The heavy equipment manufacturing industry is at a crossroads in 2025. Rising tariffs, slowing global demand, shifting customer expectations, and increased pressure on margins have created a turbulent environment for manufacturers. At the same time, opportunities exist for those who can harness digital transformation, streamline engineer-to-order workflows, and find new efficiencies.
For heavy equipment manufacturers, the challenge is not only how to survive uncertainty but also how to adapt their operations to thrive in the long run.
The Current State of Heavy Equipment Manufacturing
The headlines tell the story of a sector under stress:
- John Deere layoffs – In August 2025, Deere announced 238 layoffs at its Harvester Works facility in Illinois. The company cited weak tractor demand and tariff pressures as key factors behind the decision. Deere has faced multiple rounds of production cuts in 2025, signaling ongoing strain in the agricultural equipment market.
- Weak earnings across the sector – Deere, CNH, and AGCO all reported lower Q2 production and weaker sales. Tariff-driven costs, particularly for imported steel and components, have cut into profitability. With farmers already pulling back on new purchases, the combination has created a perfect storm for ag-focused heavy equipment makers.
- Caterpillar’s $1 billion tariff warning – Caterpillar, a global leader in construction and mining equipment, announced that tariffs could hit earnings by $1 billion in 2025. While the company has benefitted from growing demand in data center construction and infrastructure projects, higher input costs have reduced flexibility and strained margins.
- Tractor sales slump in the U.S. – Data from the Association of Equipment Manufacturers (AEM) shows continued declines in U.S. tractor sales through mid-2025, even as Canadian sales show modest gains. This divergence complicates forecasting for manufacturers and underscores the need for agile production planning.
- Volvo CE expansion – Not all the news is negative. Volvo Construction Equipment announced a $261 million expansion of its Shippensburg, Pennsylvania facility. The move highlights a growing trend of reshoring and localizing production to hedge against international tariff risks and supply chain disruptions.
These stories illustrate how unpredictable the landscape has become. Demand swings vary region by region, global tariffs cut into earnings, and manufacturers must weigh whether to reduce costs or reinvest in growth.
Turning Challenges into Opportunities for Manufacturers
The challenges facing heavy equipment manufacturers are significant, but they also open the door for innovation. A Siemens analysis of the industry in 2025 highlights that manufacturers can transform uncertainty into opportunity by embracing digital strategies. Key considerations include:
- Simulation and Digital Twins – Testing equipment virtually before production reduces costly design errors, accelerates product development, and improves customer satisfaction. For engineer-to-order manufacturers, digital twins can also help visualize how unique customer configurations will perform in the field.
- Supply Chain Resilience – Recent tariff shocks underscore the importance of building transparent and flexible supply chains. Manufacturers that diversify suppliers, adopt real-time inventory visibility, and use ERP systems to model cost scenarios are better able to weather disruptions.
- Engineer-to-Order Customization – Today’s customers increasingly expect equipment tailored to their exact requirements. Manufacturers must be able to capture unique specifications, configure pricing accurately, and feed this data seamlessly into production workflows.
- Workforce & Automation – Heavy equipment manufacturing remains labor-intensive, and workforce shortages compound the challenge. Investments in automation and employee training can reduce bottlenecks, improve productivity, and offset rising costs.
In other words, the future belongs to manufacturers who can balance flexibility and efficiency.
How Frontier ERP Helps Heavy Equipment Manufacturers Adapt
Frontier leads the industry as the best manufacturing ERP for engineer-to-order (ETO) and make-to-order (MTO) manufacturers. By connecting every stage of operations, such as sales, engineering, production, supply chain, and finance, into one system, Frontier helps heavy equipment manufacturers reduce inefficiencies, cut costs, and stay competitive in uncertain times.
1. Engineer-to-Order Product Configuration
Accurate, Fast Quoting
Heavy equipment products often have thousands of possible variations in size, attachments, engines, and other components. Frontier’s parametric product configurator allows sales reps and dealers to generate accurate quotes instantly, without relying on engineering for every custom request.
Eliminating Costly Errors
Misquotes and incorrect specifications are common pain points in engineer-to-order businesses. Frontier ties the configuration process directly to pricing, bills of materials (BOMs), and routing data, ensuring that what’s promised to the customer is exactly what gets built on the shop floor.
2. Supply Chain and Inventory Management
Real-Time Visibility
Tariffs, shipping delays, and regional shortages make it critical to know what materials are on hand and when replenishment is needed. Frontier provides real-time inventory tracking across warehouses, plants, and distribution centers.
Smarter Procurement
Frontier ERP automates purchasing based on demand forecasts, production schedules, and supplier lead times. This prevents both costly stockouts and bloated inventory, helping manufacturers maintain lean operations even in uncertain conditions.
Supplier Collaboration
By integrating directly with supplier networks, manufacturers can monitor vendor performance, track order status, and anticipate disruptions before they impact production schedules.
3. Production Scheduling and Control
Demand-Responsive Scheduling
When sales volumes fluctuate, as seen with the 2025 tractor slump, manufacturers need flexibility. Frontier allows planners to shift schedules in real time, aligning production capacity with current demand.
Shop Floor Optimization
With integrated work order tracking and scheduling, Frontier ensures machines, labor, and materials are allocated efficiently. This minimizes downtime, reduces bottlenecks, and improves throughput.
Scenario Testing
Frontier supports what-if analysis to simulate how production changes, such as adding shifts, reallocating resources, or facing a parts shortage, will affect delivery timelines and costs.
4. Advanced Manufacturing Execution System (MES) Software
Real-Time Production Monitoring
Frontier’s MES software tracks production in real time, giving plant managers visibility into machine performance, labor productivity, and job status. This ensures that potential bottlenecks or delays are detected immediately.
Reducing Errors and Rework
By integrating MES with ERP, production instructions, BOMs, and quality checks are automatically linked to the correct jobs. This reduces mistakes caused by manual entry, preventing costly rework or scrap.
Automated Quality Checks
Frontier MES allows automated checkpoints at each production stage, ensuring that every part meets specifications. Real-time alerts help operators correct deviations before they affect downstream processes.
4. Financial Management and Profitability Analysis
True Cost Tracking
Heavy equipment manufacturers often struggle to see the actual costs of engineer-to-order products. Frontier ERP consolidates labor, materials, tariffs, freight, and overhead into a complete cost view for each job or order.
Margin Protection
With cross-departmental visibility, managers can see where margins are eroding, whether from rising raw material costs, overtime labor, or unprofitable configurations, and take action before it impacts the bottom line.
Automated Compliance & Reporting
Frontier streamlines financial reporting, from general ledger entries to tax and compliance requirements. Manufacturers save time while reducing the risk of errors during audits or regulatory reviews.
5. Dealer and Distributor Integration
Faster Order-to-Production Cycle
Through Frontier’s eQuote Dealer platform, authorized dealers can independently configure and price equipment, speeding up the sales cycle and reducing the load on internal sales teams.
Improved Customer Experience
By giving dealers the ability to provide virtual product designs, instant, accurate quotes, and delivery timelines, manufacturers can strengthen their sales channels and deliver a better buying experience.
Reduced Back-Office Workload
Automation reduces the administrative burden on sales and customer service teams, freeing them to focus on higher-value tasks like customer support and relationship building.
By expanding these capabilities across every aspect of operations, Frontier ERP helps heavy equipment manufacturers not just manage uncertainty, but turn it into a competitive advantage.
Preparing for the Next Chapter
2025 has already shown how unpredictable the heavy equipment market can be. Layoffs, tariff shocks, weak demand, and regional fluctuations are forcing manufacturers to rethink how they operate. Yet, amid the challenges, companies like Volvo CE are proving that investment in localized production and digital tools can create opportunities.
For heavy equipment manufacturers, success in this environment will depend on their ability to adapt quickly. That means embracing engineer-to-order ERP systems like Frontier ERP that provide the visibility, flexibility, and cost savings needed to thrive.
Are you ready to see how Frontier ERP can help your heavy equipment manufacturing business dodge 2025’s curveballs and hit home runs instead? Contact Friedman Corporation today to learn more.
