79% Of Manufacturers are Delaying Capital Investments in Favor of Strategies That Hamper Long-term Competitiveness
As U.S. manufacturers face unprecedented pressure, driven by rising input costs, energy prices, and trade policy uncertainty, new research finds that that cost takeout strategies they’re using could cannibalize future growth and reduce competitiveness. The research, “State of the Manufacturing Industry Report: Navigating Tariffs, Cost Pressure & Opportunity in 2026,” was published today by EFESO Management Consultants, the leading global pure player in operations strategy and performance improvement.
According to 150 large and middle-market manufacturers surveyed for the research, the three most challenging macroeconomic pressures they are facing this year are rising cost of inputs, rising cost of energy, and trade policy/tariff uncertainty. When asked to identify their top five concerns, 60% cited rising input costs, 53% cited energy costs, and 50% cited tariffs.
These pressures are a driving force behind cost takeout efforts that can cannibalize growth and reduce competitiveness. For example, 79% of organizations say delaying capital investments and major projects is important to their cost takeout efforts this year. However, while an overwhelming majority focus on this strategy, nearly half (44%) admit that they are concerned it will reduce operational agility and scalability, and increase costs.
“Given the current economic climate, many manufacturers are focused on superficial and unsustainable cost-cutting initiatives that will impair future growth,” said Chuck Deise, Senior Partner at EFESO. “To meet today’s challenging EBITDA targets and better position for the rebound, companies must embrace structural changes. They have to rethink how work is done, redesign organizational models and create an energized culture to survive today and thrive in the future. Our research found that in the current margin-pressured environment, too many organizations are taking the short-sighted approach.”
The research found that cost takeout efforts for a vast majority of organizations this year are either more aggressive (51%) or the same (40%) as they were in 2024. However, as part of these efforts, manufacturers are making fewer investments in initiatives to lower costs over the long-term.
While manufacturers show that they understand the value of strategic investments upstream, few are focusing on strategies that will return sustainable results. In fact, 84% rate manufacturing processes and 91% rate reducing product capabilities or features as extremely or very important to cost takeout efforts. However, only 31% report engaging in value engineering or product design as a means to reduce costs.
The research also explored factors including the impact of technology, how manufacturers of different sizes are employing different strategies, and disparities between discrete versus process manufacturers. Among the additional findings:
- The largest enterprises have a lead in AI. Companies with more than $5 billion in revenue are more likely to rely on AI tools to achieve cost takeout than their smaller counterparts.
- Closely held companies are less likely to be deferring capital expenditures and major projects or identifying cost-cutting opportunities. These companies are 17% less likely to delay capital investments or major projects, and 50% less likely to be identifying cost-cutting opportunities.
- Public companies are under greater pressure to remove costs. They are most likely to report cost takeout goals of 10% or greater, while private companies are most likely to report goals of 5% to 10%.
- Tariffs have a greater impact on discrete manufacturers. With more suppliers and inputs from parts, components, assemblies and subassemblies, discrete manufacturers rank tariffs and trade policy as their top macroeconomic challenge (16 percentage points higher than process).
- Process manufacturers are 12 percentage points more likely to defer capital maintenance than discrete manufacturers. Basing maintenance decisions on operating conditions and likelihood of failure rather than operating hours enables some maintenance tasks to be dropped without increasing risk.
EFESO Management Consultants partnered with Endeavor Business Intelligence to conduct this research in August 2025. Respondents included 150 manufacturing executives in Noth America with titles including C-level, VP, SVP and board member/senior advisor. Companies represented in the research have annual revenues greater than $100 million, with the vast majority over $250 million.
