Home » Survey: Respondents Outside of Bldg Materials/Transportation Optimistic
Survey: Respondents Outside of Bldg Materials/Transportation Optimistic
July 9, 2008
Companies reporting their business conditions as thriving and growing"declined by nearly 10% in the past year, according to the third annual RSM McGladrey Manufacturing and Wholesale Distribution National Survey. However, business remains good for more than a third of survey participants within the following industry segments: food and allied products, medical devices, industrial equipment, metal fabrication and electronics.
More than 960 industry executives -representing 911 companies -responded to questions on current business conditions, growth strategies, innovation, cost management, technology initiatives, operations and globalization.
Growth Prospects The survey showed 80% of respondents are pessimistic about U.S. economic growth prospects, and the percentage of respondents describing their business as "declining"has tripled in the past two years. Building materials, transportation equipment, plastics, and printing and publishing are the industry segments most impacted by the housing crisis, reduction in consumer discretionary spending and high energy costs.
Inflationary pressures are largely to blame for dampened expectations, with 80% of companies expecting cost increases exceeding 6% in energy, raw materials, operating labor, freight and benefits. Healthcare costs once again are projected to increase on an average exceeding 10% in 2008 -the third year in a row of double-digit increases in healthcare benefit expenses.
However, many respondents still remain optimistic about their company's growth prospects. With the exception of transportation equipment and building materials, more than 60% of respondents across all industry segments are optimistic about their company growth in 2008.
"Confidence about company growth may indicate belief that the economy is bottoming and will begin to rebound later this year,"says Tom Murphy, RSM McGladrey's executive vice president of manufacturing and wholesale distribution.
Demand for Labor While demand for skilled labor among survey respondents has decreased over the past year, more than 20% report a need for skilled workers.
"One in five companies cannot find the skilled workers they need for today's advanced technology manufacturing and wholesale distribution environments,"said Karen Kurek, managing director and business line leader of RSM McGladrey's manufacturing and wholesale distribution practice in the Great Lakes region. "As baby boomers retire, demand for labor will certainly increase -irrespective of economic conditions."
Downturn Strategies The survey also found surprising strategic reactions to declining business conditions. Three-fourths of respondents plan to build their market share through new customers. New product line developments were reported by more than half the responding companies, and 46% reported innovations in their processes.
These strategies require increased investment instead of the retrenchment more common in declining business climates.
Globalization Strategies While cost advantages of globalization are shrinking -respondents moving production or services offshore since 2007 has declined 20% -opportunities to benefit from participating in the global economy remain underutilized. U.S. manufactured goods are in demand globally due to the weak dollar, timely delivery and innovative products. Becoming internationally active in order to serve markets abroad is a sound strategy for companies seeking to increase revenues.
Companies that indicated they are pursuing a global strategy -which remained flat in 2008 at only 45% overall -report a 4% higher gross margin than those with no global strategy. Also, 12% of respondents report