TL;DR

Demand is back, costs are climbing. The ISM Manufacturing PMI hit a four-year high of 54.0 in May, while the Prices Index spiked to 84.6. Full order book, rising cost base, same week.
ERP Watch: AI only pays off on clean, connected ERP data, and agentic AI is now landing inside mid-market ERP, not just enterprise platforms.
AI in Manufacturing: affordable automation moved down-market at IMTS 2026, and reshoring is really a supplier-depth story.
Industry Watch: the IEEPA tariff-refund fight heads to a June 9 hearing, and OBBBA made 100% bonus depreciation permanent, with a state-conformity catch.
The take: the capex-timing question and the margin-defense question are one question this quarter, and the answer lives in your ERP data.

The factory sector roared back in May. The ISM Manufacturing PMI hit 54.0 percent, the strongest reading since May 2022 and a 1.3-point jump from April. New orders and production led the gains. Sixteen of eighteen industries grew. After two years of mostly sub-50 readings, demand is real again.¹

Then look at the other line on the same report. The Prices Index spiked to 84.6 percent. Input costs are climbing fast, and survey respondents tied the surge to the Iran conflict pushing oil and commodities higher. So you get the squeeze of the year in one chart. Your order book is full and your cost base is on fire at the same time.²

This is the Third Wave weekly roundup. Here is what moved, what to watch, and what each item means if you run a manufacturer or distributor from SMB to mid-market, whatever ERP you run on.

ERP Watch

Two stories define where ERP is heading this week, and both point at the same prerequisite: connected data.

AI models earn their keep only when wired into the right data and workflow. In manufacturing, the data sits scattered across ERP, MES, quality systems, and machine sensors. Most stalled AI projects do not fail at the model. They fail at integration. Clean, connected ERP data is the price of admission for any real payoff.³

The mid-market got a direct sign of this too. Vendors are pairing open-source automation layers with RPA to run agentic AI inside mid-market ERP systems, targeting the everyday workflows users flag as priorities.⁴ AI is showing up where smaller manufacturers already keep their books, not in some separate enterprise platform they will never buy. We made the same bet ourselves rather than wait for it, which is why we started building AI into ERP directly.

What this means for SMB to mid-market manufacturers and distributors: the AI conversation is no longer about whether to adopt. It is about whether your ERP data is clean and connected enough to use. Duplicate business partners, inconsistent item naming, and legacy migration artifacts are not cosmetic problems anymore. They are the difference between AI you trust and a confident wrong answer. This is exactly why we treat ERP as a connected business platform, not a box of disconnected modules.

AI in Manufacturing

Automation kept moving down-market this week. IMTS 2026 centered the show on low-cost automation for smaller shops, from cobots to AI-driven systems, paired with low-risk financing. The pitch is unattended production and quality gains without an enterprise budget. Capability once reserved for the giants now fits a mid-size shop’s balance sheet.⁵

The reshoring story sharpened too. The headlines chase robotics and chips, but a new plant runs only as fast as its slowest Tier 2 and Tier 3 supplier. The reshoring boom is a supply-chain depth story, and the upstream base often gets ignored until a launch stalls on a single missing part.⁶

What this means for SMB to mid-market manufacturers and distributors: cheaper cobots and ERP-native AI let you add capacity without adding headcount. This is how you defend margin when input prices spike to 84.6. But automation amplifies whatever process you point it at. If your purchasing and supplier data is a mess, you will automate the mess faster. Fix the data first, then automate.

Industry Watch

The tariff and tax picture stayed messy, and the messiness has a price tag attached to your working capital.

Businesses started receiving IEEPA tariff refunds after the Supreme Court ruled the import taxes unconstitutional in a 6-3 decision. Then the administration said it will appeal a federal ruling, which would stall the refund pipeline.⁷ The Court of International Trade ordered CBP to complete reliquidation and refund affected entries, CBP said it cannot immediately comply, and the court set briefing for June 4 with a hearing June 9.⁸ If you are an importer sitting on refundable duties, this date is your clock, and the real question is whether your ERP can prove what CBP owes you.

On the capex side, the IRS confirmed permanent 100 percent bonus depreciation under OBBBA for qualified property placed in service after January 19, 2025.⁹ You write off the full equipment cost in year one instead of spreading it over years. The catch: many states do not conform.¹⁰ You take the full federal deduction and still owe on the state side, which changes the real cash benefit of an order. Model state treatment before you sign. (For the broader picture on how fast-moving trade rules land on your ERP, see Tariff Law Just Changed Again.)

What this means for SMB to mid-market manufacturers and distributors: these are cash-flow events, not headlines. Refundable duties are working capital you are owed. A permanent write-off changes the math on every equipment quote in your pipeline. Both live or die on whether your ERP tells you, fast, what you bought, what you imported, and what you are owed. The answer should take a query, not a week. That is also the case CFOs make when they justify ERP investment in a tight budget year.

The take

Here is the one decision this week forces on a mid-market manufacturing CEO. Demand is back, and the cost side is fighting you. PMI at a four-year high with new orders leading means the order book is real. Prices at 84.6 and an unresolved refund fight mean cash and margin are both uncertain. You sit and wait for clarity, or you convert demand into capacity now while OBBBA hands you a permanent 100 percent write-off.

The smart play is to move, with eyes open. Buy the capacity, model the state conformity hit before you sign, and lean on cheaper automation to add output without adding payroll. None of this works on guesswork. It works on an ERP instance giving you a clean, fast answer on inventory, supplier reliability, landed cost, and refundable duties the moment you ask.

The capex timing question and the margin-defense question are one question this quarter. The companies winning it will be the ones whose ERP data is ready to answer before the window closes.

References

ISM Manufacturing PMI at 54.0, May 2026 — PR Newswire
Input prices at 84.6, ISM data via The Shop — The Shop
ERP as an AI decision engine, and where AI integration stalls — Manufacturing Business Technology
Agentic AI inside mid-market ERP — Elevra Tech
IMTS 2026 affordable automation — Modern Machine Shop
Reshoring needs the whole supplier stack — PC Tech Magazine
Trump administration to appeal tariff refund ruling — AP News
CIT June hearing on IEEPA refund compliance — Allyn International
IRS confirms permanent 100% bonus depreciation under OBBBA — IRS
State conformity gaps on bonus depreciation — EcomCPA

Factory Demand Hits a Four-Year High While Costs Spike: The Week in Manufacturing