As we reflect on the trends that defined 2024, we recognise that the manufacturing industry is at a tipping point. With more emphasis and focus on advancing on all fronts – whether it is digitalisation, disruptive technology, operational excellence or ESG performance – CEOs must overcome critical challenges such as addressing their legacy systems, infrastructures, and archaic ways of operating.
Advancements in these areas are crucial, especially as we anticipate that 2025 is the year of step-change transformation – where incremental change is no longer sufficient and instead, a significant uplift in performance is required, paving the way to not only achieve Industry 4.0 but also become Industry 5.0-ready.
According to Zion Market Research, the global Industry 5.0 market is set to grow exponentially over the next decade from US$130 billion to US$630 billion by the end of 2032. Despite the concerns that machines will rule the world, this new era will be characterised by human-machine interaction, social responsibility, workforce reskilling, cyber security, and maintaining the privacy of data, highlighting the critical role humans will play in steering this transformation.
While the future remains unwritten, 2025 will be unlike any other. As McKinsey and Co. says, the industry doesn’t need a total makeover, but CEOs have their work cut out. They must not only concentrate on rebranding for GenZ and millennials and redesigning their manufacturing businesses and operations, but drastically transform in areas like sustainability, innovation and transformation. If they don’t, CEOs could risk the competitiveness and viability of their businesses. As this year draws to a close, we recognise that change, often painful in the short-term, is necessary in our industry.
From Industry 5.0 to automation – the trends that will shape 2025
As we approach the new year, talk of inflation and political tensions are already dominating the news. How will the outside world affect manufacturing? We don’t have a crystal ball, but by scrutinising the market and analysing last year’s trends—such as implementing cybersecurity-enabled software and increased focus on compliance—we can establish the framework for manufacturing priorities, informing our expectations for 2025.
The rise of Industry 5.0 will spur innovative solutions like AI, which is set to play a key role in transforming operations. AI is expected to impact every part of business, from the shop floor to meetings, automating dangerous tasks once done by humans and using generative AI (GenAI) to summarise meetings.
As automation takes centre stage, will humans take a back seat? With some organisations laying off staff and becoming increasingly AI and machine-reliant, is the manufacturing industry headed for a crash, a transformation, or a little of both? The answer is complex. CEOs must embrace Industry 4.0 solutions and smart manufacturing to remain competitive, but as we know, Industry 5.0 will be human-led.
Here, we consider past and future years, focusing on the trends we predict will define next year.
Our top 2025 predictions unpacked
Last year was challenging for CEOs, who had to navigate political uncertainty, inflation, and a complex regulatory environment. Key changes, like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) targeting supply chains, the Buy America Act affecting global trade, and the EU Deforestation Regulation (EUDR) restricting products linked to forest degradation, added extra pressure. Many of these regulations, which will take effect in 2025, require CEOs to stay ahead of new rules while managing their companies through a difficult landscape.
What else is bound to affect the sector’s operations, production and sustainability efforts? Here are our top five predictions for 2025:
1. AI a non-negotiable and agentic AI
The new frontier. AI or not AI, to be or not to be. AI-powered tools are required in this complex landscape, yet many C-Suites aren’t prepared for adoption or know if they will have an ROI. Gartner reported that more than 30 per cent of GenAI projects will be abandoned by the end of 2025. Also, agentic AI is becoming the next large trend, as it can plan actions, make decisions, and learn from past experiences. Additionally, it can optimise manufacturing processes by improving workflow efficiency and predictive maintenance.
Recommendation – Balance the power of AI and humans by retaining and upskilling your staff. Combining AI with traditional methods while ensuring control measures like shutdown systems to safeguard against its inherent dangers. Also, gain knowledge on any new AI solutions you are adopting, as surface-level knowledge will not serve you well in this challenging landscape.
2. Sustainability is supported by green software
Gartner has warned that CEOs are not adopting the most cost-effective sustainable IT initiatives, indicating these less expensive options have less than a 30 per cent adoption rate by organisations. This number is forecasted to rise rapidly. Other green software suggestions included removing “zombie” equipment, migrating to the cloud, and using underutilised measures like enhanced cooling. Additionally, Gartner predicts 30 per cent of large global enterprises will integrate software sustainability, up from less than 10 per cent in 2024.
Recommendation – The jump in green software spend indicates that CEOs should embrace greening initiatives, as green businesses experience higher employee job satisfaction, brand recognition, and investments and can ultimately expect higher profits. Patagonia is a great example.
3. The metaverse is going mainstream
In manufacturing, the metaverse is projected to grow from USD 12.93 billion to USD 337 billion by 2033. One of the top buzzwords of 2024, the metaverse can transform manufacturing operations and drive innovation, leading to vastly better process optimisation when supported by virtual worlds through the help of digital twins. The metaverse allows virtual prototyping, enhanced collaboration, and enriched training and simulation capabilities.
Recommendation – Get comfortable with being uncomfortable. Ask your engineers and CIOs pointed questions about how to successfully apply the metaverse to ensure it matches up with your current IT infrastructure or locate a trusted managed services provider to help.
4. “The circular economy will be the only economy”
Gartner has said this would occur by 2029. A circular economy is the future, and it must be embraced by the manufacturing community to cut waste now. According to Zion Market Research, manufacturing accounts for roughly 50 per cent of the world’s generated waste. There are also various benefits. According to Gartner, 74 per cent of supply chain leaders could expect an increase in profits through 2025 if they embrace a circular economy.
Recommendation – Are you lagging behind in adopting a circular economy approach? If so, you are falling behind, but the good news is that you can start now. To start, look at optimising resource efficiency, cutting waste (i.e. recycling and reusing materials), or managing product lifecycles efficiently.
5. Microfactories are the future of manufacturing
These smaller factories leverage cutting-edge tools and solutions, granting new flexibility and scalability that larger, conventional factories struggle to achieve. Microfactories also use AI, machine learning, big data, and other innovative technologies, enabling enhanced waste elimination, process optimisation, and improved personalisation.
Recommendation – CEOs should first assess their current processes and then include microfactories in their long-term strategy, as they play a pivotal role in supporting Industry 4.0. They can seamlessly incorporate advanced technologies like IoT, AI, and machine learning, and they are agile, offering higher levels of customisation and align with eco-friendly manufacturing.
Conclusion
CEOs must start strategising for 2025 if they haven’t already. The lack of a strategic master plan that integrates digital transformation, sustainability, and AI will hold businesses back in the year ahead. As part of a strategic master plan, AI should feature strongly. But a word of caution; CEOs should temper their enthusiasm for automation, AI and GenAI, recognising that although these cutting-edge solutions may be transformative, they are still new and will need a steady hand to guide them.
Finally, business leaders must ensure they have the budget to adopt innovative technologies that can support sustainable measures effectively. Don’t be afraid of green leadership, as it pays dividends, leading to enhanced sustainability performance and positively contributing to the company’s overall sustainability goals. To learn more about the Consumer Sustainability Industry Readiness Index, contact us.
