How Cost Pressures and Tariffs Are Reshaping Manufacturing and Distribution

Citrin Cooperman’s 2025 Manufacturing and Distribution Pulse Survey Report notes supply chain issues and tariffs as two of the main challenges facing business leaders in the industry. This article further explores these two challenges and some of the common strategies being utilized and implemented by the respondents.

Supply Chain Challenges

Starting with the supply chain, one of top challenges is managing the costs of products so companies can remain competitive. Some strategies utilized by survey respondents include manufacturing more products themselves (50%), whereas 43% identified that outsourcing more manufacturing to third parties was an alternative approach. Another strategy commonly used by respondents (43%) is to relocate sourcing closer to customers. Manufacturers and distributors alike face the challenge of sourcing products and/or materials; those challenges can vary between different sub-sectors.

The survey results show that approximately 62% of respondents source a majority of their product from North America compared to 72% seen in the prior year. The sourcing mix from North America varies between subsectors; consumer products and retail have approximately 51% of their products sourced from North America, versus the food and beverage subsector which sources approximately 71% from North America.

A common agenda item and focus point is reshoring, which does not come without its own challenges. Fifty-two percent of survey respondents indicate that a lack of meaningful tax incentives and the cost of U.S. labor are major hurdles to completing reshoring efforts. Additional hurdles to reshoring identified by respondents include capital investment costs (44%) and lack of access to skilled labor (33%).

Uncertainty Surrounding Tariffs

One of the most prevalent themes across all industries for the past year has been tariffs and the uncertainties surrounding them. Companies should evaluate the imposed tariffs, consider the potential for any proposed tariffs that would directly impact their businesses, and evaluate whether the proposals could be deferred or even renegotiated. For many manufacturers and distributors that rely on sourcing or purchasing products from other countries or regions, they must be proactive and devise a plan to mitigate potential risks and forecast for the future, including responses to potential revisions.

Our survey asks respondents about their thoughts on what the impact of an increase in tariffs would have on their business — 43% of respondents indicate that there would be an indirect impact and 28% indicated there would be a direct impact. In addition, survey results indicate that 46% of respondents already manufacture products in the U.S. with 26% considering reshoring with the possibility of increased tariffs and another 20% indicating that nearshoring to a country closer to the U.S. would be an alternative option. However, these options may not be viable for all business situations.

Some strategies implemented by the respondents to mitigate tariff exposure include:

• Demand Planning (46%): A critical business process that involves forecasting future customer demand for a product or service. Demand planning for manufacturers and distributors can help optimize inventory levels, reduce waste, and improve customer satisfaction. The ability for companies to successfully forecast should include historical data, judgment and market research, and collaboration across different functions of the company.
• Freight Consolidation (40%): This is a focus on logistics and managing the transportation of goods. Consider whether to use a third-party carrier or maximize truck/container space to reduce the number of shipments where possible.
• Alternative Sourcing (40%): The process of identifying additional suppliers or sources of materials, products, or services beyond your primary vendor to mitigate risks and concentrations. This can help prevent potential disruptions if a new tariff is established.

As economic conditions change, whether favorably or unfavorably, manufacturing and distribution companies should be proactive in understanding the current trends and conditions that may significantly impact their business. Citrin Cooperman’s Manufacturing and Distribution Industry Practice is prepared to help your business navigate uncertain waters to create future value. Contact our team today to discover how to prepare your business.