Turning trade issues into opportunities for modernization

In the face of evolving trade policies, industrial manufacturing (IM) executives are navigating the challenges with a balanced approach, combining measured concern with proactive planning. Forty-four percent of IM leaders view these policies negatively, citing operational and planning difficulties, strategy disruptions, and increased costs. However, the majority remain neutral or see the policies as positive. A key concern for IM executives in a high-tariff environment is supply chain disruption, followed by rising delivery and compliance costs, and service delays due to sourcing or location constraints. Despite these challenges, the IM industry leads all others in planning for potential disruptions, with 28% of its executives engaging in scenario planning, which is significantly higher than the 22% average across other industries.

IM executives report a strong reliance on outsourcing and managed services, with 60% indicating significant dependence. In response to trade and tariff uncertainties, many are shifting more non-core roles to external providers. The use of contract labor is increasing and hiring freezes are being implemented. Rather than reshoring, the preferred approach involves offshoring and building regional redundancy or diversification to manage risk and ensure business continuity. Over half are accelerating modernization and digital innovation. However, fewer are prioritizing the reduction of labor-intensive service delivery, highlighting an area that may warrant greater attention.

To stay ahead, IM executives should monitor trade developments and adjust strategies as needed. Consider the following when acting:

• Assess your supply chain for potential vulnerabilities and develop contingency plans.
• Explore opportunities to diversify your services and create redundancy in critical areas.
• Invest in automation and digital transformation to reduce operational costs and enhance efficiency.
• Engage in scenario planning to prepare for various trade policy outcomes.

Download our report to learn how leading executives are using managed services and modernizing their operating models.