What to Make of Mid-Market Manufacturing in 2026

Mid-sized manufacturing companies spent much of the past 12 months in a reactive mode for very compelling reasons. A surge in tariffs, AI-driven technology upgrades (and disruptions), geopolitical unrest, and supply chain redesigns kept manufacturers on their toes. To thrive in 2026, these organizations, and their indirect tax teams, will need to become more proactive.

Four Enablers of a Unified Strategy

The key to doing so, according to West Monroe’s Mid-Market Manufacturing 2026 Outlook, is to move beyond treating operations, workforce management, and AI deployments as discrete initiatives by connecting them in a single, unified strategy.

The consulting firm’s report identifies four common pillars of a proactive strategy, and most of these enablers have implications on tax compliance:

1. Embedding “permanent flexibility” in supply chains: This requires more proactive planning, robust scenario planning, and supplier collaborations and visibility. These capabilities in turn require strong data governance, clean data, and modern analytical tools, including those with AI functionalities.
2. Aligning AI with measurable outcomes: Leading manufacturers will move beyond AI pilots to embedding AI in workflows that solve real-world business problems.
3. Pursuing more valuable business consolidations: Industry leaders will combine exhaustive due diligence with analytical insights. They will use M&A activity not only to expand their footprint but also to advance digital transformation, deploy AI, and hedge against risks.
4. Creating an increasingly AI-enabled workforce: “Labor shortages, retirements, and immigration pressures are converging just as AI and automation reshape how work gets done,” according to West Monroe. “The manufacturers pulling ahead are capturing institutional knowledge, redesigning roles for human-machine collaboration, and building inclusive upskilling programs that turn change into capability.”

How Tax Teams Can Respond

There are several ways in which indirect tax groups can support these strategic pivots and improvements.

First, the development of greater supply chain flexibility will expose manufacturers to new shifting trade policies, new tariffs, and different tax compliance requirements. Tax leaders can help their finance partners conduct modeling and planning that accurately forecasts landed costs.

Second, as manufacturers source and sell in new regions and countries, they will be exposed to new tax compliance obligations – including new e-invoicing and real-time reporting requirements. By assessing the magnitude of these obligations during scenario planning activities, tax leaders will ensure that their senior colleagues have a more holistic grasp of the risks, costs, and returns of supply chain redesigns and growth initiatives.

Third, if M&A activity increases in the manufacturing sector as expected, senior tax leaders will have a role to play in due diligence activities while assessing tax liabilities and the quality of tax compliance and planning capabilities within potential consolidation partners.

Embedded Tax

The manufacturers that succeed in 2026 will be those that transform uncertainty into opportunity, in part, by embedding tax planning directly into their operational and scenario planning activities. By aligning their expertise with these four strategic enablers, indirect tax teams can move from being reactive compliance functions to proactive business partners.