Survey shows manufacturers making tough choices to steady the bottom line

Source: PlantServices.com

Feb 17, 2009

The Web site www.MFG.com has announced the results of its latest MFGWatch Survey conducted in January 2009. A total of 570 North American Suppliers, also known as contract manufacturers, participated in the survey covering topics such as the state of the global economy, current business conditions and survival plans to combat the economic downturn. Surprisingly, 45% of respondents are projecting growth in 2009, while 28% project their business to remain at last year's level. Overall, manufacturers are making tough choices to steady the bottom line and boost operational efficiencies.

Effect of current economic conditions

As manufacturing continues at a 26-year low in the United States, the MFGWatch survey asked if participants were optimistic about the global industry rebounding in 2009. Of those surveyed, 37% stated they were optimistic, 28% were neutral on the possibility and 34% thought a 2009 rebound was unlikely.

Queried about overall business conditions, 51% replied that their businesses were experiencing declining conditions, while 49% stating improving or excellent business conditions. Those respondents were also asked if they noticed an increase or decrease in new demand over the past six months. According to the survey, 50% responded there has been a decrease in demand, 28% report there has been no change in customer demand, 18% experienced an increase in business from their current customers and 3% were not sure.

Participants were asked if they had noticed an influx of work comingback to the United States from overseas:

  • 54% said they had not seen work coming back to the United States
  • 16% said they had noticed an influx of work coming back to the United States
  • 30% were unsure

Questioned about the potential of company growth in 2009, the majority are holding steady:

  • 36% project they will grow between 1-24% in 2009
  • 9% project they will grow between 25-50% in 2009
  • 28% are planning no growth
  • 17% plan to downsize between 1-24%
  • 3% plan to downsize between 25-50%
  • 1% don't plan to be in business by the end of 2009

Suppliers were also asked if their customers had increased or decreased the volume (both value and quantity) of their orders in the past six months. Of those surveyed, 61% responded their orders had decreased, 22% had no change in business, while 15% were experiencing an increase in orders from their client base. A mere 2% were not sure. Survey participants were asked a follow-on question: If their customers have decreased the volume, have they increased the frequency of their orders? According to the survey, 89% responded no, 7% had an increase in frequency of order and 3% were not sure.

Tightening business belts

Surveyees were asked if their companies had to reduce their profitability margins to increase customer demand and new customer acquisition. Of those surveyed, 53% responded affirmatively, 39% said they had not decreased their profit margins and 7% were not sure. The survey also inquired if these manufacturers had implemented changes during the current economic downturn. The replies were:

  • 28% shortened shifts or work house
  • 26% replied that it is business as usual
  • 23% had layoffs at their company
  • 9% canceled shifts
  • 6% implemented automation to reduce payroll
  • 3% added overtime
  • 2% added shifts
  • 2% opened new facilities
  • 1% closed facilities

Suppliers were also asked if they had postponed or canceled any major purchases due to the current state of the economy. The responses were:

  • 18% stopped hiring new employees
  • 15% postponed or cancelled capital equipment purchases
  • 12% have not stopped any purchases to date
  • 11% stopped hiring replacement employees
  • 11% curtailed business travel to customers and trade shows
  • 8% cancelled their memberships in professional or industry associations
  • 7% halted facility expansion
  • 7% will not purchase software
  • 4% will not pursue business expansion

Expanding business

In reference to expanding their business, 75% of suppliers stated they were looking to expand their offerings into other industries, while 25% had no plans for cross-industry growth. The respondents saw promise for additional contract manufacturing business in a variety of industries including: wind power, solar, power, generation, alternative energy, medical, marine, biotechnology and pharmaceuticals, mechanical assembly, subassembly and test, automotive accessories, agriculture, aerospace, apparel and textiles and more.

Respondents are looking at a variety of strategies to acquire new customers in 2009.

Of those surveyed, 24% of respondents plan to increase their Web presence, 19% intend to enter new markets, 16% will attend more trade shows, 12% are retaining a sales representative or broker, 8% are expanding their outside sales staff and another 5% stated they were expanding their inside sale team. According to the survey, 17% were not employing any of the tactics above.

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