The global manufacturing industry has entered a new era. What was once a simple question – “How can we cut costs?” – has turned into a strategic challenge about how to build the future. The Boston Consulting Group (BCG) report “How Manufacturers Are Rethinking Costs” shows how companies are fundamentally rethinking their cost structures amid geopolitical instability, energy price volatility, and labor shortages.
Today, efficiency means more than savings – it means rethinking everything. Companies are rebuilding supply chains, adopting automation, and deploying artificial intelligence to turn crises into opportunities.
Costs are rising while demand weakens. According to Bloomberg Intelligence, manufacturers are maintaining revenues mainly through existing contracts, while new orders have slowed sharply. The ISM Manufacturing PMI has remained in contraction territory since early 2023.
Tariffs and trade barriers have become central concerns for global producers. Harvard Business School professor Willy Shih notes: “Everyone is trying to figure out how to live in a world of tariffs. Even the most efficient factories can’t offset their impact.”
Daniel Küpper, Managing Director and Senior Partner at BCG, warns that in industries such as wood, paper, and furniture, a 10% tariff could cut global trade by half. In response, many companies are quickly trying to reduce material costs – often the fastest way to stabilize profits in the short term.
But old cost-cutting tactics no longer work. The era of cheap labor and offshoring is fading. Rising wages, tariffs, and shipping costs have erased much of the advantage of “low-cost” regions. Meanwhile, pandemic-era investment freezes have slowed innovation. Küpper emphasizes: “Companies need to start building advanced new plants – not just patch up old ones.”
This is fueling a powerful shift toward reshoring and nearshoring. In the United States, manufacturers are moving production closer to home, doubling industrial construction spending since 2022, according to the Federal Reserve Bank of St. Louis. Local production offers more control, greater resilience, and protection from tariffs.
“There’s no future in shutting down factories and moving them abroad,” Küpper says. But bringing production back home raises new costs. To balance them, companies are investing in automation, smart systems, and scale efficiency. As Shih asks, “What technologies will help me reduce my capital costs?”
The main answer is artificial intelligence. AI, robotics, and digital twins are reshaping cost management. They help predict downtime, optimize production, and reduce waste. While such systems require major investments – in cloud services, data infrastructure, and integration – they are already paying off. Standardization and automation are allowing many firms to protect margins even when revenues decline.
Cost-cutting is no longer an end in itself. Leading manufacturers are reinvesting their savings into modernization and workforce training. “It’s not enough to repeat what we’ve done for the past 30 years,” Küpper says. “The future belongs to those who see cost management as transformation, not austerity.” In other words, savings are being turned into innovation – fueling advances in AI, robotics, sustainable materials, and energy efficiency.
These lessons are especially relevant for Kazakhstan.
First, automation and standardization can help small and medium-sized factories raise productivity even with limited budgets.
Second, localization of production should become a priority: developing domestic suppliers and components reduces import dependency.
Third, investing in human capital is essential. Without retraining engineers and technicians, digital transformation will remain on paper.
Fourth, modernizing the energy infrastructure and using energy-efficient technologies can cut costs and shield industry from external shocks.
Finally, applying AI-based cost management across planning, logistics, and procurement will help Kazakh manufacturers become more transparent, agile, and competitive.
The BCG report makes one thing clear: the industrial world has changed. Success now belongs not to those who simply cut costs, but to those who turn efficiency into strategy. For Kazakhstan, this means acting early – embracing the principles of smart cost management to build a more resilient industrial economy. In this vision, cost control is not a survival tactic, but a driver of industrial progress.
Alen Serik, expert of the portal EconomyKZ.org