Contrary to popular belief, manufacturers buy more than parts to make a final product. They have the same need for products and services as any other industry. They buy stuff, a lot of stuff – and they utilize a lot of services, from staffing to marketing, IT, finance, and more. And best of all, they have more money to spend than most other businesses in this country. In this article, we’ll take a look at some of the major trends driving investment from U.S. manufacturers and the opportunities therein for the industries that support them.
Manufacturers are a powerful force in the U.S. economy. They account for 10% of the U.S. GDP, generate an impressive $2.9 trillion in added value to the economy, and employ over 13 million people. The U.S. manufacturing market is projected to grow further, with an anticipated value of $3.09 trillion in 2023 and a compound annual growth rate (CAGR) of 3.05% from 2023 to 2028.
Manufacturing companies are actively seeking new products and services to help them stay competitive, investing in smart manufacturing, IT and cybersecurity, staffing, sales and marketing, while taking steps to shorten their supply chain.
Here are some of the key trends that are driving manufacturers' buying power:
• The Infrastructure Investment and Jobs Act (IIJA) is a historic piece of legislation that is injecting billions of dollars into the U.S. economy. This is driving demand for construction materials, machinery, and services from manufacturers.
• The electronics sector is driving growth. The demand for electronic devices is booming, and this is leading to increased investment in electronics manufacturing.
• The labor shortage is making it difficult to find skilled workers. This is forcing manufacturers to rely on staffing agencies and invest in training programs.
• The need for cybersecurity is increasing. Manufacturers are being targeted by cybercriminals, and they are investing in security solutions to protect their data and operations.
• Manufacturers are looking for ways to shorten their supply chains. This is making them more resilient to disruptions in the global supply chain.
These trends are creating a surge in demand for products and services from manufacturers. This is an excellent opportunity for businesses that can cater to the needs of this industry.
Here are some specific areas where businesses can invest to capture this opportunity:
• Smart manufacturing technologies such as automation and robotics
• IT and cybersecurity solutions to protect against cyberattacks
• Staffing solutions to help manufacturers find and retain skilled workers
• Sales and marketing services to help manufacturers reach new customers and drive sales
• Supply chain management solutions to help manufacturers shorten their supply chains and improve efficiency
By investing in these areas, businesses can position themselves to be a valuable partner to manufacturers and capture a share of this growing market.
Let’s take a look at each of these concepts in detail.
Passed in November, 2021, the Infrastructure Investment and Jobs Act (IIJA) stands as a historic legislation, investing $1.2 trillion in a grab-bag of infrastructure projects over the next decade, from upgrading roads, bridges, railways, ports, and airports to improving the electrical grid, providing funding for the research and development of electric vehicles, and ensuring clean drinking water and other infrastructure investments.
Of major note for manufacturers, however, is the direct funding and tax incentives for public and private manufacturing construction provided by the IIJA.
Fast forward to today, and the latest statistics reveal the IIJA has indeed boosted the spending power of manufacturers. Let’s take a look:
U.S. Manufacturing Construction Spending Has Doubled According to the U.S. Department of the Treasury, real manufacturing construction spending has doubled since the end of 2021. The surge comes in a supportive policy environment for manufacturing construction: the IIJA, Inflation Reduction Act (IRA), and CHIPS Act each provided direct funding and tax incentives for public and private manufacturing construction.
Electronics Sector Driving Growth Within real construction spending on manufacturing, most of the growth has been driven by computer, electronics, and electrical manufacturing. Since the beginning of 2022, real spending on construction for that specific type of manufacturing has nearly quadrupled .
Today, the computer/electronic segment is the dominant component of U.S. manufacturing construction.
Importantly, the boom in this segment has not been offset by reduced spending on other manufacturing construction segments, which are largely consistent with long-term levels. In fact, construction for chemical, transportation, and food/beverage manufacturing is also up from 2022, albeit much less than the computer/electronic sector.
U.S. manufacturing ranks first in many global manufacturing sectors. America outranks every other country in the production of chemicals and pharmaceuticals; computer, electronic and optical products; motor vehicles, trailers and semi-trailers; fabricated metal products; coke and refined petroleum products; paper products and printing; and other transportation equipment.
Unfortunately, America ranks third in the production of electrical equipment, well behind top-ranking China. This fact plays a big role in the supply chain issues that have plagued U.S. manufacturers in recent years.
China is the world’s top manufacturer of semiconductor chips. Guess what goods require semiconductor chips? Computers, motor vehicles and even printing presses require semiconductors. Without them, American manufacturing stalls.
For many years, American manufacturers ran on the principle of “just in time” ordering. As long as the global supply chain remained stable, this practice made sense. However, the global supply chain has been anything but stable since the Covid-19 pandemic hit.
Now U.S. manufacturers are turning to local partners or expanding their own operations to shorten supply chains and maintain productivity. And with demand soaring, U.S. manufacturers are on the hunt for more services as well to help them get their products out the door.
So based on these trends, what are some of the top products and services U.S. manufacturers are investing in right now? Every week, MNI provides a rundown of the most in-demand industrial products based on search trends on the industrial marketplace IndustryNet, while IndustrySelect subscribers can take advantage of MNI's exclusive intent data trends to determine buyer demand for particular products and services, but on a larger scale, here are some of the top trends to watch out for:
Smart Manufacturing: To keep pace with the evolving landscape, manufacturers are investing in new equipment, often leaning towards smart manufacturing choices, including automation and robotics. As they embrace these technological advancements, they seek to strengthen their data infrastructure and software capabilities, as the need for integrated systems and data exchange becomes paramount across various work areas.
IT & Cybersecurity: With this paradigm shift towards technology, manufacturers also confront the growing threat of cybersecurity attacks. As even the simplest of devices, like personal cell phones, can pose risks, the demand for robust cybersecurity risk mitigation services is on the rise. This evolving need presents a significant opportunity for technology companies to make inroads into the manufacturing marketplace, offering solutions that protect and fortify this critical industry against potential cyber threats.
Staffing: There are currently 13 million individuals employed by U.S. manufacturers, and an astounding 627,000 job openings as of September 2023.
In the midst of a widespread labor shortage affecting industries far and wide, manufacturers are facing a unique set of challenges. Finding and retaining skilled workers is no longer a simple endeavor. As the manufacturing sector forges ahead with expansion plans and investments in automation, the need for qualified personnel becomes even more critical.
This situation has led to a growing reliance on staffing solutions. Manufacturers are increasingly turning to staffing agencies to bridge the talent gap, sourcing skilled workers, whether for specialized machinery operation, maintenance, or even IT support. Temporary and contract workers have become a valuable resource, offering manufacturers the flexibility to scale their workforce up or down in response to fluctuating demands.
The manufacturing industry's collaboration with staffing agencies is not merely a short-term fix. It represents a strategic approach to address labor shortages while ensuring business continuity. Staffing agencies play a pivotal role in connecting manufacturers with the skilled individuals they require, ensuring that production lines continue to run smoothly and that expansion plans remain on track.
As the labor shortage persists, staffing services will remain an integral component of the manufacturing landscape. Manufacturers who can effectively tap into this resource will not only overcome immediate workforce challenges but also position themselves for sustainable growth in the dynamic and evolving world of manufacturing.
Sales and Marketing: According to a recent trend analysis by Deloitte Insights, manufacturers are investing more in sales and marketing due to softened demand in the market. The most recent survey of manufacturing purchasing executives conducted by the ISM echoed this trend, with one executive in the computer & electronics products stating “Markets remain tough and we have focused more resources on sales and marketing to drive greater sales and new market penetration with our devices.”
This trend is expected to continue in the coming years as manufacturers seek to stay competitive in a rapidly changing market.
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Editor's Note: This article was originally published in January 2022. It has been updated to reflect the latest trends in U.S. manufacturing.