Roberto Isaias: Making Mattel’s supply chain strong “kenough”
Mattel Chief Supply Chain Officer—and CSCMP EDGE keynote speaker—Roberto Isaias discusses how changes to the toy company’s supply chain planning process helped it handle the pandemic and the spike in sales from the Barbie movie.
GLOBAL TEAMWORK: Product ideas were sketched on the set of the Barbie movie, then set to the plant in Indonesia. There, the product ideas were more fully developed, greatly accelerating product launch.
Supply chain disruptions don’t always come from negative events like a global pandemic or a natural disaster. Sometimes they come out of positive events such as a spike in sales or an innovation.
In the past four years, the toy company Mattel has faced disruptions on several fronts—both good and bad. Like everyone, Mattel had to deal with the challenges of the COVID pandemic. Then last year, the smash success of the Barbie movie drove sales of movie-related items sky high, putting pressure on its supply chain to keep up.
Fortunately, the company and its Chief Supply Chain Officer Roberto Isaias have been taking steps for years to transform and better synchronize its supply chain operations. This transformative work laid a solid foundation that helped them make savvy decisions in the moment and seize opportunities that both these events offered.
Isaias began his supply chain career at Procter & Gamble, which he calls a “formative” experience and excellent training ground for how to conduct large-scale projects focused on supply chain network planning, network optimization, and strategic planning. He then switched over to the commercial side before joining Mattel in 2002. At Mattel, Isaias, who is from Mexico, held a variety of leadership roles in Latin America prior to his appointment as chief supply chain officer in 2019.
Isaias will be discussing his experience guiding Mattel’s supply chain during his keynote address on October 1 at the Annual CSCMP EDGE Conference in Nashville, Tennessee. Supply Chain Xchange Executive Editor Susan Lacefield had an opportunity to talk to Isaias and provide a preview of topics that he may be covering.
Q: What were some of the first initiatives that you were involved with when you became Chief Supply Chain Officer at Mattel?
That was that was a really exciting time, as the company was in a turnaround led by our current CEO Ynon Kreiz. And a lot of the focus was to really restructure our system in ways that we can be more profitable. Kreiz is a great boss. He really allows you to make decisions and push the boundaries. So very quickly we were able to reconcile the system and redesign the way we were working.
The biggest changes we made were on the planning side. I call it “synchronizing the supply chain.” For example, we had an algorithm that used inventory turns to calculate production levels at the plant. So, we were having a very nervous system, where we were making a lot of [production] changes that were really hitting our profitability. But frankly, when you do that in China, it doesn't make any sense. Because after you turn that fast, you put it on a boat for eight to ten weeks. So why were you in a hurry? Why don’t you try to keep your productivity?
What we did is say, “Look, we should not be running our manufacturing lines for two or three or four hours, as you do in other businesses like consumer goods. What we need to do is to run our manufacturing lines for days.” That will increase our inventories probably by a day and a half. But frankly, it doesn't really matter, we’re going to put that in the boat for 10 weeks. If [running our manufacturing lines longer] is going to give us much more productivity, we probably want to do that. So, we changed the pattern of how we plan. And that algorithm alone probably gave us 30% more productivity.
The second thing we did is resize our capacity. When every single line is 30% more productive, then your costs also go down, and you don’t need as many factories. As result, we decided to close some of our factories, particularly in North America. With fewer plants, we were able to produce the same amount of product, so a lot of our fixed costs were reduced.
And the third one is we did a lot of changes in the way we select an end-of-life for a product. By now, we have reduced probably close to 40% of our SKUs. We used to have a line that was very broad. And as we reduced that, we actually increased again our productivity, reduced our complexity, and sped up inventory turns in the plant. All of that really helped us to work in much better ways. So, from 2019 to 2023, we have saved about $380 million.
Q: Mattel faced some significant challenges during the pandemic. Could you talk about those challenges and how the work that you had done previously helped you handle them?
A: The pandemic was a crazy time. I think that the work we did systematizing the way we did the production planning in the plants really helped us. Before the pandemic, we pulled production planning out of the plants, so that the production planner was here in the U.S. We have a team that is in a central location, and we have created visibility to all the raw materials and all the components in our [manufacturing resource planning] tool and to our suppliers’ materials.
When we saw the pandemic beginning, there were three things that we did really well. First, we increased our safety inventories in the plants from 30 days to 120 days. So, we immediately put in orders for electronics, paint, plastic, and pellets. We went to the CFO and said, “Look, this is going be about $200 million of more inventory. But if we don’t order now, and the cost goes up, then we will not be able to survive.”
Our CEO and our CFO were key. They were open [to the recommendation,] and they said, “Look, most of it you will use anyway. Of course, it will be a time and a cash flow challenge for the next few months. But after that, if we get it right, we will be able to grow.” It was really lucky that we saw that [trend], and we were really supported by our management team.
The second thing that we did is we have that centrality that allows us to make production decisions and react really fast. Sometimes we were changing the production on a daily basis.
And third, our planning person—who has worked in our plants in mainland China and Asia—and myself—who has been here for a long time—we were able to understand the trade dynamics. We knew that if we produce enough, and the demand was still high, our customers would take the inventory sooner or later. So [in the summer] they were pausing [orders with us]. But we knew that after that, [our products] would go because they need to sell toys in winter. So, we took the risk of continuing to produce and build our inventory up in China to 300 containers. We took those containers and placed them in basketball courts and football fields that we rented. As soon as our customers’ summer items were gone, they immediately started taking our product, and we were able to grow 20% that year. We hadn’t grown that much in so many years.
But again, the CFO, the chief commercial officer, our CEO, and everyone was aligned on how much risk we wanted to take. And it played out well. In our plan, we were supposed to grow 4%, and we ended up growing 20%.
Probably the key pieces were what we did before [the pandemic] to really be prepared and really have a consistent system with enough visibility, and then some smart choices on how to operate. Compared to our peers that produce in China, we were probably the best ones in service and growth.
Q: Did that basis also help you respond to the increase in sales that you saw as a result of the Barbie movie?
This is incredibly exciting! The Barbie movie has been one of the great events during my career at Mattel. I don’t know if you know, but Mattel was actually the first company that advertised toys on TV. It was during The Mickey Mouse Club in the 1950s. That’s what drove the early success of Barbie and Hot Wheels, and the explosion of Mattel as a global company. Now with the Barbie movie, our team and some of the visionaries that we have here really were able to put together a great story with a great director and with great talent.
With this movie, we had two challenges. First, the launch was really tight. So normally we have a lot of time to go see the movie and have the [toy] designers draw their ideas with the movie in place. In this case, we were not able to do that. So, our designers and some design developers were on the set. As they were filming the movie, the designers were drawing ideas and creating products. That was completely different to what we did in the past.
We also started with some direct-to-plant development ideas. We took a lot of the product development ideas, and we sent them to the plant to continue the development process not in the U.S. but in Indonesia. And that really accelerated the development.
Third, we started working around the clock on the production. And once we reached the volume that we were planning to have, we kept producing. This allowed us to hold some of the inventory and then have production capacity later in the year in case the demand went too high, which actually happened. We were glad that we created some of that inventory early in the year.
Our plants are not completely full the entire year, as we have a very seasonal business. They are completely heavy loaded from April to September. But they are probably [at] 50% [capacity] in the rest of the year. So, what we do when we really need to drive volume is we fully pull forward the production. Instead of starting in March or April, when we're supposed to start, we produce in December, January, February, and that allows us to have some free capacity. Of course, it creates more inventory and more risk. But it allows you to have more of what we call “chasing capacity”—that allows us to really adapt and produce more of what is in demand in the later months of the year. So, what we did is we created spare capacity or chasing capacity for that summer, and we're really happy that we did that. So that is the way we actually managed those changes in production. And that's how we were able to chase the higher-than-expected demand for the movie items.
Q: How did you work with your customers in handling the demand?
Our customers were so eager to have the product. We would say, “Well, yeah, I can ship you that. But I will only have [the products] on Sunday the 7th,” and our customers would say, “Yes! How many trucks do you have?” Or we would say, “We can send it to the store, but people will not get it until June. Is that okay?” And our customers would respond, “Yes. I'll send a note. Tell me the date, I'll make it happen.”
The eagerness and the excitement around the movie was great, and our customers were great partners. Our customers have their own schedules, they have a lot of stores and a lot of suppliers they are trying to manage. They have a very hard business to run. So, I was surprised how flexible, how nice, and how excited they were about the movie. Everyone wanted the product, and everyone wanted the material associated with the movie, and everybody was asking for tickets to the premiere, which were extremely limited!
I would say part of the fun of the story is how flexible our customers were. They were just willing to open their doors and help us drive this in a compressed schedule. Part of the success is not only what we did, it was also that they were extremely helpful. And it was one of the biggest successes that Mattel has had in its history. And now we have a lot of other movies in the pipeline. And that is super exciting!
Name: Roberto Isaias, executive vice president and chief supply chain officer, Mattel
Previous Experience: a variety of leadership roles at Mattel in Latin America including Managing Director and Senior Vice President of Latin America and Senior Vice President and General Manager of Spanish Latin America; 12 years at Procter & Gamble in various commercial and supply chain leadership positions
Education: Engineering degree from Universidad Anáhuac; MBA from the Instituto Tecnológico y de Estudios Superiores de Monterrey; certified in Total Productive Maintenance by the Japanese Institute of Plant Maintenance
Strikes and potential strikes have plagued the supply chain over the last few years. An analysis of data from the Bureau of Labor Statistics by the Economics Policy Institute concluded that the number of workers involved in major strike activity increased by 280% in 2023 from 2022. Currently, the U.S. East Coast and Gulf Coast ports are facing the threat of another dockworker strike after they return to the negotiating table in January to attempt to resolve the remaining wage and automation issues. Similarly, Boeing is continuing to contend with a machinists strike.
Strikes, or even the threat of a strike, can cause significant disruptions across the global supply chain and have a massive economic impact. For example, when U.S. railroads were facing the threat of a strike in 2022, many companies redirected their cargo to avoid work stoppages and unhappy customers. If the strike had occurred, it would have had a massive economic impact. The Association of American Railroads (AAR), estimated that the economic impact of a railroad strike could be $2 billion per day.
Similarly, although the U.S. West Coast ports avoided a strike in 2023, the labor negotiations caused companies to reroute freight. For example, companies with locations on the East Coast went through the Panama Canal instead of having their cargo land at West Coast ports. As a result, West Coast ports’ market share dipped during this timeframe. Now as the East Coast and Gulf Coast ports try to finalize negotiations to seal the deal with the International Longshoremen’s Association (ILA), companies are searching for alternative routes and transferring their shipments back to West Coast ports. The economic impact of the strike is estimated at $3.8 to $4.5 billion per day by J.P Morgan.
Labor negotiations also threaten to further exacerbate inflationary trends, which have been a key concern across the supply chain. The ILA and port operators reportedly reached a tentative agreement to increase wages by 62% over the next six years. Similarly, the Boeing machinist strike is mainly related to a request for a 40% pay raise, with machinists recently rejecting a proposed 35% increase. These demands come as companies and consumers across the spectrum are resisting increased costs.
Nor are these strikes completely focused on pay increases. The ILA is also demanding a total ban on the further automation of cranes, gates, and container movements that are used in the loading or loading of freight. This issue still remains unresolved. Such a ban would not only increase costs, it would also threaten the competitiveness as the U.S. ports, which are already some of the least competitive in the world. According to the Wall Street Journal, L.A. and Long Beach ports are about half as productive as China’s best port in terms of average container moves per hour.
Creating a Resilient Supply Chain
Labor unrest and strikes have caused executives to open their eyes to the volatility, uncertainty, complexity, and ambiguity (VUCA) in their supply chains. Many are responding to the volatility and disruptions by working to create more resilient supply chains.
No company can thrive in a supply chain disruption-ridden environment if it is not prepared to pivot as conditions change. However, preparation alone will not suffice. To thrive in a VUCA world, companies should be ahead of changing conditions or perhaps flip the situation on its head to become the disruptor instead of the disrupted. As the competition struggles to maintain customer service levels, profitability, and working capital requirements in the face of disruptions, companies with a more resilient supply chain will gain market share.
There are several strategies to create a resilient and proactive supply chain. The most successful approaches include rethinking strategies, upgrading business processes, and automating and utilizing advanced technologies. The bottom line is to create resiliency/flexibility, quick responsiveness, and upgraded performance.
Rethinking Strategies
Old strategies will no longer suffice in this more volatile world. For example, producing in China to reduce labor costs provides no resiliency when chokepoints arise in the global supply chain and/or as geopolitical risks surge. For example, the Red Sea crisis has created a supply chain chokepoint, delaying goods transiting from northeast Asia to the East Coast of the U.S. and Europe. Container ships have re-routed around the southern tip of Africa, adding cost, time, and other risks to the trip. As labor disputes and/or strikes arise, the risk increases that the product will get stuck or delayed in transit. If there are strikes on the East Coast and Gulf Coast ports, ships will have to divert to the West Coast and be shipped across the country, adding time and cost. By moving manufacturing closer to customers and consumers through reshoring, nearshoring, and vertical integration efforts, these risks are mitigated. If local disruptions do occur, companies can recover quicker due to the shorter distances, quicker lead times, and greater control.
Thus, proactive executives are rethinking their manufacturing and supply chain network. For example, Ascential Medical & Life Sciences last year expanded its domestic manufacturing footprint, opening a 100,000-square-foot facility in Minnesota that will specialize in developing custom manufacturing machinery and solutions for medical and life science companies. The facility is part of a broader reshoring effort by the company.
In a similar vein, many companies, such as GM, Samsung, and Dell, have followed a nearshoring (also called friendshoring) strategy to Mexico. By moving closer to customers, they not only are more resilient but also can take advantage of trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), as well as lower regulations and costs.
In addition to moving manufacturing, companies are also diversifying their supply base. They are pursuing strategies such as adding backup sources of supply, establishing strategic partnerships and joint ventures, and vertically integrating their supply chain.
Upgrade Business Processes
The most successful companies are aggressively upgrading strategic processes to support resiliency, customer success, and profitability. For example, rolling out an SIOP (Sales, Inventory, Operations Planning) process can help companies respond more quickly and proactively to changing customer demand and/or supply chain disruptions. Similarly, companies that have upgraded their demand, production, and replenishment planning processes are able to provide customers with higher service levels while also freeing up cash by reducing unnecessary inventory. These upgraded planning processes also improve margins by increasing efficiencies and productivity while reducing waste.
For example, a manufacturer of health care products utilized a SIOP process to better predict revenue and to create a better operational rhythm. The company’s demand plan was translated into machine capacity and critical raw material requirements. By taking this step, the company became aware that it needed to get a backup supplier to avoid a potential critical chokepoint in the supply chain. At the time, the manufacturer was purchasing all of its most important material from Brazil. Due to geopolitical risk in the region, there was the potential for supply chain disruption. To mitigate this risk and ensure reliability, the manufacturer began sourcing 20% of its material requirements from a backup supplier in the United States. Fast-forward a few years, and there was a port strike that made it difficult to receive the materials from Brazil. The manufacturer’s SIOP process provided a forecast of what was required to bridge the supply gap during the disruption. Because of the already existing relationship, the backup supplier was willing to ramp up volume to cover the manufacturer’s supply gap, even though the supplier was receiving an overload of requests from other companies. As a result, the manufacturer was able to maintain supply of this critical material and continue to meet its customer service levels. While its competition struggled, the health care manufacture was able to grow its revenue by 15%.
Automate & Digitize
Technology can also help companies respond better to disruptions and volatility. For example, advanced planning systems can help planners can quickly pivot with changing conditions, such as strikes. The most advanced of these systems will be equipped with artificial intelligence (AI) capabilities that will recommend changes on the fly to satisfy customer needs in the most profitable and least risky manner. For example, as strikes arise, the system will quickly assess changing conditions and recommend that the manufacturer move demand to plants and/or routes not impacted by the strike. The planning systems will also provide the planners with a better picture of requirements so that they can change production plans and ensure high service levels for customers.
In the same fashion, companies that automate their manufacturing processes, such as by using robotic welders, can more flexibly respond to changing customer requirements change while also mitigating costs. Similarly, companies that use additive manufacturing technologies can produce and customize on demand. By using robotics and automation equipment, manufacturers can run lights out, thereby increasing output and flexibility, while reducing cost. Therefore, if a strike occurs at the manufacturer, some level of production is likely to occur, as long as they can assign a resource to keep the robotics and automated equipment running.
In logistics, advanced technologies can seamlessly sort, package, and move products. These technologies can help companies quickly respond to changing conditions so that packages can be re-routed at any time. Similarly, transportation planning can use predictive models to optimize freight costs and rerouting shipments through the global supply chain in response to changing conditions, thus ensuring timely deliveries. For example, as strikes arise, the system will quickly assess a company’s transportation network, evaluate alternative routes, and recommend the optimal one. Changes will also be made to current routes for goods in transit so that they meet the customer due dates at the lowest cost.
Delivering Bottom Line Business Results
The bottom line is to create a resilient supply chain and craft tomorrow’s supply chain today. Companies that invest smartly in the future will be prepared to take market share as disruptions occur. There will be more opportunity than ever before for those that rethink strategies, upgrade business processes, and automate and digitize their end-to-end supply chain.
About the author: Lisa Anderson is founder and president of LMA Consulting Group Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue & EBITDA Growth that can be found at https://www.lma-consultinggroup.com/siop-book/.
Regardless of the elected administration, the future likely holds significant changes for trade, taxes, and regulatory compliance. As a result, it’s crucial that U.S. businesses avoid making decisions contingent on election outcomes, and instead focus on resilience, agility, and growth, according to California-based Propel, which provides a product value management (PVM) platform for manufacturing, medical device, and consumer electronics industries.
“Now is not the time to wait for the dust to settle,” Ross Meyercord, CEO of Propel, said in a release. “Companies should approach this election cycle as an opportunity to thrive in the face of constant change by proactively investing in technology and talent that keeps them nimble. Businesses always need to be prepared for changing tariffs, taxes, or geopolitical tensions that lead to unexpected interruptions – that’s just the new normal.”
In Propel’s analysis, a Trump administration would bring a continuation of corporate tax cuts intended to bolster American manufacturing. However, Trump’s suggestion for spiraling tariffs may benefit certain industries, but would drive up costs for businesses reliant on global supply chains.
In contrast, a Harris administration would likely continue the current push for regulatory reforms that support sectors like AI, digital assets, and manufacturing while protecting consumer rights. Harris would also likely prioritize strategic investments in new technologies and provide tax incentives to promote growth in underserved areas.
And regardless of the new administration, the real challenge will come from a potentially divided Congress, which could impact everything from trade negotiations to tax policies, Propel said.
“The election outcome is less material for businesses,” Meyercord said. “What is important is quickly adapting to shifting policies or disruptions that address ‘what if’ scenarios and having the ability to pivot your strategy. A responsive manufacturing sector will have a significant impact on the broader economy, driving growth and favorably influencing GDP. One thing is clear: the only certainty is change.”
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Supply chain professionals should be aware of how the different policies proposed by the U.S. presidential candidates would affect supply chain operations.
For both Donald Trump and Kamala Harris, the revival of domestic manufacturing is a key campaign theme and centerpiece in their respective proposals for economic growth and national security. Amid the electioneering and campaign pledges, however, the centrality of supply chain policy is being lost in the shuffle. While both candidates want to make the supply chain less dependent on China and to rebuild the American industrial base, their approaches will impact manufacturing, allied sectors, and global supply chains much differently despite the common overlay of protectionist industrial policy.
Both Trump’s “America First” and Harris’ “Opportunity Economy” policies call for moving home parts of supply chains, like those that bring to market critical products like semiconductors, pharmaceutical products, and medical supplies, and strengthening long-term supply chain resilience by discouraging offshoring. Harris’ economic plan, dubbed the “New Way Forward,” aims to close tax loopholes, strengthen labor rights, and provide government support to high-priority sectors, such as semiconductors and green energy technologies. Trump’s economic plan, dubbed “New American Industrialism,” emphasizes tariffs, corporate tax cuts, and easing of regulations.
Supply chain policy differences in rhetoric and priorities will become a growing attack vector in the lead-up to Election Day. While political discussions focus on the economic benefits, corporate leaders need to understand the implications of policy changes and the effect on their firms’ ability to navigate risks and disruptions.
U.S. manufacturing base and supply chains
Trump’s emphasis on sweeping tariffs creates uncertainty over supply security and fears of inflation. Harris’ continued emphasis on “Bidenomics,” such as the Inflation Reduction Act and the CHIPS and Science Act, impacts multitier global supply chains and trade policy around the world. Under either plan, the net effect would be that free trade will continue to regress under the impulses of decoupling from high-risk markets, geopolitics, and regionalization. Both parties emphasize the opportunity to create new, well-paid jobs. At the same time, customers are likely to have to bear the higher costs, either directly by paying higher prices in stores or indirectly through subsidies financed by taxpayers’ money.
Labor, immigration, and the workforce
Trump’s emphasis on mass deportation of illegal immigrants will impact the manufacturing and agricultural sectors that already have labor shortages. Harris’ focus on labor rights will amplify organized labor’s influence in supply chain operations and thereby increase costs as seen in the recent longshoreman strike on the East and Gulf Coasts. Both directions will only strengthen inflationary pressures and cause organized labor to resist technological advances such as automation and artificial intelligence to replace jobs. The net effect is that organized labor sees its influence growing under either election outcome, resulting in more potential strikes, and the educational sector being called upon to develop the requisite training and development programs and public–private partnerships to address the manufacturing and supply chain skills gap. Access to top domestic and global talent will be critical to support a growing U.S. manufacturing base.
Sustainability
Trump would roll back some of the environmental regulations, climate initiatives, and decarbonization measures. Big Oil companies, such as Exxon Mobil and Phillips 66, however, have come to embrace the low-carbon energy provisions of the Inflation Reduction Act. Harris is expected to strengthen protections and enforcement alongside international allies and partners. In continuation of the Inflation Reduction Act, a Harris administration would continue providing incentives to green technologies and businesses. The net effect of both approaches would be that corporate leaders will stay committed to decarbonization measures that were set in motion years ago.
Regardless of the election outcome, the uncertainty around supply chain policy will continue well into 2025. In particular, there are growing concerns about costs and their inflationary impact on the deficit and national debt; reform of the de minimis exemption for low-value imports; the role of friend-, near- and re-shoring; and the renewal of the U.S.-Mexico-Canada Agreement in 2026. The authors are hopeful that supply chain policy steps announced by the U.S. Department of Commerce in September at the Supply Chain Summit will be institutionalized and survive leadership turnover. The election outcome will determine supply chain policy’s next form and shape the U.S. economy’s ability to compete in an increasingly uncertain global market.
The firms’ “GEP Global Supply Chain Volatility Index” tracks demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses.
The rise in underutilized vendor capacity was driven by a deterioration in global demand. Factory purchasing activity was at its weakest in the year-to-date, with procurement trends in all major continents worsening in September and signaling gloomier prospects for economies heading into Q4, the report said.
According to the report, the slowing economy was seen across the major regions:
North America factory purchasing activity deteriorates more quickly in September, with demand at its weakest year-to-date, signaling a quickly slowing U.S. economy
Factory procurement activity in China fell for a third straight month, and devastation from Typhoon Yagi hit vendors feeding Southeast Asian markets like Vietnam
Europe's industrial recession deepens, leading to an even larger increase in supplier spare capacity
"September is the fourth straight month of declining demand and the third month running that the world's supply chains have spare capacity, as manufacturing becomes an increasing drag on the major economies," Jagadish Turimella, president of GEP, said in a release. "With the potential of a widening war in the Middle East impacting oil, and the possibility of more tariffs and trade barriers in the new year, manufacturers should prioritize agility and resilience in their procurement and supply chains."
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.