure, analyze, tinker with, and perform cost evaluations on the simulation—all for a fraction of the cost of building a new, actual system.
While the core idea of digital twin technology dates from the 1990s, it was first applied to manufacturing and formally announced as a concept in 2002. NASA introduced the term “digital twin” in 2010, and it’s widely used across manufacturing, power generation equipment, large-structure design, and healthcare services.
Enterprise management
A particularly important capability for manufacturers is enterprise resource planning (ERP). Manufacturers use it to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations.
These are essential functions for manufacturers, particularly in an era in which change in speed and volume of production has become one of few constants. However, many manufacturers are using enterprise software that is hard to update, missing key features, and lacking the power to harness all the data factories produce, as they operate independently from the many operations and functions within the factory that have either become digitized or connected to a digital system.
Manufacturers are often reluctant to widespread changes to their ERP functionalities, due to potential disruption of operations, capital flow, and scheduling. The thought of overhauling their ERP or bringing it onto a new platform is daunting and comes with perceived risk.
But the importance of switching away from running the business on a totally isolated ERP can’t be understated. Omnichannel is the new norm, bringing with it both many opportunities and a plethora of data that can feel diffuse unless it’s actively unified in a centralized platform, connecting sales reps, buyer portals, eprocurement, distributors, marketplaces, trade shows, and so forth, into a single environment. It is this unification effort that creates seamless passing of information between the many arms of the business in order to maximize selling and operational activities, ensure nothing slips through the cracks, and create the best experience for those interacting with the business both internally and externally. It’s unified commerce at its finest.
Centralizing an ERP does not have to mean a complete overhaul.With Shopify Commerce Components, for instance, manufacturers can choose either to build their ERP directly into the platform or simply sync their ERP with it, so that Shopify functions as that business’ central growth engine. Shopify powers commerce around the world, including commerce centered around ERP systems. As a collection of components, manufacturers can pick and choose which components they use, whether they go all in or integrate tested component APIs into their existing third-party services and ERPs. This modularity also enables manufacturers to swap components in or out as the needs of the business change, allowing for maximum adaptability.
2. Automation and the need for new skills
The latest National Association of Manufacturers “Outlook Survey” shows that 75% of manufacturing leaders in the US consider attracting and retaining a quality workforce to be their biggest business challenge. Deloitte Insights predicts that 2.1 million manufacturing jobs will remain unfilled in the US alone by 2030.
Labor shortages are expected to worsen and become more complicated as the industry changes. A McKinsey & Company survey indicates that the manufacturing sector’s demand for traditional skills involving physical, hands-on labor will decline by 30% over the next decade. During the same period, demand for workers with technical skills will increase by 50%. And the technically skilled are already rare; some 45% of survey respondents said they had turned down business opportunities because of a lack of workers with the necessary skills.
Rethinking roles
Manufacturers are responding to this situation in various ways. One is with money; nearly three-quarters of respondents to a survey by the National Institute of Manufacturers, said they planned to raise wages an average 3% over the coming year. Another is reskilling employees and making sure they understand how their efforts contribute to overall success, in part through recognition programs.
These efforts have been working well. According to a joint survey by the Manufacturing Institute and the American Psychological Association, the vast majority of respondents who felt valued by their employers said they were highly motivated, satisfied with their jobs, and would recommend their company to others as a good place to work.
This shift in skilled labor presents an opportunity to rethink roles, skills, and operations. To stay ahead of the labor crunch, businesses should look to find more efficiencies through tools and services that make operations, sales, marketing, supply chain, shipping, and invoicing both easier to learn and easier to teach.
Automation tools
Providing such tools and services is part of Shopify’s mission. Shopify Magic is helping manufacturers tackle time-consuming tasks like generating content, finding reports, and building features. Sidekick, an AI-enabled Shopify Magic commerce assistant, can answer questions, create reports, and complete tasks 24/7.
Shopify Functions extends Shopify's back end in significant ways, turning Shopify from a product into a platform, where businesses can build logic and workflows that suit their needs. It can enhance business processes in various ways, including creating new discount types for clients, customizing bundles, and making custom cart and checkout validations.
Shopify empowers business to automate many manual processes using Shopify Flow and Launchpad. Shopify Flow can automate tasks like identifying high-value clients to reward them with special offers or unique pricing. And instead of sifting through data yourself, Shopify Flow can find and execute your sales strategy itself—saving time and making money.
A new external study by a leading global management consulting firm analyzed the conversion rates of major commerce platforms as well as custom builds. Shopify’s overall conversion rate outpaces the competition by up to 36% and an average of 15%.
3. Rethinking sales and client expectations
The manufacturing industry is changing rapidly, and along with it, so too is the way customers prefer to buy. There’s a shift towards self-serve purchasing, which empowers customers to better research, compare, and order products in bulk on their own. Self-service drives more orders and higher average order volumes (AOV) with less hands-on support from sales reps.
However, the need for talented and skilled sales reps has not decreased. In fact, even customers that engage with self-serve tools often do so only to a certain point in the funnel, at which point theyexpect to have informed communications with vendors who understand their industry, production, and market challenges.
This inclination, the report notes, is supported by industrial customers’ experience in B2C commerce. Particularly since the 2020 pandemic, B2C merchants of all kinds have accustomed buyers to a very high—and growing—level of attention, research, and understanding. According to McKinsey & Company, customers now expect five simultaneous “must dos” from salespeople:
- Performance guarantees offered during sale (78%)
- Real-time, 24/7 customer service (72%)
- Product availability shown online (74%)
- Consistent experience across channels (72%)
- Ability to purchase from any channel (72%)
This same study reports that customers expect suppliers to put them at the center of sales by improving channels, technology, talent, incentives, and culture. Otherwise they have a strong inclination to move elsewhere.
Retraining and restructuring
To prevent this from happening, sales retraining and sales restructuring are vital. McKinsey & Company also reports that 9 out of 10 B2B decision makers say that marketing and sales need to work more closely together to put an end to overlapping work.
It is true that in B2B, content outweighs both sales presentation and timeliness as customer buy-in factors. At the same time, however, 57% of sellers say they “don’t pay much attention” to content prepared by their own marketing teams. This is a sign that marketing teams as they are now structured may be failing to develop and deliver messaging that leads to MQLs.
Some companies are making serious investments of time and money to address this problem. For example, one leading enterprise security system has reorganized marketing and sales so that they collaborate in “pods” that report to a combined business leader. First, marketers develop personalized content and digital tools, and then they train sellers to deliver them.
Sellers then deliver the pitch and report back on how it went; front-line reps provide critical inputs to marketing. Content management systems and digital asset managers help access and tag content, while other internal communications channels ensure consistent delivery. This has all contributed to 30% year-on-year growth.
Global application
To help sellers broaden their access to and communication with customers and prospects, Shopify has developed its core product to power B2B commerce on a global scale. Users can customize pricing and product availability with unlimited catalogs, supporting any currency. They can also consolidate customer information with Shopify’s enhanced companies feature, managing multiple locations, contacts, and essential details in a single profile.
Users can also seamlessly manage receivables with flexible options like automated payment reminders, deferred terms, and secure vaulted credit cards. The customer is able to enjoy a personalized self-serve buyer experience with market and B2B-specific theme customizations and optimized buying workflows, all within one store.
4. Making it all look easy
And even if it’s a multimillion-dollar purchase of manufacturing services and components, on some level it’s still one store. Recognizing this, over the past 12 months, no other platform has moved faster to meet the needs of B2B merchants faster than Shopify. During that time, in fact, the company has released more than four dozen new features over the past two years for wholesale alone. At this pace, Shopify will surpass the traditional names in this space within a year. This is something industry experts like Forrester have recognized by promoting Shopify to Leader status in the Forrester Wave for B2B Commerce Solutions in our first year of participation.
Shopify’s suite of B2B features is built into the core of the company’s platform offering, providing merchants access to the same powerful tools they use for B2C to support their wholesale business. This includes access to custom themes, Shopify Functions, discounts, Shopify Markets, APIs, Flow, and the world’s best converting checkout. Merchants can sell to all of their customers from a single platform or even a single store. It’s everything you need to shape the right experience for every customer using curated catalogs, custom pricing, personalized storefronts, flexible payment terms, and a self-serve portal—right out-of-the-box.
Businesses can take advantage of the following features without the effort, cost, and risk of building it themselves by connecting existing systems with partnered or customer integrations utilizing Shopify’s robust suite of powerful APIs.
- Custom data models: Build custom fields and objects that model your unique business data and extend core business workflows.
- Data analysis: Generate business insights with ShopifyQL, our query language custom-built for commerce, or export data into your own data warehouse.
- Headless API: Create unique commerce experiences for any platform, from the web and mobile apps to AR, VR, and 3D models.
- Customer data: Power growth and retention with accurate customer data, integrated with your centralized customer database.
- Marketing insights: Build your data layer with secure events that connect customers across devices.
- Order management: Integrate your preferred order management system and set custom business rules.
- Product catalog: Integrate and sync product information, pricing, and collections from any source.
- Checkout platform: Make more money with the world’s best converting checkout. Skip the work, cost, and risk of building your own.
- Fraud protection: Keep your revenue secure with fraud protection built on data from millions of retailers around the world.
Checking out
Finally, just like B2C consumers, B2B buyers need to check out. Building a state-of-the-art checkout is one of the most complex product areas within Shopify; we have hundreds of engineers dedicated to building new and improved features for our checkout platform.
Major drivers of conversion—for consumer products as well as advanced technological capabilities—are speed and a streamlined flow, customer trust, the ability to simplify complexity and above all, the ability to handle transactions at scale.
In other words, we understand manufacturers because we meet them on their home ground. At Shopify, we decided that using our checkout platform has to be tantamount to hiring domain experts for infinite scale, and superior to what’s otherwise available with alternatives. As the manufacturing industry continues to grow and change, Shopify will be there, ready to handle any sale at any time.
