Manufacturing industry to face a challenging 2025

Manufacturers expect raw material and input costs to grow by 2.7%.

Manufacturers will face a challenging 2025 and uncertain business climate due to higher costs, potential policy changes following the US and global elections, and geopolitical uncertainty, according to Deloitte.

According to a National Association of Manufacturers survey, manufacturers expect raw materials and other input costs to grow by 2.7% over the next year.

Deloitte said the manufacturing sector will see changes in its talent, artificial intelligence, supply chain, smart operations, and clean technology segments.

Labor market tightness has been declining in 2024 and July was the first month since May 2021 unemployment exceeded job openings. The quits rate in the sector reached 1.6% in September 2024.

According to Deloitte, companies are focusing on improving the worker experience and leveraging digital tools to help meet workers’ changing expectations.

As for artificial intelligence (AI), Deloitte found that 55% of industrial product manufacturers are already leveraging generative AI tools in operations, and over 40% plan to increase investment in AI and machine learning over the next three years.

Identifying targeted opportunities to invest in AI may be key for manufacturers in 2025 as it improves efficiency, productivity, and cost reduction.

Manufacturers will also continue to experience supply chain disruptions due to shipping delays, labour challenges, rising input costs, and potential government policy changes.

Deloitte said manufacturers must stay focused on investing in digital tools that enable advanced supply chain planning techniques, better collaboration with suppliers, simulation, and enhanced visibility.

Another trend to watch is the evolution of manufacturing toward a software-driven industry. Manufacturers are increasingly enhancing the digital connection to their products to gather data that can help improve performance and serviceability.

Moreover, some companies have continued to make targeted investments in adding lower-carbon options, such as electric and hydrogen power, to their product lines.

For example, one heavy equipment manufacturer plans to add over 20 electric and hybrid model options to its lineup by 2026, Deloitte noted.