2025 Manufacturing Outlook: Preparing for Uncertainty

Key Takeaways:

• The manufacturing outlook for 2025 will continue to bring uncertainty, requiring manufacturing operations to be more prepared than ever before
• By leveraging technology investments, including AI-driven manufacturing insights, and aligning them with business strategies, manufacturers can lessen high interest rates, tariff impacts, and other risks

The Full Article:

President-elect Trump has stated he will impose tariffs once in office. If his promise comes to fruition, it could create upheaval globally and, in particular, to U.S. manufacturing companies. Tariffs on Canada, China, and Mexico could have a profound economic impact on the manufacturing industry, including major supply chain disruptions and a slowdown in production.

However, these are not the only potential speedbumps in the 2025 manufacturing outlook.

Deloitte’s 2025 Manufacturing Industry Outlook notes that although the inflation rate has contracted, manufacturers are still contending with higher costs. It points to the producer price index for input materials and components, which, though stabilized, remains high. If these tariffs are realized, the current material and component prices likely will rise, further compromising revenues and profitability. Tax Foundation suggests that if all of Trump’s tariff proposals go into effect, the average tariff rate could rise from 2.4 percent to 17.7 percent—the highest since 1934.

Four Areas to Prepare for Uncertainty

It will be easier to prepare for uncertainty if you focus on those areas most critical to your business objectives. Let’s focus on four major ones:

1. Profitability

Profitability is key to remaining competitive and growing. What can manufacturers do to lessen the effects of rising material costs and pricing wars without impacting consumers’ wallets?

Potential Scenario: Many manufacturers could be far more profitable. However, factors beyond their control, including inflation, supply chain issues, tariffs, and geopolitical risks, can create a domino effect. As a result, manufacturers can experience operational inefficiencies, stalled decision-making, and product development bottlenecks that impede profitability. From an internal perspective, the following can lead to deep cuts in profits and slow time to market:

• Continuous design iterations
• Late-stage engineering change orders (ECOs)
• Cost overruns and/or inaccurate cost estimates
• Inability to lower costs due to outdated information and/or processes

Action: Digital solutions like aPriori streamline the product development process and mitigate external disruptions by:

• Providing design for manufacturability (DFM) and design to cost (DTC) along with recommendations for remediation early in product development
• Reducing iterations and ECOs, ensuring a more efficient, cost-effective design process and reduction of manufacturing cycle times
• Navigating new product introductions (NPI) challenges with manufacturability, cost, sourcing, and sustainability guidance
• Conducting make vs buy analysis to determine product feasibility and profitability
• Optimizing existing parts (reduce costs without compromising value) via aPriori’s Value Analysis/Value Engineering (VAVE)

Our advanced solutions provide accurate, timely cost insights, ensuring projects stay within budget and on track.

Benefits:

• Faster make vs buy decisions
• Design insights early in development, decreasing delays and costs
• NPI cost reductions
• Improved operational efficiencies

Example:

2. Revenue

Today’s manufacturing environment requires that organizations stay one step ahead of the competition. To innovate faster or implement advanced technologies, a robust revenue stream is crucial. How can you do so quickly and efficiently?

Potential Scenario: Although manufacturing revenue is expected to increase by 4.2% in 2025, any number of developments, including Trump’s potential tariffs, could impact that number. Operational inefficiencies can further hamper revenue streams, including:

• A lack of detailed data and visibility into revenue roadblocks
• Manual solutions and processes that are cumbersome, siloed, and difficult to use
• More experienced quoting professionals exiting (i.e., retirement)
• Inability to collaborate and share information and insights in real-time

As a result, manufacturers often experience slow, inaccurate response times to requests for quotes (RFQs). The ability to quote faster, accurately, and more competitively is essential to winning more business and growing revenue.

Action: Advanced solutions like aPriori streamline processes and deliver greater data accuracy. When quoting, they factor in all cost considerations, including geometry, labor, processing times, and more. Manufacturers are able to:

• Get more accurate cost estimates
• Mitigate risks that compromise profit margins
• Respond to RFQs faster

Benefits:

• Greater quoting confidence
• Increased win rates
• More profitable business wins
• Faster (and repeatable) RFQ turnaround times
• Streamlined design and cost review/approval
• Accelerated supplier quote responses (and often higher response rates)

Example:

3. Manufacturing Risks

As outlined above, the slightest hiccup in manufacturing operations can halt product development and hamper competitiveness. How can manufacturers mitigate risks and be more proactive in addressing disruptions?

Potential Scenario: Supply chain disruptions and higher costs will continue into 2025, particularly if tariffs are enforced. An agile sourcing and supply chain management strategy that utilizes AI-driven insights is critical.

Geopolitical tensions and other factors may contribute to ongoing shipping challenges in 2025. Examples of these risks include:

• 2024: The Houthi militia attacked cargo containers in the Red Sea, and the threat still exists
• 2023: A drought significantly reduced the Panama Canal’s water levels, causing delivery delays and increased costs for goods and raw materials between the United States and Asia as well as other global routes
• 2022: Truck drivers disrupted Canada, occupying parts of Ottawa and blocking its most critical trade route to the U.S. in protest of Covid restrictions and vaccine mandates

Other manufacturing risks include a lack of skilled labor. Nearly 60% of manufacturers in the National Association of Manufacturers (NAM) outlook survey for the third quarter of 2024 cited the inability to attract and retain employees as their top challenge. Moody’s projected Trump’s tariff plan would result in a reduction of 675,000 U.S. jobs and increase the unemployment rate by 0.4%, which could lead to a recession. It also could worsen labor shortages for manufacturers if tariffs force them to cut staffing due to cost constraints.

Action: Manufacturers need to leverage technology to navigate supply chain disruptions and compensate for labor shortfalls as they develop a better long-term strategy to address these issues. Here’s how:

• Digital factories identify and eliminate manufacturability and cost risks early in design, accelerating time to market and ensuring profitability
• NPI risk scoring and mitigation can confirm the feasibility of a new product and ensure smoother production processes and high-quality outcomes
• Design to cost to reduce inflation impact
• Supply chain management to work around disruptions, improve supplier relationships, quote faster, and get more accurate supplier data via Regional Data Libraries (RDLs)
• Automated design, sourcing, cost, and sustainability insights to compensate for skilled labor shortages and quickly ramp up experience for newer workers

Benefits:

• Reduce design iterations and ECOs
• Manufacturing cycle time reductions
• Manufacturing risk scoring/mitigation (NPI)
• Stronger, more agile supply chain and supplier relations
• Labor shortage compensation without slowing production
• Faster make vs buy decisions

Example:

4. Sustainability

Manufacturers, including the automotive industry, are feeling the pressure to become more sustainable. Is it possible to achieve profitability AND lower carbon emissions?

Potential Scenario: Despite sustainability progress, roadblocks persist. One administration’s green efforts could unravel with the next administration:

• Trump plans to impose battery tariffs, roll back Biden’s EV mandate, and erode current sustainability regulations
• In 2024, several automakers reduced electric vehicle (EV) investments in response to slower-than-projected passenger EV adoption
• EV automakers in North America and Europe must compete with Chinese and Latin American EV manufacturers producing more vehicles at significantly lower sticker prices

Action: aPriori’s sustainability solutions help reduce embodied carbon in new and existing parts while mitigating manufacturing risks. Here’s how:

• Digital factories enable energy source specification as part of any manufacturing simulation. Materials, energy requirements, cycle times, and more are factored in
• Manufacturing simulation utilizes the above data to calculate precise CO2e emissions associated with new or updated product designs
• Cost vs carbon evaluation simulates how design, materials, manufacturing processes, and specific factory changes impact CO₂e and cost
• Hidden CO₂e identification that drives better product decision-making

Benefits:

• CO₂e estimates/mitigation (NPI)
• Reduce CO₂e of existing parts (VAVE)
• Enhance sustainable sourcing efforts
• Regulatory requirements fulfilled
• Improved brand recognition and consumer trust

Example:

Digital Transformation: A Silver Lining In a Cloudy Forecast

Though the economic outlook isn’t particularly sunny, there are still many unknowns. The good news is that advanced technologies can mitigate many roadblocks. For example, manufacturing insights can anticipate potential risks, optimize design, cost, sourcing, and sustainability, and accelerate time to market. As a result, manufacturers can take a more proactive approach to building greater resilience while achieving their goals.

Best of all, these new technologies allow manufacturers to find the silver lining in an otherwise cloudy forecast. Those who find and optimize new opportunities will emerge from the storm stronger, more competitive, innovative, and profitable.