Manufacturers Go All-In on AI Amidst Rising Economic Fears

SAN RAMON, CA – January 28, 2026 – The manufacturing industry is navigating a high-stakes paradox: even as economic anxieties, trade volatility, and workforce shortages intensify, companies are accelerating their adoption of artificial intelligence and digital technologies at an unprecedented rate. A new industry report reveals that while progress is undeniable, the motivation has shifted. Technology is no longer just a tool for growth; it has become a critical instrument for survival and resilience.

Results from the 2026 State of Manufacturing Technology Survey, commissioned by cloud ERP provider Rootstock Software, paint a detailed picture of an industry in transition. The survey of 520 manufacturing leaders across North America, Europe, and Asia shows that AI has firmly entered the mainstream. However, this technological leap forward is set against a backdrop of significant operational and market pressures, forcing a more strategic and defensive approach to digital transformation.

AI Moves from Hype to High-Impact Application

The era of AI as a futuristic buzzword in manufacturing is officially over. According to the survey, an overwhelming 94% of manufacturers are now utilizing some form of artificial intelligence. More telling is the industry's growing confidence in its own digital maturity, with 73% of respondents believing their company is either “on par with” or “ahead” of its peers in AI adoption.

This confidence is backed by a clear shift from experimental projects to high-impact, execution-focused applications. The largest gains were seen in predictive AI, which rose 12 points to 48% adoption. This signals a move towards using AI not just to analyze the past, but to forecast the future and proactively manage operations. The investment priorities reflect this trend, with spending shifting most sharply toward supply chain planning (+19 points to 35%) and process optimization (+11 points to 36%).

These findings align with broader industry analyses from firms like Gartner and Deloitte, which have consistently pointed to AI’s growing role in enhancing predictive maintenance, optimizing complex supply chains, and improving quality control. The survey suggests manufacturers are moving beyond pilot programs and are now embedding AI into the core functions that determine operational success and profitability, particularly in areas vulnerable to external shocks.

A Counterintuitive Bet: Doubling Down on Tech Amidst Uncertainty

Perhaps the most striking finding from the report is the industry's commitment to technology spending in the face of a gloomy economic outlook. A majority of manufacturers, 61%, plan to increase their spending on enterprise software over the next 12 months. This comes at a time when 31% of the same leaders expect customer demand to decrease and 39% anticipate higher raw material costs due to tariffs.

This apparent contradiction is explained by a strategic pivot. Manufacturers are not spending indiscriminately; they are making targeted investments in technologies that promise greater efficiency, agility, and control.

“Manufacturers aren’t slowing down on digital transformation, but they’re being more selective about the initiatives they move forward with, ensuring projects will help improve performance and results,” said Rick Berger, CEO of Rootstock Software, in the press release. “With this strategy in mind, many manufacturers are actually increasing investments in enterprise software, as they see these solutions as being able to help them respond faster to market conditions, plan with greater confidence, and operate more effectively in today’s volatile market.”

This strategy is a direct response to a global landscape fraught with risk. Economic forecasts from institutions like the IMF and World Bank project slower global growth, while ongoing geopolitical fragmentation continues to fuel protectionist trade policies. The survey data confirms that manufacturers are acutely aware of these threats, making technology a key part of their defensive playbook.

The Human Hurdle in Digital Transformation

While technology is advancing rapidly, the survey highlights a critical and growing bottleneck: people. The most significant barriers to digital transformation are no longer technological but organizational. A lack of the right talent was cited as a primary barrier by 33% of respondents, while insufficient cross-departmental collaboration was reported by 31%.

This “human hurdle” is a well-documented crisis in the sector. Industry groups like the National Association of Manufacturers have warned for years of a widening skills gap, projecting millions of unfilled jobs due to a combination of a retiring workforce and a lack of incoming talent with the necessary digital and analytical skills. The survey confirms that this long-term challenge is now having a direct, immediate impact on the ability to execute strategic technology initiatives.

Siloed operations and poor communication between departments create data silos and cultural resistance, preventing companies from realizing the full value of their technology investments. This finding suggests that the next frontier for digital success in manufacturing lies not in the code, but in fostering a culture of collaboration and committing to workforce development, reskilling, and upskilling.

ERP as the Unifying Backbone

In response to these internal and external pressures, manufacturers are increasingly turning to their Enterprise Resource Planning (ERP) systems as a strategic solution. The survey reveals that platform consolidation has become a leading priority, with nearly half of manufacturers (49%) citing the simplification of infrastructure and standardization of application platforms as a key desired outcome from their ERP.

This marks a significant evolution in the role of ERP. Once viewed as a rigid system of record, modern cloud ERPs are now seen as the central nervous system of the enterprise—a unifying platform essential for breaking down the very silos that inhibit progress.

“Manufacturers are increasingly looking to ERP as a way to consolidate platforms and bring fragmented parts of the business together,” noted Ohad Idan, Vice President of Product at Rootstock. “The survey shows rising expectations around ERP to unify data across sales, operations, and supply chains. This type of unified view helps manufacturers modernize processes and gives them clearer insights to meet customer demand.”

Crucially, this unified data foundation is the prerequisite for effective AI. Without a single source of truth that connects the factory floor to the front office, AI applications for forecasting and decision-making are starved of the high-quality, cross-functional data they need to function. The push for ERP modernization is therefore inextricably linked to the ambition of becoming an AI-driven enterprise.

The findings from the 2026 survey depict an industry at a crucial inflection point. Manufacturers are aggressively pursuing a technologically sophisticated future, but they are doing so with a pragmatist's eye on the immediate threats. The embrace of AI and the renewed focus on foundational ERP systems represent a calculated strategy to build resilience, enhance agility, and maintain a competitive edge in a world where uncertainty is the only constant.