How Manufacturers Can Expand in the Changing Marketplace

The pressure on manufacturers isn’t letting up in 2026 — supply chain complexity, rising costs, workforce shortages, and increasingly volatile trade policies are all shaping how leaders invest and plan.

But despite these challenges, business leaders are optimistic. In fact, 70% feel confident or extremely confident  in their ability to pursue growth in the year ahead. That confidence comes from a shift in mindset: manufacturers aren’t just reacting to change anymore. They’re building smarter systems, stronger supply chains, and better ways to deploy technology so they can scale without hesitation.

Here’s what growth looks like in 2026 — and how manufacturers can expand strategically in a fast‑moving market.

Diversification is Data-Driven

Diversification is still a reliable way to enhance operational efficiency, increase brand exposure, and strengthen customer loyalty. But the difference now is speed and precision.

Manufacturers aren’t relying on instinct alone — they’re using integrated data, AI‑powered forecasting, and market analytics to choose where and how to diversify.

What’s driving this trend in 2026?

• Companies expect production volumes to increase, even as operating costs rise.
• 38% of respondents plan to expand into new markets over the next three years.
• Leaders are seeking ways to reduce reliance on any single customer, supplier, or region.

Diversification is becoming a strategic hedge — one backed by stronger data than ever before.

Product Diversification

Introducing new products or variations of existing ones can open additional revenue streams. This strategy often involves investing in research and development (R&D) to innovate and enhance product offerings.

Diversification into related product lines or entirely new sectors allows organizations to leverage existing expertise and infrastructure while exploring new growth opportunities. By broadening their product portfolio, manufacturers can cater to a wider range of customer needs and preferences.

Vertical Diversification

Exploring additional opportunities within the supply chain is another effective strategy. Vertical integration involves increasing control over different stages of the supply chain, either forward (towards the consumer) or backward (towards raw materials).

Manufacturers realized the importance of vertical diversification after suffering supply chain volatility in recent years.

For example, a shoe manufacturer producing interior components in-house while outsourcing rubber sole production can benefit from vertical integration by taking over the production of rubber soles. This ensures better quality control and may reduce costs. Selling the finished product through proprietary stores and other retail outlets diversifies revenue channels and enhances market reach.

In addition to expanding product lines, manufacturers are also using customs strategies to reduce tariff exposure. Techniques like the first-sale rule — declaring the factory price instead of the brokered resale price — and dynamic HTS classification allow companies to lower duty rates on subcomponents. These “no-regret” tactics can reduce landed costs by 15-30% without major supply chain disruption.

Mergers and Acquisitions are Fueling Accelerated Growth

M&A remains a powerful expansion strategy, especially for manufacturers looking to access new technologies, talent, or production capabilities quickly.

But integration is where deals succeed or fail. In 2026, manufacturers are:

• Leaning heavily on ERP modernization and automation to integrate acquired entities.
• Standardizing data models early to avoid fragmented reporting.
• Using AI to analyze post‑deal performance and uncover synergies faster.

A well‑executed acquisition can open new markets overnight. A poorly integrated one can slow down operations for years. The differentiator? Unified data and connected systems.

Key post-acquisition steps include:

• Develop a comprehensive integration plan that outlines goals, timelines, and key performance indicators (KPIs).
• Conduct team-building activities and provide regular communication to bridge cultural gaps.
• Create a strategic technology plan that reviews current technology solutions and needs, as well as where new digital investments may need to occur. Here’s how to get started planning your strategy.
• Develop a clear communication plan to keep employees informed and engaged throughout the transition.
• Conduct a thorough risk assessment to identify potential challenges and develop mitigation strategies. This should also include a cybersecurity plan, centralized support, consistent platform alignment, and more.

Technology Modernization is the Bare Minimum

Investing in new technologies or optimizing existing systems is critical for staying competitive. Agility enables organizations to quickly pivot production processes and product offerings, ensuring they can meet new customer needs and capitalize on emerging trends.

Manufacturers aren’t debating whether to modernize — they’re debating how fast they can get there.

According to our recent survey:

• 74% will increase investment in AI in the next year.
• 72% plan to increase investment in core systems like ERP and MES.
• 71% will increase spending on automation and robotics.

The numbers tell a clear story: Tech modernization is no longer an IT project — it’s the backbone of business expansion.

Modernizing Data Systems to Support Growth

Upgrading legacy systems to incorporate modern technologies such as cloud computing, artificial intelligence (AI), and the Internet of Things (IoT) enables manufacturers to gather and analyze vast amounts of data in real time. This transformation facilitates predictive maintenance, optimizes production processes, and reduces downtime.

AI is essential to your ERP, MES, and WMS platforms. Manufacturers are using AI to forecast tariff impacts, optimize inventory replenishment, and detect anomalies in scrap rates. Rather than chasing flashy pilots, companies are seeing real ROI by embedding AI into core systems and launching two or three targeted use cases with clear KPIs.

When manufacturers align business goals with data, they gain valuable insights that keep them agile and at the forefront of their industry.

Modern systems enable:

• Real-time production visibility.
• Automated quality inspection and predictive maintenance.
• Streamlined financial and supply chain planning.
• Faster decision-making across teams.

Companies that delay modernization risk falling behind in cost, speed, and customer expectations.

Workforce Strategy is a Critical Enabler

Manufacturers pursuing long-term market expansion aren’t just focused on systems — they’re focused on people and sustainable growth.

In 2026, leading manufacturers are:

• Upskilling and reskilling employees in new technologies.
• Automating repetitive tasks to reduce strain on labor.
• Prioritizing employee cybersecurity and risk awareness training.

Growth isn’t only about entering a new market — it’s about ensuring the business is built to last once it gets there.

The Bottom Line: Smart Growth Requires Strong Foundations

Manufacturers see ample opportunity to expand in today’s environment. The real challenge is building an operational backbone that supports sustainable growth.

That backbone must include:

• Modernized, integrated data systems.
• Real-time visibility across the supply chain.
• Forward-looking scenario and cost modeling.
• Automation and AI that improve quality and output.
• A workforce equipped for the next generation of manufacturing.

When these components come together, manufacturers can move quickly, pursue new opportunities with confidence, and stay ahead of whatever disruption comes next.

Contact Eide Bailly Manufacturing Advisors | Access the 2026 Manufacturing Outlook Report