Survey: Optimism Grows Among Small, Midsized Manufacturers - Modern Distribution Management

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Survey: Optimism Grows Among Small, Midsized Manufacturers

More than half expect the economy to grow in 2013.

Prime Advantage, a buying consortium for manufacturers, recently released its annual CFO survey results, which found that small and midsized manufacturers anticipate ongoing revenue growth despite the ups and downs in the business environment.

Only 5 percent of the companies surveyed feel the U.S. economy will contract this year and over half feel the economy will expand. Nearly all CFOs (96 percent) believe U.S. manufacturing will expand or stay the same in 2013.

The level of optimism among CFOs about their own companies increased this year. Seventy-two percent of respondents rated their optimism about financial prospects of their companies as moderate to high, which is 10 points higher than last year (which was a record high). Executives are more optimistic about the business outlook for their key customers, with 73 percent of respondents forecasting moderate to rapid growth (up from 59 percent in 2012).

Fifty-one percent of respondents feel more optimistic about the economy this year compared to last year, when 67 percent felt more optimistic about economy. At the same time, the level of optimism about U.S. economy has risen from the previous year to 36 percent (in 2012, only 26 percent of respondents felt this strong).

When asked to cite the top potential threats to economic growth in the U.S., executives named healthcare reform, the U.S. budget deficit and European fiscal conditions as the biggest hurdles to the growth and stability of the U.S. economy.

To address current economic conditions, U.S. manufacturers would support simplification of the business tax (91 percent), balancing the U.S. budget (78 percent) and reducing regulations (72 percent) as the most desired government actions.

As companies actively explore new markets, they are also increasing investment in R&D. Fifty percent of companies plan to increase spending for new product development, the highest percentage since 2009.

Cutting operational costs and developing new products and services, the top priorities of 2012, retained their positions for 2013. However, long-term strategic planning was replaced by seeking new markets for products and services, which moved 29 points up to the third position from the seventh position it occupied in 2012.

More companies than a year ago are planning to increase the number of domestic employees in 2013, as indicated by 49 percent of respondents (up from 41 percent in 2012). Three in four companies are planning to increase wages and salaries this year. This is in contrast to 2011, when 72 percent of companies expected to add employees. Steady corporate employment plans have also appeared in other recent industry surveys, such as BofA's 2013 CFO Outlook and Duke/CFO Magazine CFO Survey.

Companies are still struggling with finding skilled labor. Seventy percent of respondents indicated that the low level of skilled employees in the area is the main reason for difficulties in filling positions. Sixty percent of companies that were actively hiring indicated they had open positions for which they were having difficulty finding qualified labor.

Read about the state of hiring in wholesale distribution.

Nearly half of U.S. manufacturers (46 percent) indicated they engaged with local educational providers in order to train workers (up from 19 percent in 2012). Other short-term solutions to these challenges are setting up training for new employees (63 percent of the votes) as well as re-training existing employees (58 percent). As a long-term solution, companies indicated working with local economic development and government leaders, increasing funding for vocational education options, getting more involved with the K-12 program, and developing better training programs in manufacturing and technical areas.

Top Concerns
External concerns facing U.S. manufacturers for the most part remained the same. One in three companies in the survey named customer demand as the top external concern; two-thirds included it in their top three concerns. Price pressure from competitors was the second leading concern, selected by 61 percent of manufacturers. The cost of non-fuel commodities, a long-time third concern, was replaced by the federal government agenda, selected by 36 percent of manufacturers (up from 21 percent in 2012).

Ability to maintain margins, the chief internal concern of 2012 and 2010, retained its top position again, selected by 71 percent of respondents. The cost of healthcare, the leading concern of 2011, has moved up to second place, as 55 percent of respondents have included it in their top three concerns, up from 38 percent a year ago.

The Prime Advantage Group CFO Survey was conducted in March and April of 2013 using an online survey platform. Prime Advantage surveyed a cross-section of finance executives from its member companies consisting of industrial manufacturing firms representing more than 25 different industries with annual revenues ranging between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million.

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