Beyond the numbers: Jerry Murphy interprets our Manufacturing Industry Pulse survey findings

Jerry Murphy, CPA, CMA, CGMA, Principal and leader of Sikich’s manufacturing and distribution services team, has over 35 years of experience providing assurance and consulting services to businesses in this sector. He weighed in on Sikich’s latest Manufacturing Industry Pulse survey findings, offering analysis and recommendations for executives as they plan for 2026’s challenges and opportunities.

Industry outlook and confidence

Manufacturing leaders are operating in a state of sustained disruption, shaped largely by tariffs and an increasingly complex geopolitical environment. That tension shows up in the data: the average optimism score held steady at 6.8 out of 10 — unchanged from a year ago — suggesting not a surge in confidence, but a notable steadiness despite ongoing volatility. What’s underpinning that stability, in Jerry’s view, is less about improving conditions and more about the sector’s ingrained resilience. Even amid uncertainty, manufacturers continue to push forward, reflecting a broader tendency among U.S. business leaders to adapt, recalibrate, and keep investing through turbulence rather than retreat from it.

Growth and demand

Most manufacturers are still expecting revenue growth this year, pointing to underlying demand that has held up better than many anticipated. But that demand story is increasingly uneven, with strength tied closely to how well companies navigate a rapidly shifting landscape, Jerry explains. In his view, the key question isn’t whether demand exists, but whether manufacturers can keep pace with the forces reshaping it. The most significant risks to growth over the next 6 to 12 months are geopolitical instability and persistent inflation, which continue to create uncertainty around costs and planning. At the same time, Jerry notes, competitive pressure is intensifying as peers accelerate investment in data, AI, and R&D — raising the bar for innovation and execution across the sector.

Strategic priorities and investment trends

Operational efficiency has emerged as the top priority for manufacturers, largely in response to margin pressure from inflation and tariffs, Jerry explains. With input costs remaining volatile, companies are tightening operations to protect — and where possible improve — profitability. But that focus on efficiency is not coming at the expense of growth. Instead, Jerry notes, leading manufacturers are treating efficiency and growth as a dual mandate: pursuing cost discipline while simultaneously investing in innovation and market expansion. Rather than sequencing these efforts, they are running them in parallel, recognizing that long-term competitiveness depends on doing both well at the same time.

That balance is also shaping investment decisions across equipment, automation, and talent. Jerry explains that the most effective investments are those tied to both efficiency gains and long-term capacity building, rather than short-term reactive spending. New equipment is often both a driver and outcome of improved efficiency, while sustained demand is prompting more deliberate capacity expansion. Looking ahead, Jerry notes, competitiveness will increasingly depend on deeper investment in R&D, AI, and advanced technologies, alongside a stronger focus on workforce development. As labor pools continue to shrink, companies that prioritize training and upskilling their existing employees will be better positioned to adapt and grow.

Workforce and hiring

While a strong majority of manufacturers plan to increase headcount, that growth is becoming far more targeted. “Smart hiring” today means evaluating where talent truly adds value — and where automation may be the better solution, Jerry explains. As companies expand, they’re being more deliberate about the roles they fill, prioritizing positions that support higher-value, technology-enabled work rather than repetitive tasks. That shift is being driven in part by changing workforce expectations, Jerry notes, as employees increasingly seek more meaningful, high-tech roles. At the same time, many manufacturers continue to face persistent workforce challenges, from a shrinking labor pool to the need for new skill sets, reinforcing the importance of aligning hiring strategies with both automation and long-term capability building.

Challenges and risks

Tariffs, geopolitical uncertainty, and economic slowdown remain top concerns, but tariffs in particular are proving more structural than temporary. Even as demand holds steady or grows, manufacturers are adapting through dual sourcing and, in some cases, reshoring. At the same time, Jerry notes, strengthening customer relationships through better communication and collaboration is becoming critical to protecting market share. Preparing for continued uncertainty will require this balance of supply chain flexibility and closer customer alignment.

Closing thoughts

Looking ahead, the manufacturers most likely to outperform over the next 12 to 24 months are those that position themselves as true business partners to their customers, Jerry explains. In his view, companies that establish themselves as trusted experts in their space become “sticky,” making them harder to replace in an increasingly competitive environment. That requires a stronger and more deliberate focus on customer service, including making technical product information easily accessible to buyers who are often forming preferences before ever engaging directly with a sales team.

At the same time, Jerry notes, sustained competitiveness will depend on how effectively manufacturers leverage both new and existing technologies to improve productivity and offset ongoing labor constraints. But technology alone is not enough. The companies that will win are those that continue to deepen customer relationships rather than operate transactionally, as buying decisions are increasingly influenced by perceived stability, technical expertise, and a clear ability to enhance customer profitability.

Curious about what these results mean for your business? Contact our manufacturing industry experts to turn these insights into action.