Can the Right KPIs Help Manufacturers Navigate Rising Costs in 2026?

As manufacturing companies head into 2026, the ability to track and control expenses has become more critical than ever. With tariff-related cost pressures continuing to affect margins and input costs expected to rise, manufacturers need KPIs that do more than measure activity. They need metrics that drive expense control decisions and reveal opportunities to protect profitability.

Start With Cost Visibility in Manufacturing

The first step is ensuring your KPIs connect operational performance directly to financial outcomes. Cost per unit remains one of the most direct indicators of whether process improvements are translating to bottom-line results. Track this metric regularly and investigate variances immediately. When material prices fluctuate or labor utilization drops, cost per unit will signal the problem before it compounds.

Inventory carrying costs deserve renewed attention in 2026. Many manufacturers are holding excess stock as a buffer against supply chain disruptions, but carrying costs typically run 20 to 30% of inventory value annually. Pairing inventory turnover ratios with carrying cost analysis helps identify slow-moving items that tie up cash without contributing to revenue.

Reduce Manufacturing Waste and Improve Efficiency

Scrap rate and first pass yield are particularly valuable for expense management because they reveal hidden costs that financial statements often miss. High scrap rates directly impact material expenses, while low first pass yield increases labor costs through rework. Set targets by product line and material type rather than broad company-wide goals. This targeted approach makes it easier to identify where improvements will have the greatest financial impact.

Labor utilization metrics help manufacturers understand how much of their workforce capacity is actually driving production versus being consumed by downtime, changeovers, or inefficiencies. Even small improvements in utilization can produce six-figure savings in labor costs.

Make Manufacturing KPIs Actionable

The real value of KPIs comes from using them to drive decisions. Review key expense-related metrics weekly with operations teams and monthly with leadership. When variances appear, investigate root causes immediately rather than waiting for quarterly reviews. Consider tying KPI performance to incentives so teams have direct motivation to identify and implement cost-saving improvements.

Manufacturers who establish clear expense-focused KPIs now and review them consistently will be better positioned to navigate pricing pressures, protect margins, and make informed capital investment decisions throughout 2026.

If you’d like to discuss your options for identifying the right manufacturing KPIs or improving cost controls with our experienced BMSS manufacturing team of professionals, please reach out to us by calling (833) CPA-BMSS or visit our website for more information.