Crystal Ball 2025: Supply chain insights from conversations with manufacturers

Economic pressures, the labor shortage and skills gaps, and IT consolidation driven by digital transformation and AI also are top of mind for these industrial stakeholders.

Josh Cranfill

Dec. 23, 2024

6 min read

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A note from Scott Achelpohl, managing editor, Smart Industry:

Welcome to the Crystal Ball Report for 2025, which will appear in this web space the rest of December and into January as a series of contributed pieces from esteemed experts in manufacturing technology.

We've invited these thought leaders to look into their "crystal balls" and tell us what's ahead (with an emphasis on data, AI, and cybersecurity). So please enjoy the series and, from all of us at SI, have a happy and safe holiday season.

Crystal ball gazing is always an interesting exercise, but instead of making predictions, let’s look at the expectations of manufacturers based on insights from conversations with them.

For Quickbase’s annual State of Manufacturing report, we interviewed 500 manufacturing leaders to understand the biggest challenges in manufacturing today.

Participants primarily functioned in decision-making roles, including staff responsible for managing processes or teams, up through chief operating officers. Based on the feedback, three themes emerged:

Supply chain and economic pressures are expected to persist, but efforts are underway to resolve them before they further undermine productivity and profitability.
Manufacturers are taking both tactical short-term and strategic long-term approaches to address the labor shortage and skills gaps.
Digital transformation and AI are driving the need for IT consolidation.

More of the Crystal Ball Report for 2025:

Insights on 2025 from talks with manufacturers, by Josh Cranfill, Quickbase
AI, automation, and insider threat detection, by Chris Scheels, Gurucul
Business leaders should look inward to identify what they can control, by Michael van Keulen, Coupa
Cybersecurity trends that will reshape private content security, by Patrick Spencer, Kiteworks
Configurability, modularity, and AI: The 2025 challenges, by Damantha Boteju, Henrik Hulgaard, and Daniel Joseph Barry, Configit
The rise of resilient manufacturing, by Aron Brand, CTERA
2025 prediction thread, Part 1, by various authors
2025 prediction thread, Part 2, by various authors
Your opinion counts: Results from SI's reader poll on 2025, by Scott Achelpohl, Smart Industry

Looking closer at these three themes, there are some underlying trends as well as early signs of solutions to these challenges facing manufacturers today.

Supply chain and economic pressures are expected to persist

The survey shows that over the last 12 months, manufacturers experienced unexpected or increased costs leading to production operations exceeding budgets. For some manufacturers, this is an inconvenient and costly yet infrequent issue, but for 22% of them, this is happening frequently.

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There are steps manufacturers are taking to avoid or at least minimize the frequency of these increased costs. One way to improve production efficiency is by taking a closer look at how well-orchestrated materials, tools, and staff are. If they are not working well together, it creates efficiency gaps; too often, those gaps aren’t revealed until the damage is done.

A simple way to uncover those gaps earlier is to ask and analyze how long it takes employees to complete their daily tasks. This isn’t about putting workers on the spot; it is about understanding the processes in place that enable them to do their jobs.

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For example, a recent productivity study found that employees were spending 11 hours a week, on average, gathering data from different systems and teams across the company just to do their job.

This wasted time, a.k.a. “gray work,” leads to inefficiencies, impacting production. By identifying bottlenecks and inefficient processes, manufacturers can make the necessary changes to make sure people, processes and technology are in synch and gray work is eliminated.

Strategic paths manufacturers are taking to address the labor shortage, skills gaps

Manufacturers need people and people need jobs, so why is the manufacturing labor gap widening? A recent report from Deloitte and The Manufacturing Institute found that U.S. manufacturing could need as many as 3.8 million new employees by 2033 and that 1.9 million jobs could be left unfilled.

Key drivers of the labor shortage in manufacturing are a retiring workforce, high turnover, and fewer people going into manufacturing. In response, 57% of manufacturers are offering higher wages to attract skilled talent, according to the Quickbase survey. Also, 71% have increased the time and resources spent on training new hires.

Yet these efforts have not been as smooth as planned; 41% of manufacturers report they had an inadequate transfer of knowledge from experienced workers to new employees. That “brain drain” and a lack of skilled labor led to production delays for 89% and undermines employee morale and workplace culture to some extent for 77% of respondents.

Automating processes is one of the most impactful actions manufacturers can take to reduce turnover and sustain their businesses. While manufacturers agree automation is critical to avoiding the fallout from a labor shortage, only 39% are using automation tools to address this issue. However, 49% do plan to enhance automation and technology in the coming months.

As we get deeper into 2025, look for manufacturers to invest more resources into automating workflows, and employee recruitment and retention programs.

Digital transformation, AI driving the need for IT consolidation

While digital transformation is underway at most manufacturers, many still rely on a mix of paper-based processes, siloed data repositories across a variety of platforms such as ERP, MEP or MES systems, and spreadsheets and other home-grown solutions. The number of tech solutions an employee toggles on a regular basis quickly adds up.

According to a recent survey of over 1,000 IT professionals—over half of whom are from manufacturers—over 75% say employees use more than 10 software applications on a regular basis. This leads to frustration, with 80% of IT respondents saying they struggle with effectively managing all those software applications.

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These information silos lead to inaccuracies and inefficiencies, contributing to low productivity, project delays, and undermining the ability to make smart decisions. Along with those issues are higher costs, integration problems, and security and compliance risks.

The time to consolidate is now, as nine in 10 survey respondents say they plan to reduce their tech stacks in the coming year. The urgency is being driven by AI, as 74% of respondents said that getting the most out of AI is a factor in needing to consolidate tools. Almost two-thirds of respondents, 65%, believe AI will make consolidation easier by improving decision-making, integrating with other tools, and identifying redundant tools.

An effective consolidation strategy should arm IT professionals in manufacturing with training and change management support, integration solutions, and a detailed cost-benefit analysis to support their efforts.

This is executed through training, tools, and a centralized work management platform that eliminates the information silos. Going a level deeper, the key areas to begin the process should be rooted in production efficiency, quality management, machine maintenance, and safety.

This provides transparency across the company while addressing the gray work issue. It also enables manufacturers to respond to the priority of reducing costs from the C-suite and boards of directors, creating a more collaborative effort across the company.

As we get deeper into the new year, new challenges may emerge for manufacturers. At this point IT consolidation, accelerating the use of AI, and addressing labor challenges by fostering more efficient processes are the priorities.

See also: The 2024 Crystal Ball Report