Chinese New Year is over, and the Year of the Flame Horse has begun. Wonder why it’s the Flame Horse? Here is a handy guide to the Chinese Zodiac. The flame horse symbolizes intense passion, rapid change, and untamed, transformative energy. From what we have seen so far, it is clear that 2026 and 2027 will bring a period of untamed transformation. It will present a lot of practical challenges, but there are many opportunities for companies that can hold on and ride this horse.
The Global Manufacturing System is Already Under Pressure
Over the last three decades, global manufacturing followed a relatively simple formula: optimize for cost and efficiency. China became the center of gravity for production, while companies stretched supply chains across continents in pursuit of lower prices.
That model has been under strain for several years.
Trade tensions, tariffs, geopolitical competition, and pandemic-era disruptions have exposed the fragility of long supply chains. Suddenly, manufacturers began asking new questions:
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Should we depend on a single country for critical components?
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What happens if shipping routes are disrupted?
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Is the lowest cost supplier still the safest choice?
Rather than slowdown in 2026, I expect these pressures to increase, and the companies that fail to take bold action will be left behind. More companies have reached out to MTG than ever before to discuss relocation, shipping questions, and how to safeguard their supply chain. The last point — “Is the lowest cost supplier still the safest choice?” — has tripped up many companies. They struggle to move away from the familiar, lower-cost options they have relied on for the past three decades. Companies that are not willing to change will be the ones left behind in this tumultuous time.
Automation Could Rewrite the Economics of Production
The promises of AI in manufacturing have yet to be fully realized. MTG works with Overview.ai, an AI visual inspection company. Its AI-powered camera is an excellent addition to manufacturing lines, quickly learning how a product should look and identifying defects the human eye cannot detect. However, it is a tool to find problems, not fix them. That still requires skilled human operators.
Until the fabled AI manufacturing tools arrive, more companies are turning to automation as rising labor costs, labor shortages, and the need for greater process control push them to automate in ways they never had to before. The good news is that automation equipment continues to fall in price and become more effective than before.
MTG is assisting a large client with implementing automation, manufacturing execution systems (MES), and enterprise resource planning (ERP) systems into their factory. It is not a quick or easy process, yet the results are impressive. The improvements and automations we are implementing with our client will increase the gross margin by 15 points and will pay for themselves in less than three years just with cost savings. It will be a substantial transformation of its manufacturing operations.
Resilient Supply Chains are Becoming Strategic Assets
The volatility mentioned above has forced manufacturers to take a harder look at their supply chains. Not knowing the location and operations of your sub-suppliers is no longer acceptable. More clients than ever before have come to MTG asking how to relocate their operations and build a supply chain from scratch. This means asking hard questions about your bill of materials and searching for critical weaknesses. The process started during COVID and is accelerating now.
The companies that will succeed this year and in the future will be those that create resilient supply chains that can shift and adapt quickly to a changing geopolitical and economic environment.
The changes required may be considerable. We have clients that have had to alter their designs and manufacturing processes to manufacture competitively in North America. Others have had to invest in new machinery for themselves and their suppliers. For example, one company that currently uses a Chinese supplier who manually welds its products together has realized that it needs to work with new suppliers to buy and integrate robotic welding.
Efficiency will no longer be the only requirement. Supply chains need to have both resilience and efficiency to remain viable going forward.
What Should You Do?
The first thing you should do, if you are not already doing it, is take a hard look at your manufacturing operations and supply chain. Ask yourself:
- Is our manufacturing efficient? (Do you have the basics of lean and 5S in place?)
- What challenge could be solved by automation? For example, if you have a lot of splatter from welding or painting, automated systems, if set up properly, could improve that.
- How dependent are we on a single supplier, either for our products or critical components?
Second, you need to look for viable solutions and take the effort to understand the timing, cost, and effort required. Companies often have quick responses but fail to do their due diligence on what the costs are of both their action and their inaction. While 2026 is a time of untamed transformation, companies that do not take the time to manage their transformation will lose significant time and energy rushing into poorly thought-out solutions.
Manufacturers that take the time to analyze their operations, understand their supply chains, and plan their automation strategies will be the ones that benefit from this period of transformation. Those that delay may find themselves reacting to disruptions rather than shaping their own future. At Manufacturing Transformation Group, we spend most of our time helping companies evaluate their manufacturing operations, redesign supply chains, and implement practical automation solutions. If your company is facing questions about relocation, automation, or supply chain resilience, this may be the right time to take a closer look. The companies that act early tend to have the most options available to them.
