The commercial construction industry is an odd spot entering 2023. With the country staring down a potential recession, there may be fewer projects available thanks to high-interest costs and perceived reduced spending. But Forbes’ Bill Conerly notes that industry employment is on the rise for both actual building work and specialty trades. The manufacturing industry is in a similar spot—while momentum carried the industry through 2022, inflation and economic certainty paint a cloudy future for 2023, according to Deloitte.
“This year my motto is: Don’t just get ready, stay ready. If you haven’t started planning for next year, now’s the time — then you’ll be ready to tackle 12 months of come-what-may.” Dave Evans, Forbes
Even facing economic uncertainty, the simple truth is that things need to be built and skilled labor will always have a place. By researching market trends, assessing expert opinions and predictions, and looking into the statistics, we’ve created the ultimate guide to the commercial construction and manufacturing industries for 2023.
*Courtesy of the experts at Big Top Manufacturing, Revolutionized, Building Design + Construction, Forbes, Exploding Topics, Deloitte, Armacell, and more!
Labor shortages
It’s no surprise that the COVID-19 pandemic had a massive effect on available jobs and created a multitude of layoffs in the construction and manufacturing industries as it did many others. While the country started opening back up and alleviated some of the shortage, the pandemic is far from the only reason there is a labor shortage in these industries.
Nick Grandy, senior analyst at RSM US, believes there are 25% more unfilled construction positions than hires. Grandy compares the shortage to that of the early pandemic toilet paper shortage—a lack of inventory creating a market filled with desperate buyers.
Revolutionized’s Emily Newton writes that many long-standing construction professionals have either left the workforce, are near retirement, or have faced layoffs. In this industry, it can take a long time for information and skills to transfer from veterans to new hires, leading to a dearth of particularly qualified professionals. In addition, it’s more difficult to get those entering the workforce to consider construction in the first place.
Luckily, there are solutions on the horizon. CBS News’ Nancy Chen reports that there has been a 50% increase in the number of women in construction thanks to targeted marketing campaigns. Deloitte reports that despite the high number of voluntary exits in the manufacturing industry, organizations industry-wide are researching retainment strategies.
Reducing Costs
With inflation at work and a shortage of laborers, it’s crucial for companies to find a way to reduce costs around the board. Construction management firm Skanska found that construction spending will increase in many vital sectors, including manufacturing, transportation, highways, multifamily housing, lodging, and communications. In order to help meet the demand, industry leaders are looking for creative ways to reduce costs.
via Building Design + Construction
Material costs
Skanska’s Vice President of National Strategic Supply Chain, Tom Park, noted that a reduction in housing has eased demand for raw materials, making it both cheaper and less time-consuming to acquire many necessary building components, including commercial roofing materials, architectural interiors, lumber, and plumping.
Emily Newton found that while the labor shortage and sourcing difficulties led to a rise in the cost of construction materials in recent years, the burden should be eased in 2023, corroborating Skanska’s findings.
Outsourcing
In order to further reduce costs, companies will start outsourcing manufacturing more than ever before. The 2022 State of Manufacturing report found that 48% of companies increased their manufacturing outsourcing in 2022, and that number is expected to rise in 2023. Forbes’ Dave Evans says that while finding the right outsourcing partners are key, a good diversification of geographic partners will further slow any potential disruptions.
Construction sites
Big Top Manufacturing suggests that rethinking the literal foundations of construction and manufacturing sites is a key way to reduce costs without sacrificing quality. Switching to fabric buildings is not only more cost-effective but they take much less time to build, meaning these sites can start producing, and thus become profitable, much more quickly. These sites are surprisingly more resilient to the elements, don’t require as many expensive repairs, and are more environmentally friendly than traditionally-constructed buildings.
Emerging Technologies
A rise in emerging technologies means rapid changes are constantly occurring worldwide, and the construction and manufacturing industries are no strangers to technological growth. Advancing technology should lead to smoother training and more efficient processing industry-wide.
VR training
As mentioned above, many qualified professionals are leaving the industry, and the labor shortage makes it difficult to replace that productivity. An effective way to speed up training and reduce the skill gap is the use of virtual reality training programs.
Big Top Shelters notes this technology can allow new hires to get hands-on experience with concepts that are difficult or expensive to organically practice otherwise. VR also allows workers to see structures before they are built in real space, speeding up the process by allowing them to eliminate blueprint errors and test designs before work begins. This ultimately saves the company a great deal of money while also creating a safer environment.
Robotics and IoT
Both robotics and the Internet of Things (IoT) are becoming commonplace in many industries thanks to their ability to save time and money.
Nidhi Aggarwal mentions the importance of IoT in allowing companies to remain productive with remote work sites, which became a necessity during the pandemic but persistent thanks to how much time and money they save. The more work that can be done offsite, the more money the client and the company can save while also keeping workers safe.
Robotics meanwhile serve to assist workers by decreasing the time tasks take while keeping laborers safe. Robotics don’t exist to replace human workers but enhance what they can do. Emily Newton notes how robotics can help with manual tasks like bricklaying to allow humans to work faster and without as much strain on their bodies. A common trend is the rise of exoskeletons that can reduce the fatigue common in many physical labor tasks.
Supply chain innovations
Supply chain disruptions have been a frequent topic when discussing these industries, and that isn’t going to change anytime soon. Industry innovations to stay ahead of disruptions while further lower costs will be essential.
At the surface level, finding ways to automate processes and lowering the amount of physical labor will save time that could be better focused elsewhere. Exploding Topics’ Josh Howarth says that reshoring, or looking to other countries for material processing plants, is estimated to be around $443 billion in the US. With this in mind, those manufacturers best able to incorporate new technologies that can reduce delays will be highly-profitable and sought out.
Dave Evans reports that the companies that will best weather potential disruptions are those that are agile and strategic and that taking time now to reevaluate processes and create redundancies will save time when delays inevitably occur.
Smart factories
All of the above will coalesce into “smart factories,” a concept that has surged in recent years according to Josh Howarth. Gartner defines these as “a concept used to describe the application of different combinations of modern technologies to create a hyperflexible, self-adapting manufacturing capability.” The ability to automate tasks, minimize errors, and promote worker safety will allow productivity to surge. Howarth reports that automotive manufacturers expect to have one-quarter of their plants as smart factories and that those factories could create $160 billion in value. Other industries will certainly follow suit.
“Industry 4.0 continues the push towards automation, employing technologies such as IIoT (industrial internet of things), big data, machine learning, artificial intelligence (AI), and advanced analytics.” –Josh Howarth
Howarth also believes there will be a rise in microfactories, or small, highly modular setups that make use of leading-edge technology like artificial intelligence, robotics, and big data, to enable hyper-autonomous manufacturing, thanks to the ascension of smart factories and the need to restructure supply chains. Microfactories can be built closer to points of trade and cut down on travel time, errors, and costs.
Environmentalism
As more companies make concentrated efforts to have less of an impact on our environment, green technology and environmental efforts will be prioritized heavily in 2023.
Key components of green building include energy efficiency, renewable energy, water efficiency, using recycled materials, reducing waste, increasing air quality, and smart growth. Emily Newton lists incorporating solar panels, recycling materials during and after projects, and using sustainable materials like bamboo as tangible methods to achieve these goals.
Via Armacell, green buildings accounted for just 8% of construction spending in 2013. In 2022, green buildings made up 47% of new construction processes, and that number is expected to skyrocket to 60% by 2025. These 60% are believed to be net-zero ready, or able to be built with zero carbon emissions.
Not only are these green buildings much better for the environment but will be profitable as well—Armacell cites that the green building market will be over $81 billion. Tax incentives are being created to further entice companies to invest in energy-efficient buildings.
The aforementioned emerging technologies should factor into making environmentally-sustainable buildings as well. By increasing digital efforts, utilizing VR training, and using robotics for environmentally-friendly construction, an organization will be able to lower its carbon footprint.
Final thoughts
The construction and manufacturing industries are in a challenging but exciting state entering 2023. Forbes’ Bill Conerly cites the growing costs and upcoming recession conflicting with the rise of employment opportunities and activity increasing as factors that make projecting the 2023 landscape difficult.
What is clear is that the pandemic forever altered the face of these industries, and companies willing to evolve and embrace new technology and rethink supply chains will be the most successful moving forward.
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