The Economy, Manufacturing, and A 12-Month Projection

The recent economic summit hosted by Allied Executives in Minneapolis highlighted dynamics within the B2B manufacturing market in the US and made projections about how businesses may be impacted and what they can do to mitigate risks.

Spoiler Alert: The B2B manufacturing sector has not seen growth since the end of 2022. The largest impacts on B2B manufacturing have been:

• Higher interest rates dampening capital investments, especially if they require loans for financing
• Concerns about demand growth, which is somewhat warranted given inflation and the impact on consumer buying power
• General pessimism by leaders about the state of the industry

As of the writing of this blog, the outlook for the next 12 months is that Q2 and Q3 will stay flat or even flirt with a slight recession, according to economist Alex Chausovsky. A slow uptick is expected by the end of 2024 with more optimism for growth and expansion as 2025 progresses.

But The Leading Indicators ...

…are good news! Chausovsky collects data on several leading indicators of the B2B market, such as capacity utilization, copper prices, and PMI. When overlaid against the trend in industrial production, the leading indicators nearly consistently predict the general trend (upwards or downwards) with industrial production having somewhat of a lag.

Some of the leading indicators are beginning to show an upward trend that puts industrial production back on the rise heading into mid-to-late 2025.

In the meantime, industrial/B2B businesses will feel continued inflationary and interest rate pressures on materials and the cost of investments, upward pressure on wages, and potential downward pressure on consumer demand, which will drive efforts to reduce costs.

So, What Do We Do For The Next 12 Months?

The recommendation for industrial and B2B businesses and manufacturers was clear: protect margin. Growth is likely to be difficult for the next 12 months and coupled with upward cost pressure, margin protection activities are great ways to make investments in your business without taking on too much growth. Being a supply chain management consultant, you know we have thoughts on margin protection as it relates to supply chain:

• Understand opportunities to lean-out unnecessary costs in your supply chain and operations. If you’re willing to hold yourselves accountable for the work and results, an end-to-end analysis and improvement project will set you up nicely for at least 12 months and beyond. It typically takes a month to assess and 6-12 months to implement any findings so the time is now to start that journey and prepare for growth in the end of 2025 with a lean, mean organization. We at Waypost have developed an end-to-end margin optimization assessment that starts with product sourcing and category management analysis, planning purchasing and inventory optimization analysis, operations continuous improvement, and logistics & distribution network analysis. We work with your teams to understand processes and deep-dive data to drive cost optimization decisions. Check out our Margin Optimization blog for more details.
• Ensure your systems and data are operating as effectively as possible. Invest in your existing supply chain technologies by ensuring you are able to leverage them to drive-down unnecessary human work and reduce unnecessary costs in purchasing and inventory holding. If you hear feedback from your team that they have to work outside of the system (*ahem*, spreadsheets) to do purchasing or inventory planning, or just general complaining that the system can’t be used, this is a good trigger to find out why and what to do about it.
• Keep a strategic focus on your supply chain. Even though #supplychainissues have settled down in the last 12+ months, don’t get caught flat-footed when the economy heats up again. If you’re solely focused on tactical activities for the next 12 months your supply chain is going to suffer its own bullwhip effect once you have an opportunity to sell more. Ensure your planning capabilities are robust and your supply chain and operations teams are participating in sales discussions so they have the earliest possible indicators of changes to your business.

The message here is definitely not doom-and-gloom. On the contrary, it’s quite positive. We’ve all been hearing that the economy is strong but those of us in B2B/industrial space haven’t necessarily felt it, so consider this article the acknowledgement of the realities of what we are feeling. The relief is that it appears we’ve crested the hardest part of the roller-coaster and have line-of-sight to a fun ride of growth ahead.

Stay focused on the positive, invest where it makes sense, and leverage partnerships that can help you achieve your short-term efficiency objectives for your longer-term success.

Achieve Supply Chain Success with Waypost Advisors

At Waypost Advisors, we work with companies everyday that benefit from improved supply chain management and execution. Our industry-experienced consultants specialize in providing expert guidance and support to businesses looking to optimize costs, minimize inventory, and drive pride in their teams. Our comprehensive approach leverages cutting-edge technologies and industry best practices to help companies achieve measurable and sustainable results. By partnering with us, clients can streamline their operations, reduce inefficiencies, and enhance customer satisfaction. Contact our team today and let Waypost Advisors help you achieve your goals.

Waypost Advisors is an end-to-end supply chain and resourcing solution. We offer expertise in procurement, inventory, project management, planning, transportation & warehousing to fit the needs of your B2B manufacturing or distribution company. Our advisors can provide you with the resources and expertise to tackle your supply chain challenges while allowing you to still focus on running your business.