79% of Manufacturing Executives Say Skilled Labor Shortage is Greatest Challenge

New research reveals that 79% of manufacturing leaders say the skilled labor shortage remains their greatest challenge. In addition, 90% say manufacturing departments are the most impacted by the labor shortage, followed by operations (48%) and design and engineering (40%).

The shortage hits at a time when several economic factors threaten manufacturing operations. Almost half (47%) of manufacturers report tariffs and unclear trade policy are making planning harder, while 38% are bracing for supply chain disruptions tied to geopolitical instability. Sixty-one percent cite rising costs and inflation as another major roadblock.

These insights come from the CADDi’s 2026 Manufacturing Outlook Study: produced by CADDI, an AI data intelligence platform designed exclusively for manufacturing, in tandem with the Society of Manufacturing Engineers. The organizations surveyed over 200 U.S. manufacturing professionals.

“Manufacturing teams are facing shrinking headcounts despite rising volatility and pressure,” said Yushiro Kato, CEO and co-founder of CADDi. “To ease the labor shortage’s impact, companies need faster answers, stronger cost visibility, and data that lets them act with confidence. Our work is focused on giving engineers, buyers, and operations teams the ability to answer these challenges with information they already have but cannot easily access due to limited labor hours and poor visibility.”

Sixty-two percent of companies are focusing on improving employee recruitment, enablement, and retention to address the shortage. Sixty-nine percent plan to invest in physical assets such as robots and equipment – a 9% increase from 2025. Investment in operational systems like ERP and MES fell sharply to 33% (down from 60% last year), reflecting a focus on technologies that deliver measurable output gains on the shop floor.

Kato emphasized, “our research shows manufacturing growth in 2026 will not come from broad expansion. Instead, it will come from the ability to extract more value from the assets companies already own. Smarter use of parts data can help leaders automate inventory tracking, streamline procurement, and keep production moving throughout the labor shortage, global turbulence and beyond.”