Manufacturing plays a vital role in the global economy, accounting for about 15% of the world’s GDP. It fuels trade, supports millions of jobs worldwide, and provides many of the products we rely on every day.
However, like any major industry, manufacturing as a sector is not without its challenges.
In this article, we’ll explore some of the top challenges that manufacturers are facing today and, most importantly, how they are responding to them.
Here are some of the main challenges that manufacturers are grappling with today.
Global supply chains remain under considerable stress in 2025. Even though the effects of COVID-19 have subsided, other issues like geopolitical tensions, trade restrictions, and even increased demand for critical materials continue to create supply instability.
For example, ongoing trade disputes between major economies such as the U.S., China, and the EU have led to tariffs and export controls that restrict the flow of essential components like semiconductors and rare earth metals. These have forced manufacturing companies to seek alternative sources, often at higher costs and with uncertain reliability.
The ongoing war in Ukraine, now in its third year, also continues to impact the availability of commodities like oil, natural gas, and metals like steel and aluminum, which are essential for various global manufacturing processes.
According to a McKinsey survey, nine out of ten companies reported experiencing supply chain challenges in 2024. These challenges are making it more expensive and difficult for manufacturers to stay on schedule and meet customer demand.
In 2025, manufacturers are struggling to find enough skilled workers, which is slowing down the production line and limiting their ability to grow.
This shortage is a result of several factors. One of these is an aging workforce. In places like the US and the UK, for instance, about 1 in 4 manufacturing workers are over the age of 55. Essentially, experienced workers in the manufacturing sector are retiring faster than new talent can replace them. Experts estimate that if this trend continues, the U.S. alone could have around 2.1 million unfilled manufacturing jobs by 2030.
Another challenge is that younger workers often prefer jobs that are more flexible or digitally-oriented, which manufacturing jobs usually are not. Since most manufacturing work must be done in person and on a fixed schedule, it simply doesn’t match what many younger workers are looking for, and many are therefore staying away from it.
Tighter immigration rules in countries like the US are also making it harder to hire foreign workers, who have long been an essential part of the manufacturing workforce.
Adding to the difficulty of the labor shortage is a growing skills gap. As factories embrace technological advances like automation, robotics, and digital systems, there’s a widening divide between the skills workers have and those employers need. Many companies are finding it challenging to hire people who have the technical know-how to work with these advanced systems.
Another major challenge that manufacturers are facing is rising operational costs, which are ultimately directly impacting their profitability, pricing strategies, and overall competitiveness. The primary causes of this widespread cost escalation for American manufacturers include:
In 2025, manufacturers are under growing pressure to follow new environmental rules and report on their impact on the planet.
Around the world, countries are setting stricter limits on pollution, requiring better ways to handle waste, and demanding that companies be more open about how sustainable their entire supply chain is. Non-compliance can lead to significant fines and reputational damage.
It’s not just about government pressure, however. Customers, investors, and employees now expect companies they interact or do business with to be more environmentally responsible.
Adapting to these new sustainability regulations and expectations requires significant organizational changes. Manufacturers need to focus on building more energy-efficient machinery, adopt "circular economy" ideas (which means reusing and recycling materials as much as possible), and use digital tools to track and report all their sustainability data to ensure they're meeting all the new requirements.
These changes can be expensive and complex, but they’re becoming necessary to stay in business and remain competitive.
Many manufacturers are using new digital technologies to streamline their operations and make them efficient. But this comes with risks. More specifically, the use of cloud platforms, IoT-connected machinery, and AI-driven systems makes manufacturers more vulnerable to cybercriminal activity.
Smaller manufacturers are especially vulnerable, as they often lack the resources or in-house expertise to implement comprehensive cybersecurity measures.
According to a 2025 report from IBM, manufacturing was the most attacked industry by cybercriminals for the fourth year in a row. In 2024, it had the highest number of ransomware attacks, where hackers lock up a company’s data and demand money.
Besides cybersecurity, digital transformation itself poses risks when not executed properly. Rapid adoption of advanced technology like AI, machine learning, and advanced analytics without sufficient planning can result in integration issues, data silos, and costly downtime.
Organizational challenges further complicate digital transformation efforts. Employee resistance, fears of job displacement due to automation, and inadequate training can all stall digital initiatives. Without employee buy-in and proper change management, manufacturers may fail to realize the benefits of their technology investments fully.
In summary, US manufacturers are caught in a challenging dynamic. They must embrace digital transformation to remain competitive and efficient, but doing so exposes them to a growing number of cybersecurity threats and operational risks that must be carefully managed.
Across the globe, manufacturers are finding innovative ways to adapt, evolve, and remain competitive despite the industry's many challenges.
Below, we’ll look at four of the most impactful ways manufacturers are responding to today’s most challenging hurdles.
To offset labor shortages, reduce manufacturing costs, and boost productivity, manufacturers are leaning heavily into automation and smart manufacturing in 2025.
Automation entails deploying machines, robots, and software systems to perform tasks traditionally done by human workers. This is crucial because, as we’ve seen, there are not enough workers in factories right now.
By automating repetitive, dangerous, or precision-dependent tasks, manufacturers can maintain (or even increase!) output with fewer workers. For example, car factories use robot arms to put parts together quickly and perfectly, so they don't depend as much on people doing it by hand, and every car comes out consistently.
Smart manufacturing involves integrating digital technologies such as sensors, artificial intelligence (AI), and data analytics into the production process. This interconnected approach, sometimes called Industry 4.0, enables real-time monitoring of equipment and processes, predictive maintenance, and dynamic workflow optimization.
For instance, a manufacturer might install IoT sensors on machines to continuously track their health. AI algorithms analyze this data to predict when a component is likely to fail, allowing maintenance teams to intervene before costly downtime occurs.
With labor shortages and skills gaps continuing to challenge manufacturers in 2025, workforce development has become a top priority. To build a resilient and future-ready workforce, companies are taking a dual approach: equipping current employees with new skills and creating pathways to attract and train new talent.
Some of the initiatives they are taking include:
The recent supply chain disruptions have forced manufacturers to rethink their sourcing and logistics strategies. In 2025, many manufacturers' main goal is to make supply chains tougher and more flexible so they can handle disruptive elements like wars, natural disasters, or pandemics.
For example, many companies are stopping their reliance on just one supplier for essential parts. Instead, they're finding and approving multiple suppliers from different parts of the world for the same material. This way, if one area has a problem (like a factory shutdown or trade rules), they still have other options to keep production going.
Many manufacturers are also actively fostering deeper, more collaborative relationships with their suppliers. This includes sharing forecasts more openly, offering long-term contracts, and even providing financial or technical support to key suppliers to help them build their resilience.
There's also a significant trend towards shortening supply chains by bringing production or sourcing closer to the final market. For example, US manufacturers are looking into making more parts in the U.S. or nearby countries like Mexico. This strategy, known as nearshoring, reduces transit times, minimizes exposure to distant geopolitical risks, and simplifies logistics.
Additionally, companies are investing in better supply chain management and visibility through digital tools like Cin7 that track shipments, inventory levels, and supplier performance in real time. This transparency allows for faster responses to disruptions, such as rerouting shipments or adjusting production schedules.
Some manufacturers are changing their inventory strategy. For example, some are adopting the "just-in-case" approach, which involves holding onto larger amounts of key materials to protect themselves against unexpected shortages.
Lean manufacturing is an approach focused on maximizing customer value while minimizing waste in all forms. The goal is to refine operations so that every part of the production process contributes meaningfully to the final product or service.
Lean consists of the following key principles:
Technology is a critical enabler for manufacturers working to overcome today’s most pressing challenges. Let’s look at some key technologies and platforms that manufacturers today are leveraging to handle some of the main challenges of the industry.
Enterprise Resource Planning (ERP) systems bring much-needed coordination and structure to manufacturing environments. These tools integrate data and processes across different departments, including procurement, production, sales, and finance into a single, centralized platform. This creates a unified source of truth, where data is consistent, current, and accessible to all teams.
Most ERP systems also include a special module for inventory management, or they can easily connect with third-party inventory software. This functionality provides manufacturers with real-time and precise tracking of all their inventory. Such immediate visibility allows them to figure out the perfect amount of materials or finished products to have on hand to avoid costly situations like running out of raw materials (stockouts), which stops production, or having too much inventory (overstock), which ties up money and takes up valuable space.
Artificial intelligence (AI) is transforming the manufacturing industry by enabling a level of intelligence, automation, and optimization that was previously unattainable. For example, AI algorithms can analyze historical sales, market trends, and other indicators to predict future demand with remarkable accuracy. This allows manufacturers to optimize inventory and make informed procurement decisions.
AI can also vastly improve production planning. It can automatically adjust factory schedules based on current conditions, such as which machines are available, how many workers are on shift, and any sudden changes in the supply chain. This responsiveness means manufacturers can reduce wasted time, meet tight deadlines more easily, and quickly adapt to unexpected changes without losing efficiency.
Another powerful use of AI is predictive maintenance. By constantly analyzing data coming from sensors on factory equipment, AI models can detect subtle patterns that signal a machine might be about to break down. This allows maintenance teams to step in and fix issues before they cause a complete breakdown, significantly reducing costly downtime and making expensive machinery last longer.
IoT devices bring real-time visibility to the factory floor. Sensors attached to machines, systems, and products continuously capture data on performance, temperature, pressure, and more. This constant stream of information enables immediate alerts when anomalies occur, minimizing response time to potential issues.
Beyond immediate alerts, the accumulated data offers valuable insights into long-term performance trends. Manufacturers can use this information to fine-tune processes and ultimately make data-driven decisions that optimize production processes.
Cloud-based collaboration tools are software platforms that are accessed via the internet (or “the cloud") rather than on a company's computers/servers. They allow multiple people to work together on documents, projects, and plans from anywhere, using any device, as long as they have an internet connection.
As manufacturing becomes more complex, with operations often spread across different locations or even continents, cloud-based collaboration tools ensure that all stakeholders remain connected and aligned. They allow teams, whether on the factory floor, in the office, or working with suppliers on the other side of the world, to share documents, update schedules, and track project progress in real time.
The overall outcome is faster communication, significantly fewer delays due to waiting for information, and much better coordination across different departments, with external suppliers, and with partners.
As we've seen, modern manufacturing faces a complex mix of challenges, including supply chain disruptions, labor shortages, and rising operational costs. Manufacturers are actively fighting back by embracing automation and smart manufacturing, investing in workforce development, making their supply chains more resilient, and adopting lean manufacturing principles.
As we’ve seen, technology plays a crucial role in supporting these efforts. Cin7, for instance, is advanced cloud-based software that provides manufacturers with powerful tools to manage production and inventory, streamline operations, and enhance supply chain visibility.
With Cin7, you gain a fully integrated platform that centralizes your inventory, production. sales, and supply chain data in real time, empowering you to make smarter decisions, optimize resource allocation, and quickly adapt to shifting market demands. What’s more, Cin7 comes with powerful automation capabilities that reduce manual tasks and errors, and advanced analytics that provide actionable insights to help drive improved efficiency and growth across your entire manufacturing operation.
Book a demo of Cin7 today to learn more about how it can strengthen your manufacturing operations and help you navigate today’s challenges with confidence.
Our World in Data. Share of manufacturing in gross domestic product (GDP). https://ourworldindata.org/grapher/manufacturing-value-added-to-gdp?tab=chart
McKinsey & Company. Supply chains: Still vulnerable. https://www.mckinsey.com/capabilities/operations/our-insights/supply-chain-risk-survey
Manufacturing Today. Persistent Labor Shortages are Endangering US Manufacturing Output.
The Manufacturing Institute. 2.1 Million Manufacturing Jobs Could Go Unfilled by 2030. https://themanufacturinginstitute.org/2-1-million-manufacturing-jobs-could-go-unfilled-by-2030-11330/?stream=workforce-news
IBM. IBM X-Force 2025 Threat Intelligence Index. https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/2025-threat-intelligence-index
EC Group. The Rise of Just-In-Case Inventory Management. the-rise-of-just-in-case-inventory-management