Pregis discusses three primary trends that will shape the business environment in 2024--cost management strategies for sustained profitability, the power of customer due diligence in ESG, and embracing the power of information in business

1. Cost Management Strategies for Sustained Profitability

An unsettled economy remains. Some companies are in a situation where one aspect of their business is growing revenue while another part is fighting inflation costs to maintain profitability. With this “hot and cold” landscape, refining cost management strategies will be key to sustained profitability and it is heavily influenced by supply chain optimization.

 

A. Focus on Location for Lower Costs and Flexibility

During the pandemic, some manufacturers dismantled their supply chain to bring suppliers closer to home. Current world events are again altering supply and demand prompting many North American-based companies to move suppliers or operations to either domestic sites or locations within U.S. Free Trade countries, such as Mexico.

Having a supplier network that is closer in proximity to operations allows companies to be more flexible and react quickly to market conditions, maintaining greater control over product and production quality while balancing inventory levels. It also provides an opportunity to reduce transportation and importation burdens for better cost management.

Plus, having factories closer to home fosters stronger business relationships between companies and suppliers, which has so many inherent benefits.

This trend is also encouraging secondary suppliers to make plays for the top spot, investing in new cost-saving technologies so they may offer lower-cost parts to OEMs. Younger OEM buyers are amiable to new suppliers as they care less about traditional relationships and more about improving lead times, reducing production costs, and making measurable impact on business outcomes.

 

B. Organized Labor Momentum

The aftermath of the recent UAW strikes is emboldening other unionization efforts for higher wages and improved working conditions. Being proactive can offset these efforts and eliminate downtime, dramatic wage increases, and halts in production. 

Being proactive can also keep production costs lower. Following the UAW strike, Ford Motor Company’s impact is expected to be roughly $900 per vehicle more in cost.

Attempted unionization in other industries is gaining popularity as workers demand better wages amidst high inflation and rising cost of living. Proactive businesses can help alleviate this stress, but it comes at a cost.

 

C. Increased Throughput and Efficiency Gains

Automation has been a hot topic for some time, especially following a pandemic when keeping trained employees at work was more challenging than ever. Investing in automation processes and improved efficiency can redirect labor resources to revenue-producing activities, ultimately decreasing workforce costs.

For many companies, 2024 is the year to reap the benefits of investing in robotics, increased automation, and continuing to look for ways to gain efficiency by optimizing processes. The use and increasing familiarity of artificial intelligence (AI) will help companies optimize and eventually replace mundane tasks, like re-ordering, scheduling deliveries and pickups, etc. These measures can mitigate the impact of rising labor costs while boosting throughput and reliability, which are necessary to remain competitive.

 

D. Changes in Online Purchasing Behavior

Companies are finding success by redirecting customers back into brick-and-mortar retail stores. How are they doing this? By changing free shipping thresholds.  Offering free shipping to the store is sending budget-conscious buyers into brick-and-mortar stores to browse. This increased traffic is driving up revenue from impulse purchases and strategically positioned consumer packaged goods that connect with shoppers.

With an increased cost of living, “Buy now, pay later” (BNPL) options are boosting sales for big-ticket items like electronics, appliances, and furniture. Nearly one-fifth of consumers have used BNPL during the past year, and while merchants pay higher service fees by integrating a BNPL option on their website’s checkout, these fees are typically offset by higher sales.

Buy online, pick up in-store (BOPIS) is a fast-growing omnichannel eCommerce model that allows customers to order items online and schedule a pickup in-store or at the curb for later that day. It’s popular as it merges the convenience of online shopping with the efficiency of same-day shopping. BOPIS has become a popular fulfillment method for online shopping with

72% of U.S. customers stating they are more likely to buy online and collect in-store. 

Shoppers tend to make additional purchases while picking up their items in-store and helping store locations promote store-based best sellers, new arrivals, and impulse purchases.

This hybrid approach caters to the customers’ need to research items before buying. Consumers can easily order household staples like diapers and laundry detergent but take time to research online and compare items, before dashing into the store to pick up the desired purchases. 

Customers are conducting their own cost management strategies and, with more choices and information than ever before, are turning to reviews and positive research to validate their purchases before hitting the “add to cart” button.

With BOPIS, retailers are realizing the benefits including reduced shipping costs from last-mile deliveries, lower cart abandonment rates, and increased store traffic. 

 

2. The Power of Customer Due Diligence in ESG  

The second trend making the biggest impact in 2024 is not new to manufacturers and brand owners. Environmental, social, and governance (ESG) continues to influence corporations in their approach to decreasing their environmental footprint. As an umbrella to ESG, there are three areas to focus on in 2024:

1. Use less: Shift to sustainable practices; using less and disposing of less materials in production. Aim to apply greater efficiency to logistics to spread out emissions. One example is to increase one truckload from 100 products to 120 products, reducing the environmental impact of 1 item by 20%
2. Foster workplace culture: The social aspect of ESG covers all the ways companies interact with their employees and includes wages and benefits and how these areas can reflect positively within the company and community.
3. Build brand loyalty: Customers are searching for better experiences and will reward companies with stronger loyalty resulting in higher customer lifetime value.

Customers are also looking at companies to decrease their environmental footprint and their products to be “sustainably sourced.” The definition of sustainability may vary by consumer groups. Rather than trying to “be everything for everybody,” companies should conduct voice of customer research to uncover which qualities are most important to their customers. A few examples include a carbon reduction, a waste reduction, less water use in production, less energy consumption, or using alternate materials.

Understanding your core target audience allows you to tailor value propositions to convey specific sustainable attributes. Be sure to echo these benefits across all your social channels so you can maintain a positive online reputation. People talk and ask for referrals frequently amongst business friends. Positive (or negative) reviews are also critical for B2B businesses, just as consumer reviews are important for B2C companies.

 

A. Building Brand Loyalty with Emotional Connections

Aligning your brand to the values and aspirations of your customers can create a genuine emotional connection that goes beyond transactional interactions.  Part of this emotional connection is an opportunity to promote company sustainability and community initiatives.

For all the cost-management strategies companies employ, there will typically be a core group of products where customers purchase in response to an emotional connection. That’s why it’s important to demonstrate a commitment to sustainability, the impact of recycling efforts, and zero waste achievements – as well as the people behind a company  that gives back to people in need through volunteering or philanthropic efforts.

 

3. Embracing the Power of Information in Business

The third trend that will influence manufacturing and business decisions is digital transformation. In the fast-paced world of 2024, businesses will increasingly explore how they can use artificial intelligence (AI) to optimize processes and use the flow of information to improve business performance.

 

A. Using AI to Optimize Processes

Manufacturers are incorporating AI into their business operations to accelerate routine tasks such as stocking, machine optimization, preventative maintenance, forecasting demand planning, and supply inventories. This not only enhances operational efficiency but also ensures real-time data availability.

Let’s review three ways AI can be used to optimize processes:

1. Real-time data: Access to real-time data from equipment and supply chains is instrumental in maintaining machine uptime and reducing downtime. This level of insight enables businesses to make proactive decisions, keeping their operations finely tuned.
2. Repetitive process optimization: Automating mundane, non-revenue-producing tasks in real-time streamlines processes and allows companies to shift employees to more strategic and complex aspects of the organization.
3. Feed data engines: Businesses crave accurate data for the insights where humans need information to make practical or critical decisions.

 

B. Shifting Buyer Demands and the Importance of Data

Businesses are recognizing that customers want and value detailed information – going beyond basic product data. A company that backs up product claims with data-driven insights brings tremendous value to business dealings. Let’s take a look at why this is important.

 

A global study of B2B customers discovered that 61% preferred being taught how to solve a problem independently, rather than simply having information supplied. The desire for learning was especially pronounced among younger respondents, the group most invested in building their skills. Among Gen Z respondents, more than three-quarters (76%) preferred a service provider who taught them how to solve problems independently. In contrast, just 51% of Baby Boomers prefer being taught solutions over simply having the problem solved.

For customers, especially as target audiences skew younger, the flow of information and reliable data is critical to their buying decisions. Social media platforms are valued for their access to influencer videos, demonstration videos, product research, pricing data, and independent reviews.

What does all this mean? 2024 is the year to embrace the power of information, especially as younger B2B buyers are bringing their consumer traits to the office. Investing in high-quality assets and assuring a flow of digital information to your buyers can skyrocket trust in your brand.

 

Navigating 2024

As businesses navigate the cost management landscape in 2024, a dual focus on customer due diligence and emotional connection is paramount. Embracing sustainability, aligning with social causes, and building genuine relationships with customers are key strategies for success in a market where consumer choices are shaped by more than just product features and prices.

For more info on how you can partner with Pregis to capitalize on these trends, contact us here.