Top 2025 manufacturing trends to watch

In 2025, manufacturers need to proactively adapt their operations to thrive in today’s competitive landscape. Digital transformation and the changes associated with the Fourth Industrial Revolution, or Industry 4.0—driven by more dynamic and interconnected operations—will be at the heart of all these efforts.

Supply chain resilience remains paramount for manufacturing companies, decarbonization is an increasingly urgent priority, and leadership teams will need to adapt to the changes that may arise under the Trump administration. Organizations need to understand how these themes overlap and affect each other to gain or maintain a competitive edge.

Here are the top six trends RSM has identified for the manufacturing industry:

Machines, assembly lines, smart sensors, robots and other devices generate enormous amounts of industrial data that, historically, manufacturers have not taken advantage of. As more companies implement advanced technologies and more “factories of the future” take shape, a robust data strategy becomes paramount. A data-driven decision model will provide businesses with predictive insights that can optimize processes, strengthen risk assessment procedures and ultimately help them maintain a competitive edge.

To have a successful data-driven manufacturing operation, companies also need the information technology infrastructure to support advanced Industry 4.0 technologies; this area is where many middle market manufacturers are further behind their larger counterparts. Organizations need a flexible, scalable and interconnected IT architecture to support the shift to more data-driven operations and meet future challenges.

Manufacturing is also increasingly adopting generative artificial intelligence and exploring its potential to revolutionize processes and unlock new human capabilities. The potential of AI—generative or otherwise—to enhance predictive maintenance, optimize the supply chain and improve quality control is only the beginning. Increased productivity, enhanced decision making and improved cost savings will continue to drive broader adoption of the technology across the middle market. While challenges exist, if companies plan carefully, invest in infrastructure and focus on ethics, AI will continue to revolutionize the industry.

While advanced technologies are streamlining many aspects of traditional manufacturing operations and breaking down longtime barriers that can impede innovation and collaboration across the entire value chain, they are also creating more opportunities for cybercriminals to compromise manufacturers. According to the 2024 RSM US Middle Market Business Index special report on cybersecurity, 28% of middle market executives surveyed said their company experienced a data breach within the last year, rising from 20% in the 2023 survey and matching 2021 results.

Manufacturers—and any third parties they work with—need to raise the bar on protecting themselves in an environment where workers, machines, supply chains and organizations are becoming ever more digitally connected. Understanding which critical information and intellectual property assets need protection from potential cyberattacks—and taking action to put those protections in place—will increasingly become a source of competitive advantage.

While manufacturers historically have focused on making their supply chains more cost-efficient, few have considered addressing vulnerability to trade risks or global pandemics. The past few years have shown that companies that have invested in technology and focused on supply chain agility have an edge against their competition, and that will continue to be true as we look to the future.

Manufacturers need to take advantage of technology to create more connected supply chains, providing an opportunity to link various pieces of the supply chain together to receive more data. Companies prioritizing digitizing their supply chains will be more resilient and better positioned to respond to future supply and demand disruptions (for instance, the manufacturing construction boom in 2023). Digitization will be essential in the new era of globalization as companies diversify where they source and make their goods.

Additionally, President Donald Trump has expressed his intent to increase tariffs during his second term, which could significantly affect most importers, particularly those dealing with goods from China. Although it is difficult to anticipate the specific tariff increases Trump plans to pursue—partly because he mentioned a wide variety of trade targets and tariff ranges during his campaign—importers may contend with increased costs that could disrupt supply chains. 

As manufacturers grapple with technology’s increasing role throughout their organizations, the impact on their workforce will be significant. The dynamic and fast-paced environment created by today’s advanced technologies—from intelligent robotics to big data and the industrial Internet of Things—will require the current workforce to adapt. It will also require companies to be more intentional and creative in attracting and retaining talent.

We expect this will bring a renewed emphasis on cultivating new skills for an environment where analytics increasingly drive business decisions and humans more commonly coexist with robots. Manufacturers will need to reassess and update their training and workforce development strategies to keep pace with this industry shift. Companies will also need a clear understanding of which core offerings to focus on and which might make sense to outsource.

Immigration policy under the Trump administration could also have a significant impact on the manufacturing sector. Across all industries, restrictive immigration policies pose a near-term risk to the labor supply. Should the unemployment rate decline as immigration declines and the economy heats up, talk of a wage price spiral will restart just as the Federal Reserve has obtained price stability. Manufacturers may need to revisit their initiatives for upskilling and retraining workers to prepare amid immigration policy uncertainty.

Twenty years of subdued inflation, low interest rates, a reduced cost of capital and financial leverage have given way to a new regime. An era characterized by China’s export of deflation, with its inexpensive goods shipped around the world, has given way to the embrace of industrial policies by nations that now want to nurture and protect sectors that are vital to their interests. These changing dynamics are reshaping the global economic landscape.

Efforts to encourage the reshoring or friendshoring of industrial production will lead to modest constraints on global finance and investment, and those constraints may become more onerous over time.

The impact of these structural changes is profound, and amid margin pressures in a higher-cost environment, manufacturers will need to focus on optimizing operations. This is especially important as the manufacturing sector was in contraction territory for most of 2024, according to the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index.  

In the United States, legislation in recent years—including the Inflation Reduction Act and the CHIPS and Science Act of 2022—has also shaped a new era of industrial policy that is driving increased construction investment for U.S.-based semiconductor manufacturing and green technologies that support the energy transition.

Canada, as well, is actively shaping its policies to reshore supply chains and attract investments in priority sectors, such as clean technology, advanced manufacturing, agribusiness, life sciences, the electric vehicle supply chain and critical minerals exploration. Governments at both the federal and provincial levels offer investment tax credits and incentives, funding and grants through various innovation funds and programs, government financing, and targeted support negotiated directly with manufacturers. The 2023 federal budget amplified these measures, introducing a 30% refundable clean technology manufacturing investment tax credit for capital investments in eligible property used in clean technology manufacturing and critical mineral extraction and processing.

The fact that clean energy incentives are a significant component of recent legislation underscores the importance of environmental, social and governance (ESG) issues for manufacturers, too. As ESG gains more traction among various stakeholders, decarbonization will likely need to become a bigger priority for manufacturing, automotive and energy companies. Manufacturers need to understand how to capitalize on this wave of opportunity.