What’s Next for the Manufacturing Industry in 2025?

I have a fulfilling job. And as a trusted advisor to our manufacturing clients, one of my great pleasures is a plant tour. I recently visited a plant for one of our firm’s new clients for the first time. On this day, you meet your typical groups (accounting, finance, legal) and people in operations that you don’t get to interact with as often (supply chain, warehousing, production). I talked to the executive team and leaders from all areas of operations. The company has a great product and shares an obvious value system and general optimism. I had a fantastic day and was excited to work with them.

On the drive home, I had time to think about my client’s business as a whole. What are their key inputs, processes and outputs? What are their pressures, near and far? They had plentiful opportunities to grow and mature, but what direction will the team go first? What roadblocks exist, and where might unidentified risk exist for their organization? With so much noise, uncertainty and change in the world, what is the top priority?

As we start 2025, I see many outside forces impacting almost all my friends in manufacturing. Some have existed for a while (supply chain issues, aging workforce for key technicians, industry 4.0 adoption, cybersecurity risks) and some are new (changing tariff landscape, government agency funding changes, ubiquitous generative AI).

Economic Trends Impacting Manufacturers in 2025

In Georgia, we seem to be looking at a mixed bag regarding the outlook for this year. Economists at the University of Georgia predict economic growth to slow slightly in 2025, but that the state’s economy will perform better than the national economy due to large project buildouts and demographics in Georgia.  “This risk of recession is 25%, which is lower than in recent years. Our forecast depends on additional easing of monetary policy by the Federal Reserve, the resilient labor market, and Georgia’s economic development competence,” they noted.

Certain Trump administration policy changes on tariffs and immigration could also dampen growth due to our density in the food processing and construction material industries. However, lower regulations and tax code changes could spur companies to spend research and development dollars, which generally drive growth. In this environment, management teams cannot sit back and let the rising tide lift all boats. Instead, they must spend their time wisely, investing and taking risks with the best data available.

How Manufacturers Can Adapt to Evolving Risks

With the volume, magnitude and velocity of change increasing each year, the temptation is to ignore the noise and keep doing what you have always done to be successful. The phrase, “if it ain’t broke, don’t fix it,” comes to mind. However, every organization would benefit from periodically taking stock and evaluating which risks may impact them.

Let’s use a risk many manufacturers face to illustrate the point: supply chain constraints. If this is an issue for your business, do you know where you source the top five inputs on your bill of materials? Do you know the lead time between ordering and receiving the materials? Do you have backup suppliers in countries less likely to be impacted by tariffs? Can you flex purchases using a line of credit with your bank or focus on improving your working capital ratio, so you can buy increased quantities when prices are temporarily low, improving gross margin?

Some middle market companies may believe that enterprise risk management (ERM) is only something the Fortune 1000 have the resources to focus on (both from a real and opportunity cost perspective). This belief is simply not true. Free resources exist to help companies analyze and plan for a myriad of problems. For our supply chain constraint example, the Department of Commerce, through its National Institute of Standards and Technology (NIST), has a very insightful article that might be just what you need: How Small Manufacturers Can Develop Risk Management Strategies for their Supply Chains. This article has a self-assessment tool you can use for your business. Another organization that has excellent content for manufacturers is the National Association of Manufacturers (NAM). NAM recently authored a informative study about how AI may impact a manufacturer’s business through the production process: Working Smarter: How Manufacturers Are Using Artificial Intelligence.

Manufacturing businesses must stay connected to people, processes and technology (both the technology built with steel and the technology built with 1s and 0s). Building on that foundation, does your management team have risk analysis built into its DNA? Does your business strive to grow and continuously improve? Are you seeking input from all knowledge bases within your organization, from the boardroom to the stockroom?

My clients’ businesses exist in a perpetual state of change. The world around them (suppliers, customers, competitors, employees, tools, technologies) is constantly evolving. The speed and magnitude of these changes ebbs and flows, so being aware of the forces with the most significant potential to alter your future (near and far) while staying true to your core purpose and values is what sets a winning organization apart. If you don’t have time to scour the internet for resources, your trusted business advisors are always happy to help give you advice on what we see across the industry or just lay out a structure to get your thoughts on a page. If your manufacturing business is experiencing change and needs guidance, feel free to contact us and we can help you Envision More.