How cloud migration for midmarket manufacturers is boosting growth + ROI
By moving to the cloud, mid-market manufacturers are streamlining operations to improve efficiency and drive growth.
Manufacturing’s been at an inflection point for what seems like years now. Digital transformation was supposed to radically alter the industry, helping it reach previously unimaginable levels of efficiency and productivity (as you’ll see by the 2025 manufacturing trends, this never quite transpired).
While there’s certainly been a tremendous amount of change—there are plenty of robots on factory floors, for instance—the industry as a whole has a long way to go. According to Futurum Group research, industrial manufacturers have tended to take fragmented approaches to digital transformation for a variety of reasons, which has stymied progress.
But that’s changing now as companies adopt advanced technologies like AI and smart manufacturing to build resiliency and drive growth. The top manufacturing trends for 2025 include kicking transformation into high gear.
“We see this shift as digital transformation on steroids, and it’s happening all over the world,” wrote Keith Kirkpatrick, Futurum research director.
2025 manufacturing: 6 trends reshaping the industry
Manufacturers have a lot of reasons for wanting to drive change, especially considering the kind of year they’ve had. Economic uncertainty, high interest rates, ongoing labor shortages and supply chain disruption have made things rough.
Activity in the manufacturing sector slowed as high interest rates and uncertainty around rate cuts led companies to avoided capital investments, according to a report from the Institute for Supply Management.
The Federal Reserve cut to the main interest rate in September offered a bit of relief with industry experts predicting recovery in early 2025. The Fed followed that up in November with another rate cut.
Here are the key trends for manufacturing in 2025:
- Globalization: Manufacturers will have to rethink how they do business amid supply chain risks and changing trade policies.
- Continued digitalization: With challenges posed by globalization, including increased competition, manufacturers are focused on ramping up their digital capabilities.
- Focus on ecosystem: Manufacturers want to reduce complexity across the entire ecosystem to better mitigate risk.
- Sustainability + circularity: Eighty percent of executives say that sustainability has a positive impact on profitability.
- Supporting the energy transition: Manufacturers around the world seek new solutions in order to reduce dependence on dwindling natural resources.
- Data management + cybersecurity: Manufacturers no longer work in siloed systems and can’t count on other organizations in the value chain to invest in security.
1. Dealing with globalization’s impact on manufacturing
Globalization has led to massive changes in manufacturing, forcing the industry to grapple with supply chain risks and changing trade policies. In 2025, it will continue to force manufacturers to rethink the way they do business.
Under US President-elect Donald Trump, expect trade policies to shift to protectionism with increasing restrictions and tariffs. Manufacturers will have to take this into account in their supply chain planning, management, and pricing.
Midsize manufacturers are well aware of the way global issues outside their control can disrupt supply chain operations and profitability, according to an Oxford Economics report.
About one-third of those surveyed said the rising costs of materials and substitution of materials posed a major risk to their business.
One way companies are tackling the challenge is by reshoring or nearshoring to be closer to end markets, a trend that grew with the COVID pandemic. Geopolitical conflict is driving more companies to consider bringing manufacturing operations closer to home.
Mexico has seen significant manufacturing growth as the nearshoring trend grows, according to a Deloitte report that showed nearly $40 billion worth of nearshoring-related investments since 2021.
The percentage of supply chains serving the US and located in North and South America will grow from 59% to 69% over the next two years, with Mexico the top beneficiary, according to a KMPG report.
2. Manufacturing in 2025: Digitalization trends up
With all the challenges posed by globalization—including increased competition—manufacturers are focused on ramping up their digital capabilities.
The Oxford Economics research found that more than half of midsize manufacturers surveyed say preparing for a technology-driven future is critical for the industry, with more than half prioritizing tech integration for competitive advantage.
Moving to the cloud and integrating AI to automate and standardize processes are key aspects of this trend. With automation and standardization, companies can gain insight for better decision making and ultimately improve processes, including manufacturing lines, to become more autonomous.
Manufacturers are already seeing early results with AI integration, according to a study by the National Association of Manufacturers: 72% reported increased operational efficiency and cost savings after deploying AI technology.
AMD is among those realizing AI benefits. The global semiconductor company projects a 90% of reduction in time spent on root-cause analysis by using a generative AI-enabled supply chain troubleshooting tool integrated into sales order management. That translates into 3,120 hours of headcount productivity saved each year.
The digitalization trend dovetails with the need to innovate products and services faster. Better visibility into processes and deeper analytics help manufacturers create new business models such as product-as-a-service.
For example, Komax Group—a Swiss wire processing company—uses SAP S/4HANA Cloud to bring together various systems from its many acquisitions. The streamlined, standardized infrastructure positions it for future acquisitions and growth.
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3. 2025 manufacturing: Ecosystems need more resilience, less complexity
The shift to digitalization has grown as manufacturers focus on their ecosystem and boosting their ability to withstand disruption.
“The constantly changing manufacturing ecosystem—particularly materials substitution and other supply chain changes—is fragile and easily broken by vendor delays and price movements in the raw materials market,” the Oxford Economics study noted.
The survey found that more than half of respondents don’t have the agility to react quickly to changing circumstances or take advantage of growth opportunities due to technology shortcomings.
To that end, manufacturers are looking to drive multi-tier visibility across the supply chain and reducing complexity across the entire ecosystem to better mitigate risk. By automating processes and improving end-to-end visibility, they can increase efficiency and gain the agility needed to respond faster to supply chain issues.
An overwhelming majority of more than 900 manufacturing leaders surveyed by SAP said simplifying work and improving processes is a priority for the next year.
4. Striving for sustainability + circularity
As they streamline processes and build supply chain resiliency, manufacturers will focus on improving their sustainability in 2025 by increasing the reusability and recyclability of their products.
Global demand from consumers and investors for sustainability along with growing environmental regulations are driving this trend, but manufacturers also view it as a way to gain competitive advantage.
Eighty percent of executives say that sustainability has a positive impact on profitability, according to an SAP study.
This shift to circularity makes an already complex business even more challenging, however. It requires visibility and transparency across supply chain processes, including sourcing, design, production, logistics, and end of life.
Sustainability is core to Swedish food packaging and processing company Tetra Pak’s strategy. The company aims to drive circular solutions by designing recyclable food packaging, using recycled materials, reducing waste, and extending the lifetime of their equipment.
5. 2025 manufacturing trends: Supporting the energy transition
The sustainability trend in the industrial manufacturing industry includes shifting away from fossil fuels to renewable energy resources like solar and hydropower.
This energy transition is a global movement as the world looks to new solutions in order to reduce its dependence on dwindling natural resources.
According to the U.S. Energy Information Administration, renewable energy production and consumption both reached record highs in 2023.
Manufacturers are looking at the materials, components, equipment, and systems needed to enable the energy transition, including electric cars and hydrogen fueled aircraft.
For example, Freyer Battery makes lithium ion batteries to meet growing demand for high-density, cost-effective battery cells for electric mobility solutions, marine applications, and stationary energy storage.
The company uses SAP S/4HANA Cloud public edition as part of the GROW with SAP for startups program to help it achieve its goals of industrial-scale production globally.
6. Manufacturers ramp up data management and cybersecurity
In order to have the insights to drive efficiencies and growth opportunities, manufacturers need strong data processes. In 2025, expect the industry to improve their data management and security, especially as it works to realize benefits of AI.
About four in five manufacturers surveyed in the Oxford Economics report said they see the value of integrated data as a driver of new business model creation (85%), data accuracy and security (81%), and process automation (78%).
Strong data management practices, including defining data ownership both internally and across ecosystems, is core to seeing a return on investment in AI. Without a strong data foundation and standardized IT infrastructures, a company won’t get the workforce and operational efficiencies they expect.
Today’s interconnected nature of industrial manufacturing highlights the need for cybersecurity. Manufacturers no longer work in siloed systems and can’t count on other organizations in the value chain to invest in security.
And the threat level is high. According to a World Economic Forum report, manufacturing has been the most targeted industry three years in a row. The industry’s low tolerance for downtime and relatively immature cybersecurity are a factors that makes it attractive to cybercriminals, the report said.
Industrial manufacturing 2025 and beyond
While the industry hopes to rebound next year, manufacturers will need to double down on their efficiency and agility goals. Everything always changes—technology, customer needs, market dynamics—and manufacturers have to keep up.
By advancing their digital transformation, manufacturers will have the ability to adapt, tackle new challenges, and drive sustainable growth.
