In a recent discussion hosted by the Dallas Business Journal in partnership with Crowe LLP and its wholly owned subsidiary ITR Economics, industry experts shared strategies for addressing four of the most pressing challenges facing manufacturers today: tariffs, supply chain resilience, skilled labor shortages, and inflationary pressures.
The Impact of Tariffs on Manufacturing Operations
Tariffs have created ripple effects across manufacturing operations, from sourcing strategies to cost management. While many fear tariffs could drag down the economy, panelist Grace noted that U.S. manufacturing is actually on track to reach record-high activity—surpassing even pre-COVID levels.
“Consumers remain in good shape and are still spending,” Grace explained. “The real watchpoint is inflation. Tariffs tend to drive prices higher, so companies must plan accordingly.”
Jamie added that tariffs have pushed companies to rethink where and how they produce goods. “Higher costs of foreign products and longer lead times are squeezing profit margins,” he said. “As a result, companies are increasingly looking at reshoring (bringing production back to the U.S.) and nearshoring (moving production to low-tariff countries nearby).”
Other best practices include:
- Strategic sourcing: Adopt a “country +1 or +2” strategy to diversify supply sources.
- Margin protection: Use forward contracts to lock in lower prices, pass-through pricing to offset cost increases, and just-in-time inventory when prices are high.
- Labor retention: Operations depend on people—maintain close ties with key employees and find ways to incentivize them when raises or bonuses are constrained.
Building Resilient Supply Chains Amid Deglobalization
Supply chain resilience continues to be a top priority as companies respond to deglobalization trends that accelerated during the pandemic. Grace emphasized that this shift is not temporary: “We’re in a long-term trend of companies bringing supply chains closer to home. The U.S. is a good bet for future investment.”
She urged leaders to diversify their supply base geographically and revisit contingency plans regularly. “If your company drifted back to old practices post-COVID, it’s time to reassess.”
Jamie offered additional resilience tactics:
- Source from multiple countries to reduce tariff exposure and lead times.
- Position inventory near key customer bases with strong transportation infrastructure.
- Increase communication with suppliers and review their financial health.
- Create action plans for disruptions like port delays or labor strikes.
Addressing Skilled Labor Shortages
Labor shortages—especially in STEM and technical roles—remain a critical constraint on growth. Grace warned that the U.S. labor market is hitting demographic limits, with too few workers to support rising demand.
“We’re forecasting a 28% increase in labor costs between now and the end of 2029,” she said. “Leaders need to ask: can your business model withstand that?”
Jamie recommended a multi-pronged approach to bridging talent gaps:
- Build partnerships with high schools, community colleges, and universities to develop pipelines.
- Offer apprenticeships and leverage offshore talent for non-physical roles.
- Embrace automation and AI to ease labor pressure.
- Personalize incentives for key employees to improve retention.
- Recruit experienced retirees for mentorship and part-time skilled work.
Managing Inflationary Pressures and Rising Input Costs
Finally, panelists addressed how inflation and soaring input costs—especially labor and electricity—are squeezing margins. Grace advised companies to focus on those categories first, and to ensure pricing strategies are agile enough to respond quickly to market shifts.
“If your margins were squeezed during the 2021–2022 price spikes and you haven’t changed how you manage pricing, you’ll feel it again,” she cautioned. “Build the ability to adjust faster.”
Jamie outlined several financial tools to protect margins:
- Incorporate dynamic pricing in contracts to pass on cost changes.
- Explore co-share agreements with suppliers to share cost savings or revenue.
- Hedge commodity and fuel costs using futures and options.
- Maintain transparent communication with customers about cost increases to preserve goodwill and negotiate shared burden.
Preparing for the Future
As the discussion wrapped, the panelists underscored a common theme: while challenges are real, they are also opportunities. Companies that adapt their operations, diversify their supply chains, invest in workforce strategies, and strengthen pricing models will be best positioned for long-term success.
“Manufacturing is still strong,” Grace said. “With the right strategies, companies can navigate these headwinds and thrive.”
For more information, please visit Crowe.com or reach out to Grace, [email protected] and Jamie, [email protected]
