Manufacturing Industry Trends to Watch in 2025

Businesses in the manufacturing sector contribute significantly to the economy. However, the industry has witnessed several significant challenges in the past few years. Geopolitical instability, economic uncertainty and stagnant domestic demand weigh heavily on the sector. In fact, according to Statistics Canada, manufacturing sales fell 1.3% in the third quarter of 2024, the fourth consecutive quarterly decline.

For maximum success in 2025, manufacturing organizations should monitor the latest sector developments and appropriately adjust operations and risk management practices to respond to these shifts. This article details the manufacturing industry developments organizations should stay abreast of in the coming year.

Digital Transformation

In 2025, manufacturers will continue to embrace digital transformation and technology adoption. Businesses will use these tools to improve their operations by enhancing productivity, reducing human error and facilitating decision-making. In addition, manufacturers may leverage cutting-edge technologies to uncover operational efficiencies, particularly pertinent as America shifts back to a Republican administration. Specifically, President Donald Trump’s anticipated tariffs on products imported to the United States could significantly impact Canadian manufacturers, especially considering that an estimated 75% of Canadian exports go to the United States. Amid the inflationary upheaval the tariffs could create, passing the costs onto customers may not be feasible. As such, manufacturers must find ways to operate more efficiently to reduce outgoings and remain competitive in 2025.

Fortunately, technologies like robotics, enterprise resource planning software, the Internet of Things (IoT) and blockchain can improve manufacturers’ efficiency and overall performance capabilities. Another tool gaining increased traction is generative artificial intelligence (AI), which is a type of AI that receives data inputs and creates new content (e.g., text, images, audio) based on that data. Generative AI can be used to create optimal product designs, improve quality control, address supply chain issues and enhance predictive maintenance. Generative AI can also help manufacturers promptly respond to client requests and questions.

Technology undoubtedly has several benefits, but it’s worth noting that its use can introduce various risks. For instance, the increased connectivity via the IoT and reliance on digital systems can expose manufacturers to cyberthreats like data breaches, ransomware attacks and sabotage. According to a report by industry-focused news magazine Canadian Manufacturing, more than three-quarters of manufacturers are highly concerned about their systems’ security. As such, businesses should review their digital exposures and adjust risk mitigation practices to mitigate cyberthreats. Additionally, companies should consider securing dedicated cyber insurance.

Supply Chain Challenges

Although supply chains show signs of normalizing following a challenging few years, disruptions remain a significant risk due to various external threats, such as natural disasters, geopolitical tensions, trade disputes and unexpected events like the COVID-19 pandemic. As such, the manufacturing sector is witnessing a renewed interest in localized manufacturing. Some manufacturing businesses have also begun engaging in nearshoring and reshoring. Nearshoring involves shifting production from overseas to nearby countries, while reshoring entails moving production back into a business’s home country. This trend aligns with government initiatives to strengthen the manufacturing sector while supporting local economies and creating jobs for Canadians. For instance, in October 2024, the Federal Economic Development Agency for Southern Ontario announced a funding investment of more than $6.5 million for three projects that support Southern Ontario’s manufacturing sector.
Other tactics to help businesses ensure supply chain resiliency in 2025 may include:

• Strengthening relationships—Manufacturing businesses that build strong relationships with their suppliers are more likely to receive additional support when navigating supply chain issues. For example, businesses with solid supplier connections may benefit from solutions like modified shipment routes and prioritized access to high-demand materials as they become available.
• Diversifying suppliers—Some manufacturing businesses have added contingencies to their supply chains by investing in several suppliers for the same materials instead of relying on a small selection of primary suppliers. With these diversification strategies, businesses can increase the likelihood of maintaining access to essential production materials even if their primary suppliers are experiencing disruptions.

Labour Challenges

The manufacturing industry continues to grapple with labour shortages, and the emergence of evolving technologies may be a contributing factor. Specifically, sophisticated technologies that automate tasks fundamentally change many job roles, and some employees struggle to keep pace. In fact, 38% of workers said that technological change will likely impact their jobs to a large or very large extent in a recent survey by professional services firm PwC. In addition, more than 70% of businesses reporting labour shortages say it is skilled positions they are having trouble filling. Consequently, employers must prioritize robust upskilling programmes in 2025 to address disparities in workforce knowledge and ensure workers have the necessary skills to flourish amid new working methods.

One additional concern is the mindset of young talent. Indeed, the manufacturing industry is often overlooked by younger people, who may favour opportunities in other sectors, such as technology and finance. Government initiatives, such as the Skilled Trades Ontario, are facilitating apprenticeships and training to develop workers’ skills and encourage them to enter new trades. However, manufacturing businesses must take their own steps to encourage the next generation of manufacturing employees in 2025; collaborating with schools and universities and organizing community events (e.g., job fairs) is one way to do this.

Other general measures manufacturing businesses may leverage to address labour challenges include offering flexibility and more competitive wages and benefits and attempting to attract employees who recently left the industry back to work through various incentives (e.g., flexible employment arrangements and career advancement opportunities). It may also benefit manufacturers to explore underrepresented demographics to increase their talent pools and expand their searches by using talent recruitment agencies.

Sustainability

As consumers’ demand for sustainable products grows, sustainability may be an essential consideration for manufacturing organizations in 2025. Several studies have shown that people increasingly opt for products produced by companies with “green” credentials, and they may even be willing to pay more. Consumers are willing to pay 9.7% more for sustainably produced or sourced goods, according to a report by PwC.

The Canadian government’s commitment to achieving net-zero greenhouse gas emissions by 2050 is another factor behind businesses beginning to rethink their environmental impact. However, sustainable practices often require significant investments in technology, equipment and processes, which may deter some companies. Simple changes like optimizing material usage or reducing waste through better production planning can help win favour with consumers while controlling costs.

Several trends are influencing the manufacturing sector this year. By staying on top of these developments and mitigating their associated exposures, manufacturing businesses can effectively position themselves to maintain long-term growth and operational success.

For more best practices, or to find out how to reduce your manufacturing insurance costs call CMB at 780.424.2727 or click here to get a quote.