How Manufacturers Can Expand in the Changing Marketplace

The U.S. manufacturing industry has continued to embrace resiliency and agility in recent years. And despite increasing complexities in trade policy and fluctuating legislation, optimism continues to reign. Our study of mid-level manufacturers found that over 90% are confident in their ability to grow in 2025.

Here are key strategies for manufacturers to achieve sustainable growth, regardless of what comes next.

Diversification

Diversification can enhance operational efficiency, increase brand exposure, and strengthen customer loyalty.

Product Diversification

Introducing new products or variations of existing ones can open additional revenue streams. This strategy often involves investing in research and development (R&D) to innovate and enhance product offerings.

Diversification into related product lines or entirely new sectors allows organizations to leverage existing expertise and infrastructure while exploring new growth opportunities. By broadening their product portfolio, manufacturers can cater to a wider range of customer needs and preferences.

For instance, a company that traditionally manufactures athletic footwear might diversify by launching a line of casual wear or sports accessories. This captures a broader customer base and reinforces the brand’s presence in the market.

Vertical Diversification

Exploring additional opportunities within the supply chain is another effective strategy. Vertical integration involves increasing control over different stages of the supply chain, either forward (towards the consumer) or backward (towards raw materials).

Manufacturers realized the importance of vertical diversification after suffering supply chain volatility in recent years.

For example, a shoe manufacturer producing interior components in-house while outsourcing rubber sole production can benefit from vertical integration by taking over the production of rubber soles. This ensures better quality control and may reduce costs. Selling the finished product through proprietary stores and other retail outlets diversifies revenue channels and enhances market reach.

It's important to note: vertical diversification is only as good as your supply chain visibility. One in five manufacturers face limited supply chain transparency and almost half know they need to improve visibility to succeed.

Optimize Your Warehouse

A well-organized warehouse can improve processes and reduce product movement times across the organization. End-to-end mapping leads to consistent, optimized workflows that prevent incorrect quantities, damaged pieces, and costly inventory adjustments.

Further, re-evaluating your warehouse floor can make way for strategic use of AI and automation. And the business results are substantial. One study found that manufacturers reduced machine downtime by up to 50% when utilizing AI.

In addition, the creation or optimization of facilities can impact your tax liability. Several tax credits and incentives are currently in play for clean energy buildings that could result in a direct cash influx.

Mergers and Acquisitions

Mergers and acquisitions (M&A) allow manufacturers to access new products, technologies, talent, and markets more efficiently.

While manufacturing M&A activity is expected to increase in the coming years, one challenge that remains is ensuring post-acquisition success. A structured plan, defined process, and comprehensive communication strategy are crucial parts of effective change management.

Key post-acquisition steps include:

• Develop a comprehensive integration plan that outlines goals, timelines, and key performance indicators (KPIs).
• Conduct team-building activities and provide regular communication to bridge cultural gaps.
• Create a strategic technology plan that reviews current technology solutions and needs, as well as where new digital investments may need to occur. Here’s how to get started planning your strategy.
• Develop a clear communication plan to keep employees informed and engaged throughout the transition.
• Conduct a thorough risk assessment to identify potential challenges and develop mitigation strategies. This should also include a cybersecurity plan, centralized support, consistent platform alignment and more.

Technology Adoption

Investing in new technologies or optimizing existing systems is critical for staying competitive. Agility enables organizations to quickly pivot production processes and product offerings, ensuring they can meet new customer needs and capitalize on emerging trends.

Our research has found that over 60% of mid-level manufacturers consider updating existing technology critical to growth.

Modernizing Data Systems to Support Growth

Upgrading legacy systems to incorporate modern technologies such as cloud computing, artificial intelligence (AI), and the Internet of Things (IoT) enables manufacturers to gather and analyze vast amounts of data in real time. This transformation facilitates predictive maintenance, optimizes production processes, and reduces downtime.

When manufacturers align business goals with data, they gain valuable insights that keep them agile and at the forefront of their industry.

Clean, effective data also plays an important role during mergers and acquisitions. Quality of IT assessments are gaining popularity as buyers work to ensure new companies will integrate smoothly with existing systems.

Data-Driven Decision Making

Enhanced data systems provide deeper insights into market trends and customer behaviors. Utilizing data and analytics allows manufacturers to improve production processes and identify new opportunities. Data-driven insights are crucial for strategic planning, allowing organizations to swiftly adapt their strategies and offerings to meet evolving demands.

Sustainability

Sustainability is a powerful differentiator, particularly for products aimed at younger generations and environmentally conscious consumers. Nearly 90% of businesses feel at least some pressure from supply chain partners to engage in sustainability efforts.

Sustainable practices include green manufacturing processes, renewable energy sources, sustainable supply chains, and waste reduction strategies. And for more than half of manufacturers surveyed, embracing sustainable manufacturing is critical to future growth plans.

Next Steps for Strategic Manufacturers

Navigating the challenges of market expansion diversification requires a strategic and agile approach. Our experienced industry advisors can help you enhance productivity, boost performance, and optimize operations for lasting success.