The Midwest region of the United States has always been fertile ground for manufacturing and, despite pandemic-driven supply chain challenges and labor shortages making it difficult to maintain profitable production, manufacturing is still listed as the largest industry in most Midwestern states.¹

The challenge facing Midwestern manufacturers right now is how to move into the future and remain competitive while recovering from the effects of the pandemic and protecting the financial health of the business.

Here are four Midwest manufacturing trends influencing financial management and decision-making for manufacturing leaders.

1. The rise of automation, robotics, and “smart factories”

The future of American manufacturing is the smart factory. For business leaders, making factories “smarter” means investing in cloud computing, automation, artificial intelligence (AI), and other advancements that take optimization and lean concepts to new heights. No matter what manufacturing sector you’re in, investing in technology will be necessary to keep a competitive edge.

Manufacturers are leveraging automation and robotics to not only fill the gap in skilled labor, but also to enhance and complement human workers in many manual tasks. Robots can take on physically demanding tasks to minimize risk to human workers, including working with dangerous equipment, chemicals, and high-temperature settings. In the coming decade, we expect to see more “cobots,” or collaborative, intelligent robots, working alongside human team members to improve efficiency, accuracy, and consistency in production.

AI and the Internet of Things (IoT) are reaching a new peak in manufacturing, allowing companies to leverage data for deeper insights in real time. IoT-enabled sensors on machines are constantly gathering data while empowering predictive maintenance to reduce machine downtime. With real-time alerts when a machine is due for routine care or showing signs of failure, manufacturers can plan ahead for maintenance with minimal disruption to production. Combining this with technology for predictive analytics, manufacturers can gain even more accurate forecasting for demand, supply chain, and labor volume. 

With the right technology in place, the factory of the future will take an active part in helping to run itself with optimized costs and efficiency. The exciting reality is that the technology to achieve this already exists, and pieces of it are in use in many manufacturing shops already. For decision makers, this means now is the time to increase investment in digital transformation and find ways to actively introduce more automation into the workflow. Achieving a fully smart factory is not a single leap, but rather a series of steps and implementations that will increasingly streamline workflows and connect all aspects of production.

2. New approaches to recruitment and retention

Manufacturing in the Midwest, just like in other regions of the United States, has seen dramatic drops in employment. The industry faces a deepening skills gap, a shortage of young workers applying for openings, and a stagnation in wages that is making recruiting and retaining top talent difficult. 

Attracting and keeping skilled workers is a top priority for manufacturers, and this requires investment in employee benefits, training, professional development, and recruiting programs to fill the pipeline. Many companies have already begun to sink more resources into partnering with schools and developing their own programs to help guide young people toward successful careers in manufacturing. Employers are thinking outside the box about how to target key demographic groups such as women, who traditionally have been discouraged from pursuing careers in manufacturing, and create attractive career paths to meet worker expectations.

3. Increased focus on sustainability efforts

As we see heightened pressure from government agencies² and regulators in pursuit of sustainable manufacturing, we can expect Midwest manufacturers to prioritize sustainability efforts in 2024 and beyond. We are already seeing leading manufacturers voluntarily pursuing new certifications and standards to make their businesses more eco-friendly.³

For every investment manufacturers make moving forward, they must consider whether it pushes them closer to their goals for carbon neutrality, energy consumption, waste reduction, and documentation of the entire supply chain. We're likely to see Midwest leaders making investments in traceability solutions, digital supply networks, advanced analytics, and other technology solutions that help them achieve reporting and compliance with evolving sustainability standards.

4. The move toward digital supply chains

The past two years have made painfully clear the need for manufacturers to diversify their supply chains and increase supply chain visibility in order to compete in the next decade.

Manufacturers are setting their sights on digital supply chain management as a way to leverage data, technology, and IoT-enabled assets to gain deeper capabilities for analytics and decision-making. Digital supply chains are set to become commonplace, allowing information and insights to flow continuously to decision-makers in real time. With supply costs rising in all sectors, Midwest manufacturing leaders will be seeking ways to offset fluctuating costs with advanced analytics that allow them to better forecast demand, predict obstacles, and pivot on a dime. This will mean more financial investment in digital transformation efforts like AI, automation, “smart” devices, and predictive analytics. 

Financial management is key for manufacturers to realize returns on digital transformation

Despite challenges in the supply chain, workforce, and economic landscape, Midwest manufacturers are committed to investing in digital transformation to position themselves at the forefront for the next decade. Manufacturing leaders know that to remain competitive in the coming decade, now is the time to make meaningful financial decisions that will carry them forth into a new era for the industry.

Finding trusted financial guidance and funding support will be crucial to success as companies make more concrete plans to improve efficiency on the factory floor, address the skills gap, reduce environmental impact, and gain deeper visibility and control over their supply chains. Midwest manufacturers are on the brink of needing to make multiple business-changing financial decisions, and having the right financial partner will make all the difference in putting their resources into the right areas for a worthwhile return. The Midwest has long been the centerpiece of U.S. manufacturing and the region is showing all signs of resurging from a challenging period to carry the United States into its next era.

Accelerate the growth of your business with Wintrust, a lending partner that knows the manufacturing industry and will work with you through its challenges.