10 Hidden costs of manufacturing in 2026

The current state of manufacturing: pressure from every direction

Economic uncertainty and declining demand

Manufacturing remains a critical part of the global economy, contributing significantly to GDP and supporting millions of jobs worldwide [1][2]. In major economies such as China, the United States and Germany, it continues to play a central role in industrial output and economic growth. In the UK alone, it accounts for around 10% of GDP and supports approximately 2.7 million jobs [3][4]. 

Despite this, operating conditions are becoming less predictable due to fluctuating demand and global instability. 

Forecasting is less reliable than previous years. Sudden drops in demand can leave excess stock tied up in storage, while unexpected increases can push production beyond capacity. Both scenarios introduce avoidable costs and reduce operational control. In practice, many manufacturers are shortening planning cycles and increasing production flexibility to manage this volatility more effectively.

Rising operational costs and squeezed margins

Cost pressure is now part of daily operations. Energy, materials and labour costs have all increased, with manufacturers continuing to report rising input costs and operational challenges [5]. 

This creates a less visible issue. To protect margins, many operations extend production runs or delay maintenance. While this maintains short-term output, it increases long-term failure risk. In high-output environments, this trade-off is becoming increasingly common.

Why resilience is no longer optional 

Resilience now determines whether production continues during disruption. Manufacturers are strengthening supply chains, investing in automation and securing access to critical spare parts. 

A key shift is becoming clear. Downtime is often not caused by equipment failure itself, but by the time it takes to source replacement components. Mapping critical components and identifying single points of failure is one of the most effective ways to reduce this risk. 

1. Rising operational costs are eroding profitability 

Energy, materials and labour inflation 

Costs are increasing across all major inputs. Energy remains one of the largest expenses, particularly in metal and food processing. 

Material prices continue to fluctuate due to supply constraints, whilst labour costs are rising as competition for skilled workers increases. Workforce challenges remain a key pressure across the sector [5][6]. 

The impact on production planning and margins 

Higher costs influence production decisions at every level. Output may be reduced; investments delayed or sourcing strategies revised. 

These changes introduce secondary costs: 

• reduced economies of scale  
• higher unit costs 
• longer lead times 

Over time, these factors limit both profitability and operational flexibility. 

Why efficiency is now a core operational focus 

Improving performance at the operational level helps offset rising costs. Manufacturers are focusing on automation, predictive maintenance and tighter process control. In many cases, the fastest gains come from targeting bottlenecks or high-maintenance assets rather than large-scale transformation projects. 

2. Supply chain disruption is now the norm 

From global instability to local shortages 

Supply chain disruption is now built into day-to-day operations. Global manufacturing outlooks continue to highlight supply instability and logistics challenges affecting production [5]. 

Lead times for legacy PLCs and drives can extend significantly, increasing planning uncertainty and forcing higher stockholding. 

The ripple effect of a single failure 

Manufacturing systems are highly interdependent. If one component is unavailable, production can stop entirely. 

A common scenario involves a failed PLC on a packaging line. Without a compatible replacement, upstream and downstream processes are forced to pause. The impact is rarely isolated. Delays quickly cascade across the operation. 

Why visibility and flexibility are critical 

Real-time visibility helps identify risks earlier. Monitoring supplier performance and inventory levels supports better planning. Flexibility is equally important. Manufacturers with access to multiple suppliers or global stock networks are far better positioned to maintain continuity. 

3. The skills shortage crisis in manufacturing 

Why talent is leaving the industry 

An ageing workforce and fewer new entrants continue to drive skills shortages. Workforce constraints remain one of the most significant barriers to growth in manufacturing [6]. 

The growing digital skills gap 

As manufacturing becomes more digitised, the demand for technical skills continues to increase. Many roles now require knowledge of automation systems and data tools. However, access to these skills is limited. This slows both system adoption and operational improvement. 

The cost of unfilled roles on production 

Unfilled roles have a direct impact on output and maintenance. 

In practice, this often leads to: 

• reduced production capacity  
• increased overtime  
• higher risk of operational errors  

Structured training and upskilling programmes can reduce long-term reliance on external hiring. 

4. Legacy systems are slowing digital transformation 

The challenge of outdated infrastructure 

Many operations still rely on legacy PLCs, HMIs and control systems that were not designed for connected environments. Over time, these systems have become harder to maintain. Spare parts availability decreases and failure rates increase. 

Integration issues with modern automation 

Connecting legacy equipment with newer systems introduces compatibility challenges. Differences in communication protocols often delay projects and increase costs. In some cases, organisations choose full replacement over integration due to these constraints. 

Cost vs risk of upgrading 

Delaying upgrades increases operational risk. A failed controller or drive can halt production if no replacement is available. In practice, the cost of downtime often exceeds the cost of planned upgrades, particularly in high-output environments. 

5. Automation adoption: high potential and high barriers 

Why automation investment is increasing 

Automation investment is increasing, with industrial companies allocating a growing share of capital toward robotics and automated systems [7]. This allows manufacturers to scale output without increasing labour at the same rate. 

Financial and organisational barriers 

Initial investment remains a barrier, particularly for smaller manufacturers. Internal capability also affects adoption. Teams often require additional training to manage automated systems effectively. 

ROI uncertainty and implementation considerations 

Return on investment depends on successful deployment. A phased approach helps reduce risk: 

• test systems at smaller scale  
• train teams progressively  
• expand once performance is proven  

6. Cybersecurity threats are now operational risks 

Manufacturing as a growing cyber target 

Manufacturing is increasingly targeted due to reliance on continuous production and connected systems. Cybersecurity reports highlight rising threats across industrial sectors [8]. 

Downtime, revenue loss and production disruption 

Cyber incidents can force systems offline, causing immediate disruption to production. In high-output environments, even short periods of downtime can result in significant financial loss, with recovery often taking several hours to multiple days depending on the severity of the incident. 

Why cyber resilience must be prioritised 

Cyber resilience supports continued operation during disruption. Manufacturers should prioritise: 

• network monitoring  
• system security  
• staff awareness  

7. Downtime and equipment failure still cost millions 

The impact of unplanned downtime 

Unplanned downtime remains one of the most significant hidden costs in manufacturing. Costs include: 

• lost production 
• wasted materials 
• labour inefficiency 
• restart delays 

Obsolete parts and maintenance challenges 

Older systems often depend on components that are no longer in production. In many real-world cases, downtime is not caused by failure itself, but by delays in sourcing compatible replacement parts. 

Working with specialist suppliers that focus on obsolete and hard-to-find components can significantly reduce these delays. Access to a global network of stock helps ensure critical parts are available when they are needed most, supporting faster recovery and more consistent production. 

The role of predictive maintenance 

Predictive maintenance allows earlier intervention and reduces disruption. Combined with reliable sourcing strategies, this helps maintain production continuity and reduces the likelihood of unexpected failure. 

8. Data silos and lack of visibility 

Why disconnected systems limit decision-making  

Disconnected systems create gaps in visibility. Data is often stored across multiple platforms without coordination. This limits understanding and delays response times. 

The importance of real-time insights  

Real-time data allows teams to identify bottlenecks earlier and respond before issues escalate. This supports more stable and predictable operations. 

Moving toward data-driven manufacturing  

Integrating production and maintenance systems delivers immediate benefits, improving planning, resource allocation and consistency. 

9. Sustainability pressures and ESG compliance 

Regulatory and consumer expectations  

Sustainability requirements are increasing globally, with manufacturers expected to reduce emissions and improve resource efficiency [9]. 

The cost of sustainable transformation  

Adopting sustainable practices requires investment in new processes and equipment. Over time, these changes can reduce waste and improve resource use. 

Balancing profitability with responsibility  

A structured approach helps balance sustainability with cost control. Operational changes must support both compliance and financial performance. 

10. Workforce evolution and changing expectations 

Changing workforce expectations  

New entrants prioritise development opportunities and working conditions. Manufacturers must adapt to remain competitive in attracting talent. 

Retention and capability challenges  

High turnover disrupts production and increases training demands. Development programmes improve retention and workforce capability. 

How automation reshapes roles  

Automation reduces manual tasks and increases demand for technical roles. Upskilling ensures employees can support automated systems effectively. 

Turning pain points into competitive advantage 

These challenges are interconnected. Manufacturers that act early reduce disruption and maintain operational stability. In practice, access to reliable suppliers, better visibility and stronger planning processes often deliver faster results than large-scale transformation programmes. 

Conclusion: manufacturing isn’t homesick - it’s evolving 

Manufacturing is adapting to changing economic and operational conditions. The most effective organisations are not avoiding disruption but preparing for it. Addressing downtime, supply chain instability and workforce challenges supports more stable production. 

Access to reliable automation partners plays a key role in this. EU Automation support manufacturers with global sourcing capabilities and access to obsolete and hard-to-find components, helping reduce delays when critical parts fail and maintaining operational continuity. 

Manufacturers that take a proactive approach combining stronger planning, improved visibility and trusted partners will be better positioned to maintain output, manage risk and adopt future technologies such as AI-driven maintenance. 

References 

[1] https://data.worldbank.org/indicator/NV.IND.MANF.ZS 
[2] https://www.statista.com/chart/20858/top-10-countries-by-share-of-global-manufacturing-output/ 
[3] https://www.ons.gov.uk/businessindustryandtrade/manufacturingandproductionindustry 
[4] https://commonslibrary.parliament.uk/research-briefings/sn05206/ 
[5] https://www.deloitte.com/us/en/insights/industry/manufacturing-industrial-products/manufacturing-industry-outlook/2024.html 
[6] https://www.deloitte.com/us/en/insights/industry/manufacturing-industrial-products/supporting-us-manufacturing-growth-amid-workforce-challenges.html 
[7] https://www.mckinsey.com/industries/industrials/our-insights/unlocking-the-industrial-potential-of-robotics-and-automation 
[8] https://www.ibm.com/think/insights/addressing-growing-concerns-cybersecurity-in-manufacturing 
[9] https://www.iea.org/reports/industry