Supply Chain Strategy, AI Set To Transform Manufacturing in 2026

Digital services firm West Monroe outlines four trends that will shape the industrial landscape in its 2026 Mid-Market Manufacturing Industry Outlook report:

• “Supply chains move from defensive to permanently flexible.”
• “Turning AI from proof-of-concept into proof-of-value.”
• “Deals that build, not just buy: Using M&A to modernize the mid-market.”
• “The next shift: Reinventing work for a younger, AI-enabled workforce.”

"Manufacturing enters 2026 with urgency—and a new kind of clarity,” says Randal Kenworthy, West Monroe consumer & industrial products senior partner. “The forces reshaping the industry aren’t theoretical anymore: workforce turnover, supply chain volatility, AI acceleration and renewed deal activity are rewriting how value is created and sustained.”

Long-Lasting Supply Chain Resilience

After a particularly turbulent year for supply chains due to tariffs and geopolitical volatility, West Monroe projects a more deliberate supply chain environment in the new year. Instead of the need to react in real time to drastic policy changes, the new normal will be to have flexibility built in by default. Even if supply chain disruptions persist, organizations will be better prepared to respond to them strategically.

2026 supply chain leaders will build “networks designed to flex across geographies, supported by continuous AI insights, strong data governance and the mindset that adaptability is resilience,” notes the report.

The AI Advantage

West Monroe says middle-market firms are learning how to create measurable value from AI implementation.

“AI doesn’t create value on its own. The value comes from how you build around it—your data, your people and your ability to repeat what works,” says Jeff Pehler, West Monroe consumer & industrial products partner.

The report emphasizes the need for collaboration between AI and humans, clear governance and contextualized data to achieve meaningful ROI. As AI becomes increasingly integrated into manufacturing workflows, experimentation with possible use cases is turning into scalable productivity gains.

“The ones that treat AI as a strategic lever for resilience and growth, not just efficiency and cost-trimming, will define the next era of industrial competitiveness,” notes the report.

Strategic M&A

The next trend is how mid-market manufacturers will increasingly use M&A to intentionally transform their capabilities. During a time of widespread uncertainty, M&A will offer risk diversification and modernization for these companies.

“For mid-market leaders, deals are no longer just growth plays, they’re survival strategies in an industry where technology, labor and volatility now move in sync,” notes the report. “It will be even more important in 2026 to tie each acquisition back to a clear value-creation thesis grounded in efficiency, automation and supply chain agility.”

Workforce Redesign

With an aging manufacturing workforce alongside a labor shortage of new industrial workers, finding and retaining talent has been a considerable challenge for the sector in recent years. To attract younger talent, West Monroe expects manufacturers to rethink traditional workflows.

“Shift recruiting from ‘shift work’ to ‘smart work.’ That language matters to a generation raised on purpose and problem-solving,” notes the report. A more tech-friendly workplace is appealing to younger generations interested in automation, AI and other new technologies.

The report also suggests that companies should “finally codify tribal knowledge —the unrecorded, experience-based steps that keep production running,” before retirements overwhelm manufacturers and institutional knowledge is lost.

“The companies that lead will be those who stop treating AI, workforce and operations as separate priorities and start connecting and activating them as one strategy,” says Kenworthy. “This is about redefining how work gets done, how deals create value and how resilience is built into every layer of the business. The next generation of manufacturers aren’t waiting for clarity. They’re building it."