hile there is still general optimism regarding the U.S. economic environment, manufacturing executives are less confident today than one year ago, reports a national survey conducted by Grant Thornton LLP, the accounting, tax and business advisory organization.
According to the Grant Thornton Survey of U.S. Business Leaders, 60 percent of manufacturing respondents expect the U.S. economy to improve in the coming year â a considerable decrease from 82 percent of respondents in January 2004.
Although economic recovery has been slower than expected, the vast majority of manufacturing executives (92 percent) still remain optimistic about the growth of their own business. In addition, nearly half (48 percent) plan to increase their headcounts over the next six months and nine in ten are on pace to meet or exceed their sales targets (32 percent exceed and 61 percent on target).
And, as companies strive to grow further, business leaders have recommitted to a critical asset: their brand. Nearly two-thirds of respondents (66 percent) agree that having a strong brand is more important today than it was just two years ago, with the primary focus on fostering loyalty among current customers (79 percent) and differentiating the company within the marketplace (74 percent).
“Manufacturers see the need to provide more than just products to their markets. The best and most loyal customers today don’t want their expectations just to be met, but exceeded,” says Jim Maurer, partner in charge of Grant Thornton’s consumer and industrial products industry practice. “A strong brand conveys this commitment to customers and sets them apart from their competition in acquiring new clients and retaining existing ones.”
Building a brand often begins with identifying the core strengths that give a company their competitive advantage. Among manufacturing companies, 80 percent say their strong market and customer relationships are the competitive advantages that drive their brand, while 63 percent say it’s their superior sales and distribution capabilities.
To deliver this brand promise, manufacturers have made significant investments in a variety of areas, including operations (56 percent) and information technology (52 percent). Attracting key talent, refining processes, equipment, and sales round out the list at 50 percent each.
About the survey
The 10th edition of Survey of U.S. Business Leaders is now available. To order a full copy of the report, visit Grant Thornton’s Web site at www.grantthornton.com/blcsurvey.
National Manufacturing Week 2005 annual survey results
What level of economic growth do you foresee in 2005?
19% Slow (0.0 to 1.9 percent)
53% Moderate (2.0 to 2.9 percent)
20% Strong (3.0 to 3.9 percent)
8% Robust (4 percent or more)
Do you expect manufacturing in 2005 to
34% Trail the overall economy
54% Expand at the same rate as the overall economy
12% Outpace the overall economy
Will your company increase capital spending in 2005?
If yes, this increase will be primarily to:
46% Expand production capacity
64% Modernize and increase efficiency
What is your company’s outlook for employment in 2005?
47% Stay the same
If you are planning significant hiring, what kinds of workers will they be?
40% Skilled workers for production jobs
23% Low skilled workers
9% Highly educated professionals
5% Service workers for support positions
Do you have employment positions unfilled right now because you cannot find qualified candidates?
7. Please rate the following factors in terms of their negative impact on your operations (with 1 representing the greatest negative impact and 10 the least).
2.8 Cost of non-wage compensation
3.3 Cost of materials used in production
4.4 Energy prices
4.9 Cost of wages
5.6 Foreign competition
6.1 Regulations-corporate governance rules (Sarbanes-Oxley)
6.2 Fear of litigation
6.2 Shortage of qualified job applicants
7.9 Access to investment capital
8. What is the impact of the preceding influences on your company?
87% Lower profitability
46% Loss of market share
35% Reductions or delays in capital investment
34% Layoffs/reduced ability to hire new workers
32% Fewer resources for R&D, new product lines
28% Outsourcing production
20% Less employee training
9% Offshore support functions
Do you export to other countries?
10. What do you foresee for your exports in 2005?
40% Stay the same
24% Did not answer
Have you been impacted by unfair trade practices of other countries such as domestic subsidies, tariffs, product piracy and currency manipulation?
Distribution of survey respondents by employment size
29% Fewer than 50
4% More than 5000
The 2005 National Manufacturing Week Survey contacted 3000 members of the National Association of Manufacturers representing every size, industry and region in the country. We received responses from 976 representing almost 33 percent.
NAM survey shows exports becoming more important to manufacturers
More than a third can’t find qualified workers to fill positions
he 2005 National Manufacturing Week survey shows employers continue to be upbeat about manufacturing in 2005. “This survey tells us the manufacturing recovery that gained real momentum last year will continue to strengthen in 2005,” said John Engler, president of the National Association of Manufacturers.
Two-thirds of survey respondents expect manufacturing to grow as fast as or faster than the overall economy this year, and “an astonishing 65 percent” said they export their products to foreign markets, Engler noted. “The Department of Commerce and the NAM have been working together to help more small and medium-sized manufacturers take advantage of opportunities for exports created by new free trade agreements and the movement of the dollar back toward its historical level. It appears our efforts are beginning to pay off. In the long run, expanding exports is the best way to improve our trade imbalance.
“Three fourths of respondents expect exports to either remain at current levels or increase this year,” Engler said. “This is most encouraging, given that almost half said they had been adversely impacted by the unfair trade practices of other countries. Only 3 percent of respondents said they expected foreign sales to decrease in 2005.”
Engler said the survey offers some encouragement on the employment front, with 40 percent of respondents saying they intend to add new workers, up from 31 percent last year. “Almost half of the respondents, 47 percent, expect employment to stay the same,” Engler said. “Only 12 percent said they expected to reduce their payrolls.
“The emerging employment problem in manufacturing is not a shortage of jobs, but rather a shortage of qualified applicants,” Engler said. “A full 36 percent of our members said they have employment positions unfilled right now because they cannot find qualified workers. This confirms what our members have been telling us in recent years â that the people applying for manufacturing jobs today simply do not have the math, science and technological aptitude they need to work in modern manufacturing.”
NAM Chairman John A. Luke, Jr., of MeadWestvaco Corp., agreed the survey confirms that manufacturers are generally upbeat about the economy, with most members expecting moderate to strong growth in 2005. “Manufacturing has been through a tough patch in recent years, but we have turned the corner,” Luke said. “Last year, manufacturing grew faster than the overall economy for the first time in five years. Going into 2005, it looks like the expansion is still strong.”
Engler said the NAM had recently launched an innovative new marketing and mentoring program called, Dream It! Do It! in the Kansas City area to help address the growing skills shortage. “We’re working with local educators, businesses and civic groups to educate bright young people about the excellent career opportunities in modern manufacturing,” Engler said. “It is absolutely essential that we get to work now to develop a capable manufacturing work force for the 21st century. Dream It! Do It! is a pilot program, and we are already making plans to expand it to other areas.”
The survey also showed that non-wage costs are the biggest concerns of manufacturers. “Asked to rank their biggest concerns, the top four choices were non-wage compensation such as health care, cost of materials, energy prices, and taxes,” Engler said.
The survey of 3,000 NAM members of all sizes in diverse industries and geographical areas generated a response of 976, or almost 33 percent. The survey results are available at www.nam.org/nmwsurvey.
New energy efficiency guidebook released at National Manufacturing Week
Former U.S. Energy Secretary Abraham says US competitiveness is at stake
Manufacturers are relying upon innovation to contend with rising prices of natural gas, oil and water to make sure they remain competitive, according to a study released today during National Manufacturing Week by the National Association of Manufacturers.
John Engler, President of the National Association of Manufacturers, said, “The âEnergy Efficiency, Water and Waste-Reduction Guidebook for Manufacturers’ illustrates the innovation of manufacturers in reducing their energy and water costs.”
“Manufacturers can’t ignore rising costs of critical commodities such as natural gas, oil and water,” said former Secretary of Energy Spencer Abraham. “U.S. competitiveness depends on the ability of manufacturers and other businesses to control their energy and water costs to stay and compete in a tough global marketplace.”
U.S. natural gas prices have risen by nearly 120 percent in the last five years while the prices of manufactured products rose only 14 percent. “These rising prices have put many manufacturers in a cost-price squeeze, cutting profits, investment and jobs,” said Bill Canis, executive director of The Manufacturing Institute, the NAM affiliate which produced the guidebook.
“The NAM executive committee asked the Institute last year to look into ways to help manufacturers deal with these ever-rising energy costs,” Canis said. “Today we are releasing this guidebook for manufacturers that shows nine best practices and profiles a cross-section of today’s manufacturers that are cutting their fuel, water and waste bills through new technologies. Its purpose is to make saving energy and reducing water and waste expenses so simple that it becomes part of manufacturers’ daily routines.”
“Beyond the financial necessity to reduce energy and water use, many manufacturers have come to understand that conserving scarce resources and limiting their impact on the environment is just the right thing to do,” said Tom Gannon, executive vice president of Johnson Controls, Inc., a Milwaukee-based Fortune 150 company that makes buildings more productive and energy-efficient. “We commend NAM for bringing forth this publication at this important time, as manufacturers emerge from a difficult recession yet continue to face rising costs for energy and other resources.”
“There are many actions that both small and large manufactures can take to reduce their operating costs and environmental impacts. The Guidebook provides an entryway to the information needed to take action,” said Michael Arny, President of Leonardo Academy, an environmental nonprofit that works on voluntary market based approaches to sustainability. “My organization was pleased with the opportunity to assist in the development of this guide, because helping manufactures use resources efficiently is both environmentally beneficial and economically viable.”
The guidebook shows nine best practices that manufacturers use to cut their energy, water and waste costs, including:
- Increasing energy efficiency of motors, pumps, steam and building systems
- Financing energy efficiency improvements through innovative funding arrangements such as third party lease purchase agreements
- Cutting water waste through equipment upgrades, especially in heating, chilling and pumping of water
- Reducing raw material and waste disposal costs by changing the design and use of materials used in the manufacturing process
- Setting high environmental procurement standards for suppliers
Joining NAM in the press conference was the Alliance to Save Energy, a coalition of prominent business, government, environmental and consumer leaders who promote the efficient and clean use of energy worldwide.
For additional information, or to access the full report, please visit www.nam.org/energyefficiency.