Forecast 2025 – Seven Middle Market Manufacturing Trends
Common business and technology investment trends are highlighted calling out 26 use cases that will be shaping U.S. manufacturers in 2025.
In the U.S. manufacturing sector, small and medium-sized manufacturers (SMMs) will continue to be scrapy and leverage and investments in new technologies, exploring growth through mergers and acquisitions (M&A), enhancing cybersecurity, adopting digital marketing strategies and spending more on advanced training, and optimizing product development. These investments will help ensure their security and sustainability as the backbone of America’s supply chain network.
In 2025, small and medium-sized manufacturers (SMMs) are leveraging these established and emerging technologies and growth strategies to ensure security and business sustainability, solidifying their position in the backbone of America’s supply chain.
Seven trends are outlined below with the number of use cases.
- Energy Costs and Investments
- AI (Augmented Intelligence) and ML (Machine Learning) in SMMs
- Merger, Acquisitions and Business Transitioning
- AI/ML in Business-to-Business Marketing
- Cybersecurity & Supply Chain Compliance
- New Service Development
- Augmented/ Virtual aka AR/VR Training and Development
Energy Costs and Investments
Energy will continue to be a major cost line in the SMM budget. The question of, Is sustainability and net zero an opportunity or a cost? The answer varies depending on many factors. Investments in energy management will continue as this is one area where an SMM can generate significant savings. And as a community partner, do well by doing good. Sustainability will be driven by the drive for business consistency and energy efficiency.
Automation Systems (BAS), participating in demand response programs, and incorporating renewable energy sources like solar and wind. These efforts aim to balance cost savings with environmental stewardship.
- Retro Fits & Upgrades; Surge in retrofitting older facilities with energy-efficient equipment, such as LED lighting, advanced HVAC systems, and energy management software.
- Energy Efficiency: Rising energy prices and the availability of grants and low-interest loans for energy-efficiency projects will continue to spur spending on BAS (Building Automation Systems). The success of smart home energy devices has built awareness of the possibilities in the commercial and manufacturing sector.
- Demand Response: SMMs will continue to enroll in demand response programs to earn rebates or payments by adjusting energy use during peak demand periods. Collaborations with utilities offering incentives and the availability of smart systems to automate demand reduction are well established.
- On-Site Energy: Investment in renewable: solar panels, wind turbines, and biomass systems to reduce reliance on grid electricity will expand. Declining costs of renewable energy technologies.
AI (Augmented Intelligence) and ML/Machine Learning in SMMs
Artificial intelligence (AI), better described as Augmented Intelligence, will continue to capture the attention of the SMM sector that seeks to enhance efficiency, reduce costs, and stay competitive. Successes in machine vision, chatbots to augment overburdened inside sales employees, and advances in CRM (Customer Relationship Management) through the adoption of tools such as HubSpot and Salesforce help buyers see the advantages AI.
- Predictive Maintenance: Through predictive maintenance, AI helps manufacturers be proactive and identify when equipment needs repairs, minimizing downtime and optimizing production schedules. Debates on “into the cloud” or private cloud will abound in 2025.
- Preparedness: Manufacturing operations are the top target for internet pirates and hackers. Strengthening cyber security defenses, being prepared and having crisis communication along with adequate insurance will become must-haves.
- Analytics: Additionally, AI-driven data analytics allow SMMs to better understand operational trends, anticipate inventory needs, and streamline supply chains. ERP sales are soaring.
- Advanced Quality Control: Computer vision-based inspection systems are another AI-driven development that will continue to penetrate the SMM sector.
- ROI from Capital Expenditures: Initial costs and time-starved owners may deter some smaller firms from investing in technology. Success stories and government incentives have made technology adoption more appealing.
Merger, Acquisitions and Business Transitioning
- Pent-Up-Demand: With the administration change, merger, and acquisition (M&A) activity will expand significantly even with current interest rates. M&A remains a critical pathway for growth, expansion, and succession planning in the SMM sector. SMMs are increasingly looking to either acquire other companies or seek acquisition to gain access to new markets, products, or technologies.
- Transitioning: As many small business owners approach retirement age, business transitioning activity will increase.
- ESOPS: Meanwhile, some firms are embracing ESOPs (Employee Stock Ownership Plans) or family succession strategies to ensure business continuity. Care should be taken as history shows, doing well by doing good does not always work out for owners, as many employee groups have passion but lack business acumen.
- Buy vs Sell: As indicated above, both buy-side and sell-side activity will continue to increase as companies recognize that scale and resource-sharing can help manage costs and risks in a volatile market with ample geopolitical risk.
Cybersecurity
With manufacturing becoming more digitally connected, cybersecurity has emerged as a top priority with financial priority. Breaches, phishing, and penetration testing will become more common as spending on network security and privacy increase. Participation in many supply chain networks will be dependent on cyber credentialing.
- IoT: The growing use of IoT devices, cloud-based software, and networked systems makes SMMs particularly vulnerable to cyberattacks, which have the potential to disrupt production lines, leak proprietary information, and cause substantial financial damage.
- Investments: Consequently, SMMs are investing more in cybersecurity strategies, such as multi-layered security architecture, employee training, crisis communication planning, and incident response planning.
- Certifications: Government programs, like the Cybersecurity Maturity Model Certification (CMMC), will continue to push proactive SMMs to bolster their defenses to align with industry’s best practices, especially if they are part of the defense industry.
AI/ML in B2B Marketing
Trade shows have long been an essential marketing channel for manufacturers, with advances in marketing technology. SMMs will continue to connect the dots and integrate new marketing technology like Gen AI, chatbots with traditional B2B practices. PR (public relations) will gain traction as SMMs realize it’s better and cheaper to have someone else tell their story.
- Integrated Marketing: SMMs are finding new ways to maximize their trade show presence. Hybrid trade shows, which combine physical and virtual components, have gained traction, allowing firms to reach a broader audience and with a smaller show booth.
- Marketing Technology: CRM and advanced analytics will continue to enable SMMs to target trade show attendees before, during, and after events, capturing leads more effectively and tracking ROI to enable better capital deployment.
- Chatbots: 2024 was the year of chatbots for manufacturers. SMMs will continue to leverage chatbots to improve customer support, streamline order management, and provide real-time assistance on websites, easing their labor shortages.
- Gen AI: Generative AI will play a significant role in 2025, enhancing product design, product testing, and creating customized marketing content, giving SMM manufacturers a competitive edge in an increasingly digital marketplace.
Training and Development with VR
Augmented Reality/Virtual Reality (AR/VR) is transforming the way SMMs approach training and spurring new service development. Training and development, executive leadership, and coaching spending will continue to grow beyond GDP.
- VR: VR allows firms to offer immersive, hands-on training experiences that can safely replicate complex machinery operations or emergency procedures without production downtime or the risk of injury. This is especially valuable for specialized skills in technical services and repairs that are challenging to develop through traditional methods.
- Personalized Training: New individualized programs are being created for varied learning styles (visual, auditory, hands-on), providing new hires and seasoned employees with an effective way to learn and refine their skill base. This trend will continue to help SMMs tackle skills gaps while boosting workforce productivity.
New Service Development
Product development remains at the core of manufacturing competitiveness for SMMs, especially OEMs. However, new services will continue to emerge at a rapid pace. The time to develop new services and the capital needed are significantly less compared to developing new products. By integrating customer feedback early in the development process, SMMs will continue to become more agile and responsive to changing market demands, enhancing product-market fit.
- Leveraging VOC: SMMs are increasingly leveraging voice of the customer feedback, rapid prototyping, and data-driven insights to accelerate this process.
- Hot New Services: SMMs are utilizing augmented reality (AR) and virtual product demos to enhance booth engagement and provide potential customers with interactive experiences. VR/AR prices have come down, and ROI has increased on applications such as technical training, maintenance repair, and product demonstrations.
- Not New 3-D: The adoption of 3D printing technology will continue to enable SMMs to create faster and cheaper prototypes, test more concepts in less time, and bring products to market faster. Shortened time to revenue will continue to drive spending on 3D printing.
- Digital Twins: Simulation technology will also gain traction in 2025, enabling firms to model and simulate new products and processes virtually, allowing for thorough testing and refinement before physical production or full-scale deployment.
In Summary
SMMs will continue to transform in a myriad of ways to remain competitive in a rapidly evolving digital and global marketplace. With AI, M&A strategies, cybersecurity enhancements, innovative marketing approaches, VR training, and streamlined product development and a new emphasis on fee-based services, these firms are positioning themselves for sustainable growth and resilience. These trends underscore a continuing commitment to modernize operations and adapt to new challenges that help ensure their security and sustainability as the small and medium manufacturing sector is the backbone of America’s supply chain network.