How manufacturers can manage back-office costs in a tight economy

Filling open positions has been a challenge for manufacturers for years, but a confluence of factors is underscoring this issue in 2025. Virtually every industry is struggling with increased labor costs while simultaneously managing costs amid recession expectations and a volatile trade environment. (As of early June, RSM US LLP forecasted a 40% probability of a recession over the next year.)

All these pressures combined are forcing organizations to be highly strategic with their talent. Manufacturers should assess how their information technology and broader technology teams are enabling peak efficiency amid these continued hurdles.

The jobs picture and economic outlook

The United States labor market remains resilient but continues to slow as job growth is declining and jobless claims rise. The number of continuing claims for unemployment reached 1.97 million the week ending Aug. 9, 2025, which is the highest level since November 2021, according to the U.S. Bureau of Labor Statistics.

July marked the manufacturing sector’s sixth consecutive month of contraction in the Institute for Supply Management’s employment index. Also in July, the Conference Board’s Leading Economic Index implied that the broader manufacturing sector will slow into the second half of the year. The index, a composite index made up of 10 economic indicators, tends to lead domestic industrial production by about six months and has looked soft since April. Trade policy, tariffs and a weaker dollar, all of which are contributing to an increase in the cost of doing business, will weigh on both profit margins and inflation.

Combined with high costs of capital and high interest rates, this means that companies need to be more intentional with the levers they pull to drive enterprise value growth. One of those levers includes investing in technology, and surveys indicate companies are well aware of this need.

To weather anticipated economic headwinds, manufacturing companies need to prioritize technological adoption and ensure the right teams are focused on the highest-value activities related to implementing, deploying and maintaining technology.

Advanced technologies and the role of IT

Advanced data analytics, digital twins, increased automation, Internet of Things devices, 5G and advanced robotics are just some of the technologies manufacturers need to embrace. The growing focus on artificial intelligence is also showing up in the manufacturing sector; 81% of manufacturing organizations currently using generative AI tools in their business practices have a budget dedicated to generative AI investments, according to the RSM Middle Market AI Survey 2025: U.S. and Canada.

One inherent challenge in implementing advanced technologies is that many require specialized knowledge. The biggest challenges manufacturing company survey respondents faced when implementing AI tools or processes, for example, were:

• Difficulty in integrating generative AI into existing operations/workflows (36%)
• Concerns about data privacy and security (34%)
• Insufficient internal skills/expertise (34%)
• Lack of understanding of or knowledge about generative AI tools (30%)
• Lack of employee adoption/difficulty adapting to change (30%)

If you have a small IT team, each of its members needs to focus on specific areas. The days of the IT generalist are well behind us. The question that ultimately comes to the forefront is, how can middle market manufacturers deploy the required technology to stay competitive, drive top-line growth and maintain margins when they face challenges hiring the required talent?

One strategy that can help is to assess all your technology team’s initiatives and categorize each as an activity that maintains, grows or transforms the business.

• Maintenance: While a core need, maintaining the business will require partnerships in the future. We expect businesses to look for alternative ways to staff IT functions with outsourcing or managed services. Good areas for partnership opportunities include IT service desk/help desk; systems management, including cloud platforms and on-premises server administration; and infrastructure maintenance, upgrades or refreshes. We expect to see more manufacturers lock in long-term agreements with managed services organizations to ensure fixed labor rates and schedules.

• Growth: Growing the business requires improving and elevating current platforms to drive more value. Internal champions of new systems and upgrades must drive utilization and adoption across the organization. As an example, if a company has a business intelligence platform and dashboards to track various data metrics, the future success in the use of these tools depends on the IT team’s ability to continually assess, develop and train staff to use and improve those tools as the business evolves.
  Another example within IT security—which is evolving faster than most companies can keep up with—falls into a category that is ripe for ongoing focus. As facilities get more and more connected and data-driven, we see more operational technology interconnecting with IT networks. These activities pose an increased security risk, which may require a specialist or a partner to maintain security between the two networks while allowing additional data metrics to be fed into business systems.

• Transformation: Transforming the business is about ensuring that changes to the organization generate significant value. This is where Industry 4.0 technologies can play a critical role, including new enterprise resource planning software, Internet of Things devices, autonomous technology and advanced data solutions. Deployment of these systems will require your manufacturing technology team to be intimately involved to understand how to drive the most value during implementation, while third-party partnerships will play a role in deployment and knowledge transfer. From a strategic standpoint, this is where you want to have your internal IT team focus its effort.

Businesses will need to be selective with hiring, making internal resource management decisions and considering which functions may benefit the most from partnerships. Manufacturers should focus hiring efforts on the talent that creates value and have those employees focus on areas that are unique to their operations while outsourcing necessary but more foundational roles. While hiring and retention will still be hard, and may cost more than planned, they are core to your business and will provide the most value going forward.