How to Improve Productivity in Manufacturing: 6 Tried and Tested Strategies
Originally published on September 3, 2025
What if the biggest threat to your margins wasn’t raw materials or labor costs, but the silent drag of inefficiency? For many mid-sized manufacturers, productivity loss hides in plain sight. Slow changeovers, unbalanced workflows, outdated processes and untrained workers chip away at your bottom line without showing up as line items on your financials.
The U.S. Bureau of Labor Statistics reported that manufacturing productivity increased by only 0.4% in 2023, despite widespread investment in automation and technology. This tells us productivity isn’t just a function of equipment. It’s a result of how well your people, processes and tools are aligned.
Mid-sized manufacturers often face the growing pains of complexity. What worked at $5 million starts to break down at scale. Without a plan to measure and manage output per labor hour, it’s easy to miss where your profitability is leaking. That’s why the first step in any productivity initiative is to know what you’re actually producing per hour, per shift and per machine.
Once you’ve got your metrics dialed in, you can start addressing the gaps. And one of the highest-impact places to start is your tax strategy.
Strategy #1: Align tax planning with capital investment
Buying new machinery can absolutely increase output, but it also comes with a hefty tax conversation. When you sync your capital investments with a proactive tax plan, you set yourself up to improve productivity while protecting cash flow.
Section 179 and bonus depreciation are two of the most effective tools at your disposal. For 2025, manufacturers can deduct up to $1.25 million in qualifying equipment purchases using Section 179, provided there’s enough taxable income to absorb the expense. On top of that, bonus depreciation allows for an immediate 100% deduction of eligible costs.
But there’s a catch. These deductions only apply if the equipment is placed in service before the end of the tax year. Planning purchases in Q1 or Q2 allows time for installation, testing and operation so you can fully benefit from available deductions. This is one reason we encourage clients to meet with a business tax advisor before signing any equipment contracts.
According to the IRS, the benefits of Section 179 and bonus depreciation can significantly reduce a manufacturer’s taxable income if timed and structured properly. And it’s not just about buying a CNC machine or new conveyor. Office systems, computer software, forklifts and even HVAC upgrades can qualify under current guidelines.
The right tax strategy should not be treated as an afterthought. It’s a productivity lever when aligned with capital spending, and the tax savings can be reinvested right back into operations. To explore how this works across industries, visit our Business Tax Services page.
Strategy #2: Lean operations: Not just for the big guys
Too often, mid-sized manufacturers assume Lean principles are built for Fortune 500s with dedicated Six Sigma teams. That assumption can be costly. Lean operations are about reducing waste and improving flow, and these are just as critical in a 50-person shop as they are on a national production floor.
Lean does not require a complete overhaul. It begins with identifying waste in eight key categories: defects, overproduction, waiting, non-utilized talent, transportation, inventory, motion and extra processing. Even basic changes, like reorganizing workstations for better flow or adopting a pull system for inventory, can create real productivity gains. We’ve seen firsthand how a single process map can uncover hours of lost time per week.
Lean thinking also encourages employee ownership. When your line operators spot and solve bottlenecks on their own, you’re building a culture of accountability that improves quality and reduces downtime. That kind of improvement doesn’t show up overnight, but it starts with management committing to continuous improvement and inviting the team to participate.
Strategy #3: Embrace tech that pays you back
Technology can absolutely improve productivity, but only when it is chosen and applied with intent. For mid-sized manufacturers, that means skipping the bells and whistles and focusing on tools that provide clear return on investment.
IoT-enabled sensors, machine monitoring software, predictive maintenance tools and real-time production dashboards can give you the visibility to make faster decisions. When your team knows which machines are underperforming and why, they can take action before small issues become costly breakdowns.
Manufacturers that integrate smart sensors into their operations see an average productivity gain of 10% to 20% within the first year. That frees up time, improves quality and increases output without expanding your workforce.
Technology investments should also make your data more accessible. If your production manager has to wait until Friday to get numbers from accounting, you’re already a week behind. Real-time dashboards that pull directly from your ERP or shop floor systems can help you spot issues and pivot faster. That kind of responsiveness is what turns productivity improvements into lasting profit increases.
Keep in mind that tech doesn’t have to be flashy. Sometimes the most powerful tools are the simplest ones, like visual management boards or barcode scanners that replace manual data entry. The key is to align the solution with your operational goals and measure the impact in dollars, hours and throughput.
Strategy #4: Train your people to think like process owners
No piece of equipment can make up for a disengaged workforce. Your team runs the machines, monitors quality and responds when something goes wrong. That means your productivity is directly tied to how well your people understand the process and feel responsible for the outcomes.
Training does more than improve skills. It builds confidence and creates a culture in which employees solve problems instead of waiting for instructions. When your team understands how their role fits into the bigger picture, they’re more likely to catch inefficiencies before they become costly.
Cross-training is one of the most underrated tools in a manufacturer’s playbook. When employees are capable of working across functions, you reduce the impact of absenteeism, break down silos and create better communication between departments. It also makes it easier to promote from within, which strengthens retention and reduces onboarding time for new hires.
For a manufacturer with 40 or 50 employees, even one hour of wasted time per person per week adds up to over 2,000 lost hours per year. That’s the equivalent of a full-time employee not contributing, simply because the team lacks training or clarity.
Think of training as an investment, not an expense. Just like you would schedule preventive maintenance for your equipment, schedule regular skill-building sessions for your team. It pays off in fewer errors, faster changeovers and better decision-making at every level of your operation.
Strategy #5: Track performance like you track inventory
If you measure raw materials and finished goods down to the last unit but have no idea how many labor hours go into each job, you’re only getting half the story. Productivity isn’t just about making more things. It’s about making the right things efficiently and profitably.
Tracking performance means setting up the right key performance indicators (or KPIs) and reviewing them consistently. At a minimum, we recommend monitoring machine utilization, first-pass yield, labor efficiency and on-time delivery. These metrics help you see where delays are occurring and where adjustments are needed.
KPIs are only useful if they’re tied to actionable decisions. If your reports are late, buried in spreadsheets or unclear to frontline supervisors, they won’t drive change. Dashboards that combine financial data with operational performance give you a real-time view of what’s working and what’s not.
Emphasizing the value of integrated financial and operational reporting to support better management decisions in manufacturing environments is imperative. When your leadership team has that kind of clarity, you can act faster, spend smarter and improve outcomes more consistently.
Strategy #6: Use tax credits to boost productivity without cutting corners
When manufacturers think of productivity, they often focus on machinery, labor or supply chains. But there’s a powerful financial lever hiding in your innovation. The federal R&D tax credit was designed to reward companies that improve products or processes. That includes small to mid-sized manufacturers making routine improvements to efficiency, quality, or workflow.
If your company has developed custom tooling, refined a production process, improved product testing or integrated automation, you may already qualify for the R&D credit. Day-to-day problem solving that involves experimentation, trial and error or process optimization can count toward eligible activities.
The key is documentation. The IRS requires that you track qualified research expenses (QREs) such as wages, supplies and contract research costs. You don’t need to wait until year-end either. Planning ahead allows you to structure your projects and capture qualifying activities in real time.
The R&D tax credit can be used to reduce regular income tax liability; for certain eligible startups, it can even offset payroll taxes. Depending on your situation, that could free up tens of thousands of dollars to reinvest in your facility, training or equipment.
State-level R&D incentives can provide additional savings. It is important to work with an advisor who understands both federal and state programs to ensure you claim the full value of your credits. To explore this opportunity, visit our R&D Tax Credit Services page.
Smart productivity is profitable productivity
Every manufacturer wants to produce more with less. But real productivity gains don’t come from cutting corners. They come from strategic planning, consistent measurement and targeted investment in the people, processes and tools that make your operation stronger.
If you are ready to improve productivity in a way that supports long-term growth, contact a James Moore professional today to start a conversation.
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