How Manufacturers Can Expand in the Changing Marketplace

The U.S. manufacturing industry has continued to embrace resiliency and agility in recent years.

As of Q3 2025, U.S. import tariffs have surged to a blended average of 20%, up from just 1.5% a year ago. This shift is forcing manufacturers to rethink sourcing, pricing, and operational strategy. Companies that act quickly—using smart customs-valuation methods and lean inventory governance—are already seeing margin protection and cash-flow gains.

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.

In addition to expanding product lines, manufacturers are also using customs strategies to reduce tariff exposure. Techniques like the first-sale rule—declaring the factory price instead of the brokered resale price—and dynamic HTS classification allow companies to lower duty rates on subcomponents. These “no-regret” tactics can reduce landed costs by 15–30% without major supply-chain disruption.

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.

Inventory governance is also evolving. Manufacturers are recalibrating safety-stock targets using ABC/80:20 classification, implementing cycle-count programs tied to demand planning, and redesigning pick-face layouts to reduce travel time and errors. These practices help offset tariff-driven cost increases while freeing up working capital for growth initiatives.

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.

AI is essential to your ERP, MES, and WMS platforms. Manufacturers are using AI to forecast tariff impacts, optimize inventory replenishment, and detect anomalies in scrap rates. Rather than chasing flashy pilots, companies are seeing real ROI by embedding AI into core systems and launching two or three targeted use cases with clear KPIs.

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

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.