As we continue into 2025, the manufacturing industry faces a dynamic and evolving supply chain landscape. From tariff and trade policy updates to ongoing labor shortages, large, midsize, and smaller manufacturers and distributors share common challenges — the only difference is how to scale a solution that fits.
While the future of the manufacturing industry is uncertain, it’s clear that disruption is the default; and adapting to it, the advantage. Companies need to quickly and readily adapt to significant disruption to stay competitive and resilient. Here are the top five supply chain challenges that will affect manufacturers this year.
Reshoring and nearshoring
Manufacturers continue to use reshoring and nearshoring strategies to help reduce risk, lower transportation costs, improve supply chain resiliency, and quickly react to changing market demands.
Ongoing U.S. tariff policy changes bring renewed attention to reshoring/nearshoring in 2025 for large and midsize manufacturers with overseas operations or suppliers. The initial setup costs and potential talent gaps can make the shift in operations challenging; however, the long-term benefits of reduced lead times and enhanced control over production processes can help companies make their supply chains more resilient against economic and geopolitical changes.
Large and midsize manufacturers need to decide if the advantages of reshoring/nearshoring outweigh the costs for their business. If the answer is yes, it may be time to reassess your strategy.
Stay informed on evolving trade and tariff regulations with our latest insights.
Agile and resilient strategies
Agility and resilience are essential safeguards against supply chain disruption. Flexible strategies such as collaborative planning and real-time performance monitoring can help manufacturers forecast and plan for future disruptions to ensure business continuity. Diversifying suppliers/vendors can also help spread out risk in the face of disruption rather than concentrate resources among a few sources.
Likewise, continuously refining risk management practices can strengthen supply chain resilience and minimize exposures. Activities like regularly assessing your critical suppliers and continuously monitoring demand and inventory levels can help manufacturers proactively screen and identify risks that can have ripples across the supply chain.
Taking an agile stance to your supply chain strategy remains a serious challenge amid the increasing complexity of operations. Not only do you need to be able to identify risks across the supply chain, you also have to balance cost-efficiency with the need for flexibility. Companies that can strike the right balance can achieve a significant competitive advantage.
Inventory management challenges
Inventory management continues to be a major concern for supply chains in 2025. Supply chain disruptions, demand volatility, and the complexities of technological integration pose big challenges in balancing inventory levels. Particularly, midsize to smaller companies possess less bargaining power with larger suppliers and thus need to take a strategic approach to inventory optimization to protect capital and support growth.
To navigate these issues, manufacturers are focusing on improving overall inventory management practices and collaboration across the organization. Manufacturers can pursue best practices by actively managing planning inputs (e.g., reorder points, lead times, and demand signals), implementing a robust cycle counting program that integrates continuous improvement activities based on the results, and integrating barcode scanning technologies. The latter, alongside capturing multiple points of use, can help enhance overall supply chain traceability. Automating inventory plans with material requirements planning software and reviewing the sales and operations planning side of the business to improve supply chain forecasting can also help manufacturers address challenges with balancing inventory levels.
Companies that effectively use agile supply chain strategies, advanced analytics, and predictive modeling can improve inventory accuracy, reduce stockouts, optimize inventory levels, and ultimately, better meet customer demands.
AI and technology advancements
Artificial intelligence (AI) and machine learning (ML) technologies continue to play new and advantageous roles in supply chain management. These technologies can enable predictive analytics, demand forecasting, and automated decision-making, leading to enhanced efficiency and reduced errors.
AI and advanced technologies aren’t just for larger companies — midsize and smaller manufacturers as well need to consider how they can use these capabilities to meet the scale of their problems. For instance, midsize manufacturers can significantly improve inventory management and operational performance by implementing AI and ML solutions. However, the high implementation costs and need for skilled personnel remain key barriers to adoption.
Sustainability and circular supply chains
Sustainability remains an important feature of business strategy in the manufacturing industry. Circular supply chains — which emphasize waste reduction and recycling to extend product life — not only reduce environmental impact, but also help ensure compliance with international regulations and enhances brand image.
Some solutions require initial investments in new processes and technologies but provide a long-term payoff. For example, strategies such as reusing raw materials or recycling packaging waste back into the supply chain can help support business operations and support sustainability principles. These strategies in turn can minimize transportation costs and lower capital requirements for inventory. Successful companies can identify opportunities to align sustainable supply chain strategies with business goals, helping to meet the diverse needs and objectives of stakeholders across the supply chain.
Get ahead of supply chain issues
While the top supply chain issues fluctuate, the need to prepare, pivot, and make critical decisions quickly will never go away. Considering strategies like relocating operations, or investing in effective inventory management, sustainability, agility, and advanced technologies will not only enhance operational efficiency but also build a resilient and future-ready supply chain. The key is effectively scaling solutions to fit your company’s industry, size, and business goals. Get it right, and you’ll be positioned for success, no matter the challenge or disruption.
