A little more than half of the respondents to a survey are more optimistic about the U.S. economy than they were in 2014. A majority (54 percent) of the survey’s respondents say they expect their revenue to increase by more than five percent this year, and 96 percent anticipate their company’s hiring to increase or stay constant this year.
Sikich LLP, a professional services firm, surveyed 116 manufacturers and distributors—almost 75 percent of which have annual revenues of $1 million to more than $100 million—for its 2015 Manufacturing Survey.
Nearly 40 percent of the survey respondents view increased share in existing markets as their top opportunity for gains in the next 12-18 months. Even so, in the wake of the financial crisis, many companies remain hesitant to move into new markets or expand product offerings. Interestingly, almost a third of the survey respondents say their company spends less than one percent of sales on research and development for new products.
“Many manufacturers continue a cautious approach to growth,” says Jim Wagner, partner-in-charge of Sikich’s manufacturing and distribution practice. “While a focus on existing markets presents less risk, it won’t sustain manufacturers forever. Eventually, companies will need to become more aggressive and invest in new markets and products to drive differentiation and future success.”
Additional challenges manufacturers and distributors face include the need to both cut costs and make needed capital investments in equipment and technology, the survey results show. More than 90 percent of respondents expect taxation and labor costs to either increase or remain the same in the next 12 months, while 86 percent said the same about the cost of raw materials. Additionally, 32 percent of the respondents plan capital expenditures on equipment while 42 percent expect to spend on computer hardware and software.
As they strive to balance the need for more investment with ongoing cost pressures, manufacturers identify the supply chain as a key component. For example, 59 percent of the respondents identified supply chain management as either important or highly important to their companies’ success over the next five years.
“An effective supply chain can help companies increase production and delivery and better manage materials, labor and overhead,” Wagner said. “Advanced technology and machinery can further improve potential efficiency gains from the supply chain. Implementing a strong supply chain management strategy is one of the most important decisions a manufacturer can make.”
Optimism aside, I was surprised to see the survey responses show many manufacturers still heavily rely on manual processes. Indeed, 53 percent of respondents said their companies use spreadsheets and other manual processes to prepare key performance indicators (KPIs) such as productivity, utilization and availability. According to the survey results, only 26 percent of the respondents said they use a financial application module such as an enterprise resource planning (ERP) system for KPIs.
“In a time of rapid change, tracking accurate KPIs can mean the difference between stagnation and long-term growth,” says Wagner. “The persistence of manual processes in the industry is troubling. Technology can help companies grow more efficient, lower costs and better serve customers. It has the potential to transform the industry and drive success, but companies need to make full use of it to realize gains.”
I’m interested about your opinion. Do you also see a continued cautious approach to growth?