Manufacturers confident in the future despite looming challenges
The manufacturing industry has faced its share of large-scale challenges over the last several years, including supply chain disruptions, rising material costs, and workforce shortages. Despite these issues, many manufacturers have a high degree of confidence in the state of their business conditions.
According to a recent Nationwide survey of manufacturers and independent agents, 80% of manufacturing leaders and 59% of agents expect positive business performance over the next 12 months.
The optimism is supported by national and global statistics:
- U.S. exports – Manufacturing has rebounded since 2020 when the pandemic created widespread, severe challenges. As an example, manufacturers exported more than $1.6 trillion worth of goods in 2024 – a figure that has doubled over the last 20 years – according to the U.S. Department of Commerce.
- Volume – The sheer size of the U.S. manufacturing industry is immense and would be the world’s eighth-largest economy if it stood on its own – ahead of Italy, Canada and Brazil.
- Sector growth – Industry forecasts for 2025 predict a 4.2% increase in revenues and a 5.2% growth in capital expenditure.
There’s plenty of caution within the industry as well. When considering their business’ finances, our survey showed about two-thirds of manufacturing leaders said they are concerned about inflation, tariffs and interest rates. Survey results showed:
- 64% of employers face hiring and retention challenges
- 87% fear tariffs will delay supply chains and raise prices
- 45% expect to rely on tariffed imports despite supplier changes
Worker shortages
According to a Deloitte and Manufacturing Institute study, nearly 4 million manufacturing jobs will be needed in the United States within the next eight years but 1.9 million are expected to go unfilled if more people do not enter the workforce.
Meanwhile, the Census Bureau’s Quarterly Survey of Plant Capacity showed that about 20% of manufacturing plants failing to produce at full capacity cited worker shortages as a reason for the production lag.
Our survey showed about two-thirds of manufacturers cite attracting and retaining qualified employees as a serious challenge currently as well as over the next 12 months, and 2 out of 3 manufacturing leaders stated that it is difficult to attract younger workers with the right skills for job openings.
Manufacturing leaders also said their biggest workforce-related concerns over the next 12 months include:
- Attracting and retaining qualified employees (37%)
- Training and upskilling (34%)
- Employee productivity (29%)
- Finding enough employees with critical skills (28%)
Meanwhile, seven out of 10 agents also cite attracting and retaining workers as a serious challenge and that it is unlikely to improve soon.
Supply chain and tariff challenges
Supply chains have healed considerably since the years during the pandemic, but they are still threatened by risks such as global political instability, increasingly extreme weather events, and tariffs.
Just under two-thirds (61%) of manufacturers cite supply chain disruption as a serious challenge now, and 66% said it will be a serious challenge 12 months from now.
Main business impacts of supply chain disruption cited in the survey are:
- Increased lead times for production (49%)
- Higher costs passed on to consumers (44%)
- Reduced product availability (43%)
Meanwhile, 77% of agents said tariffs were their top concern for their manufacturing clients. When considering the impact of tariffs on their business, manufacturing leaders said they were concerned about:
- the increased costs of raw materials (68%)
- having to raise prices on products and services (63%)
- the impact of tariffs on profit margins (63%)
As a result, they are making changes to help insulate themselves from increased import duties, such as:
- Increasing inventories (49%)
- Investing in domestic manufacturing (41%)
- Expanding suppliers from different countries or regions (40%)
Ultimately, some of the tariff impact will fall to consumers with 32% of manufacturers saying they plan to pass increased costs on to them and 44% saying that they plan to do a combination of absorbing impacts themselves, plus increasing some customer costs.
Efficiency through technology
According to the survey, technological advancements and strategic risk management are key factors in the sector’s future. Manufacturers see innovation and adoption of new technologies as paths to help boost operational efficiencies, helping them to stay competitive and respond to some of the challenges that they are facing.
Some of our key findings about technology adoption show:
- Investment in technology, including AI, is cited by manufacturers as the biggest business opportunity over the next 12 months, with nearly half (49%) saying so.
- Most manufacturers have integrated digital technologies in at least some of their business areas, with inventory management and Internet of Things (IoT) leading adoption rates – 91% and 83%, respectively.
- Many manufacturers are experiencing benefits of AI adoption, such as improved operational efficiency (47%) and financial savings (44%).
However, this push towards digital transformation comes with challenges. About 4 in 10 cite high costs as a barrier, followed closely by challenges integrating AI into existing systems (38%) and a lack of internal expertise (37%). Roughly 3 in 10 worry about product defects or underperformance, underscoring that even promising innovations require careful planning and execution.
With the increasing reliance on digital technologies, there is a corresponding need for increased planning and preparation. About 45% of manufacturers said increasing cybersecurity and risk management are among their top opportunities over the next year.
This takes on heightened importance as cybercrime has increased significantly in recent years. In its most recent report, the FBI’s Crime Complaint Center stated that there were more than 859,000 complaints of suspected internet crime with losses exceeding $16 billion. This represents a 33% increase over the previous year.
This jump highlights the need for businesses to continuously review and update their cybersecurity to help reduce the risk of disruption and losses. Nationwide’s cyber coverage and Cyber Resource Center can help businesses stay informed and protect themselves and their customers against cyber attacks.
Looking to agents and risk management
The survey showed 45% of manufacturing leaders said improving risk management strategies is one of their biggest opportunities over the next 12 months.
Risk management is not solely about crisis aversion; it is also about creating an environment of continuity and stability that fosters operational efficiencies. By anticipating potential disruptions and having robust contingency plans in place, manufacturers can ensure smoother operations, minimizing downtime and maintaining momentum even in turbulent times.
Agents play a key role in helping manufacturers navigate these risks and developing strategies to help protect their workers, property and operations. Our survey showed that a large majority of agents said their clients would be interested in receiving information about risk management related to topics such as tariff policies.
Risks such as supply chain disruptions and worker shortages can be addressed through efforts to strengthen business continuity planning and worker safety. Below are a few key resources from our Nationwide Risk Management team that can be shared with clients to help them keep workers safe and mitigate costly disruptions.
Taking a proactive approach not only safeguards against financial losses but also enhances a company’s reputation and reliability in the market.