Manufacturers are facing one of the most challenging financial landscapes in recent memory. Demand for everyday products remains steady, but the volatility of input costs — from plastics and packaging to energy and logistics — is squeezing margins and destabilizing cash flow. For CEOs, CFOs and controllers, the question is no longer whether volatility will strike, but how to build resilience in a sector where supply chains, consumer expectations and regulatory pressures collide.
Challenges
Before manufacturers can determine a course of action it is essential to understand the specific obstacles that are putting cash flow under pressure. The following five challenges represent the most pressing issues facing manufacturing industry leaders today. By examining these challenges in detail, organizations can better prepare to navigate the volatility that now defines the manufacturing landscape.
- Raw Material Volatility: Plastics, packaging materials and energy costs are swinging unpredictably, often with little warning. These inputs are essential to production, yet their volatility makes it difficult to forecast margins or set pricing strategies with confidence. CFOs are constantly forced to recalibrate financial models, while CEOs must weigh whether to absorb costs, pass them on to consumers or cut elsewhere.
- Supply Chain Fragility: Manufacturers rely on sprawling, global supply chains that remain vulnerable to shocks. Logistics bottlenecks, freight rate volatility and supplier instability can quickly disrupt production schedules. Company management often finds itself firefighting unexpected costs that ripple through cash flow forecasts, leaving little room for proactive planning.
- Capital Allocation Pressure: Automation, sustainability initiatives and compliance requirements demand significant investment. Companies face tough choices: preserve liquidity or fund strategic projects that promise long-term competitiveness. The wrong call can weaken both financial stability and market position, while boards and investors continue to demand growth.
- Forecasting Blind Spots: Traditional budgeting models falter under inflation and currency fluctuations. CFOs and Controllers risk making decisions based on outdated assumptions, leaving companies exposed to sudden shocks in consumer demand or input costs. Without accurate forward visibility, companies are essentially navigating in the dark.
- Software Upgrade Needs: Many manufacturers are constrained by legacy ERP and financial systems that cannot keep pace with today’s volatility. Outdated software limits visibility into real-time costs, slows decision-making and creates silos between finance, procurement and operations. Management increasingly recognizes that upgrading to modern, cloud-based platforms with advanced analytics is not just an IT project — it is a strategic necessity. Controllers, in particular, need systems that can integrate data streams, automate reporting and provide actionable insights to manage cash flow under pressure.
Where Do We Go From Here?
In the short term, manufacturers must focus on survival tactics that stabilize cash flow and provide immediate visibility into cost pressures. Static annual budgets are no longer sufficient; instead, rolling cash flow forecasts updated weekly or monthly allow finance teams to anticipate volatility before it hits. These forecasts should not simply record what has already happened — they must serve as forward-looking instruments that model multiple scenarios, from raw material price spikes to shifts in consumer demand. By stress testing liquidity under different assumptions, management can prepare contingency plans rather than scrambling to react after margins have already eroded.
Equally important are cost visibility dashboards that integrate procurement, operations and finance data into a single, real-time view. Dashboards should highlight leading indicators — such as supplier pricing trends, freight rate movements or inventory turnover — so executives can spot risks early and adjust strategy before they cascade into cash flow crises. When designed well, these tools shift the mindset from backward-looking reporting to proactive planning.
Example
A manufacturer that relies heavily on plastic packaging may have historically only seen the impact of rising resin prices after invoices are paid — a reactive posture that leads to updating budgets to adjust margins or renegotiate contracts. With real-time dashboards and rolling forecasts, a company can begin tracking supplier quotes, commodity price indices and freight costs in real time. Instead of waiting for the cost spike to appear in monthly reports, management can feed data into rolling cash flow forecasts that model multiple scenarios — from moderate increases to severe shocks. Armed with these projections, management can focus on two areas:
- Proactively adjust liquidity plans, negotiate with suppliers for volume discounts and explore alternative packaging materials.
- Make strategic decisions about whether to absorb costs, pass them on selectively to consumers or accelerate sustainability initiatives that reduce reliance on volatile inputs.
Key Takeaways
In conclusion, cost volatility is no longer a temporary disruption—it’s the new normal for manufacturing. Success depends on shifting cash flow management from a defensive posture to a strategic capability. Short-term measures like rolling forecasts, real-time dashboards and disciplined working capital provide stability, but lasting resilience requires structural change: rethinking supply chains, investing in digital systems and embedding sustainability to hedge against volatility. Leaders should not navigate this alone—advisors and financial partners offer critical insight to stress-test plans and guide capital decisions. Volatility will continue to challenge the sector, but for those who embrace foresight, agility and trusted guidance, it’s also an opportunity to protect margins and redefine financial strength.
Contact Us
For more information on this topic, please contact a member of Withum’s Manufacturing and Distribution Services Team.
