December 17, 2024 Manufacturing Paves the Way for 2025 Renaissance

Manufacturing in 2025 begins with a strategic pause—optimizing operations, workforce retention, and adapting to global shifts.

By Mike Devereux and Laurie Harbour, Wipfli

The manufacturing industry isn’t just waiting for better times — it’s strategically positioning for a seismic shift in late 2025. Many industry headlines focus on AI adoption and supply chain reconfigurations, but a recent, unprecedented “strategic pause” quietly transformed how manufacturers operate.

Hunkering down hasn’t been just about survival. It’s been about preparing your organization for growth, getting better at collecting and using data, structuring your organization to adapt to market changes and creating a focus on excellence in all areas of your operations. 

Going into 2025, manufacturers face a complex landscape of workforce challenges, technological opportunities and policy shifts. Those who’ve used this strategic pause effectively are positioning themselves to navigate these interconnected challenges while capitalizing on emerging opportunities.

The cost of talent retention

Over the past 18 months, most manufacturers have held onto skilled workers despite slowed production, absorbing higher payroll costs during lower revenue periods. It’s not because they’re desperate — it’s strategic. We’ve seen a manufacturer increase profits by $700,000 despite a $1 million revenue drop, proving that operational optimization can lead to results regardless of market conditions.

The manufacturing workforce has fundamentally transformed post-pandemic. Baby boomers are retiring, creating knowledge gaps that can’t be quickly filled. Meanwhile, multiple sectors — from manufacturing to hospitality — are fighting over the same worker pool.

Smart manufacturers are responding aggressively: partnering with trade schools, engaging students as early as fifth grade and transforming their facilities from the stereotypical “dirty and dingy” image to showcasing modern, clean operations where technology and skill intersect.

Many in the industry talk about Industry 4.0, but most small and midsized manufacturers don’t know where to begin. Conference speakers we’ve seen and some industry experts push robotics and artificial intelligence (AI), but successful manufacturers are taking a more measured approach: Start small, and scale what works.

The key questions aren’t about keeping up with trends, but rather about practical outcomes. Can technology help sales create smarter quotes using real-time data? Will it reduce unplanned downtime? Can it improve visibility into profitability by customer, part or region?

Taxes, tariffs and regulation changes forthcoming

As manufacturers prepare for 2025, several policy changes warrant attention. The expiring provisions of the Tax Cuts and Jobs Act (TCJA) will likely prompt congressional action, with potential implications for manufacturing-specific provisions like R&D cost treatment and equipment depreciation schedules. These changes could create opportunities for strategic tax planning and investment decisions. 

While it’s yet to be seen how trade policies and tariffs will be implemented under a new administration, changes to tariff structures could affect both domestic production costs and international competitiveness. Manufacturers should prepare for potential adjustments to supply chains and pricing strategies, particularly those with significant international material sourcing or overseas production (like from China).

Toolmakers and toolmaking in the U.S. may see growth or return, but unfortunately, there aren’t many left. So, production shops and OEMs will need to build a tool-buying strategy, knowing which tool makers are left that can support them.

Stringent trade policy will likely heighten geopolitical issues. The incoming administration may impose tariffs as early as day one, so the manufacturing community must watch closely and start planning for the change.

The renegotiation of the United States-Mexico-Canada Agreement (USMCA) in 2026 is significant because China invests heavily in Mexico to get its products to the U.S. Companies will need to evaluate their North American supply chain strategies in light of these upcoming negotiations.

Global supply chains are undergoing their own revolution. As manufacturers reduce dependence on traditional manufacturing hubs, particularly those facing demographic challenges and labor shortages, new production centers are emerging. India and Mexico are positioned to fill crucial gaps, but this shift isn’t just about finding new low-cost locations. It’s about building resilient, distributed production networks that can withstand future disruptions. Manufacturers can expect tariff and trade policies to impact them as worldwide manufacturing norms continue to evolve.

Cybersecurity requirements, like the Cybersecurity Maturity Model Certification (CMMC) that will take effect in early 2025, will fundamentally change how manufacturers, especially those in the defense supply chain, approach data security. Companies that don’t meet these standards will not only face compliance issues but also be excluded from contract opportunities entirely.

The 2025 manufacturing playbook

Success in this environment means manufacturers must:

• Know their data — not just profit and loss, but part by part and customer by customer profitability — and find the story in the data to problem solve.
• Implement targeted technology solutions that directly impact operational visibility and decision-making speed.
• Invest in workforce retention and development, even during slower periods.
• Build relationships with suppliers in emerging manufacturing hubs.
• Strengthen cybersecurity infrastructure ahead of new requirements.
• Use regulatory, tax and tariff changes as catalysts for process innovation.
• Create operational flexibility to manage the potential for increased demand in late 2025 for some product lines but not all. The agility to respond with the speed required will be the key.

Overall, the manufacturing community can expect demand to return, but not immediately. Less regulations and lower taxes are a good thing for manufacturing, but the impact of tariffs may be on a sector-by-sector basis, creating some winners and losers.

About the Authors:

Mike Devereux, Partner – An expert in tax incentives, R&D credits, and tax-efficient strategies for manufacturers. Mike Devereux is a national speaker and author and educates on key tax solutions.

Laurie Harbour, Partner – With over 35 years in manufacturing and consulting, Laurie Harbour specializes in strategy, operations, and performance optimization.

Read More From Laurie Harbour on Metalforming Magazine:
Sales Needs A Reboot

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