MFGWatch Q1 2012

Quarterly Survey of North American Manufacturers

MFGWatch Executive Summary: Large Manufacturers See Softening Business Conditions, While Small & Medium Sized Manufacturers See Improving Business Opportunities.

Direct media inquiries and interview requests to Chris Mitchell at cmitchell@mfg.com

BUYERS (Product Manufacturers)

Business Growth

In the past 3 months, has your business:

  • Grow: 44%
  • Contracted: 11%
  • Same: 39%
  • Don't Know: 6%

 

ANALYSIS

North American manufacturing companies reported slowing business conditions in Q1 ’12 a drop of 9% from the previous quarter.

Supplier Management

Which best describes how you have/will manage your collection of available Suppliers?

  • Increase: 36% (46%)
  • Same: 12% (7%)
  • Decrease: 51% (36%)
  • Don't Know: 7% (5%)

 

ANALYSIS

North American manufacturing companies continued to seek out additional sources for production in Q1 ‘12, a 6% rise to 36% in supply base expansion as compared to Q4 ’11 .

 

Staff Adjustment

How has your company adjusted staff?

  • Increase: 24%
  • Decrease: 19%
  • Same: 55%
  • Don't Know: 2%

 

ANALYSIS

Sourcing and purchasing manufacturers report slower employment conditions in Q1 ’12, with both a decrease in the number of companies hiring (down 2%) and an increase in the number that eliminated staff (up 5%). The 24% reporting increased hiring is the lowest percentage since Q2 ’10, and the 19% reporting eliminating jobs is the highest rate seen since Q3 ‘11.

 

Supply Chain Disruption

In the past 3 months, has your company experienced a significant supply chain disruption that caused you to investigate or select new suppliers?

  • Yes: 37%
  • No: 59%
  • Don't Know: 4%

 

ANALYSIS

The number of buyers reporting significant supply chain disruptions rose slightly from Q4 ’11 (up 3%), while those reporting no disruptions fell slightly by 1%.

 

Returned Production to North America for North American Consumers

In the past 3 months, has your company returned any portion of its production into or closer to North America from a low-cost country?

  • Yes: 17% 
  • No: 75%
  • Don't Know: 8%

 

ANALYSIS

For the 9th straight quarter, companies report returning work to the United States.

Future Returned Production to North America for North American Consumers

In the next 3 months, will your company be researching bringing any portion of its production into or closer to North America from a low-cost country?

  • Yes: 31% 
  • No: 55%
  • Don't Know: 14%

 

ANALYSIS

Q1 ’12 marks the 9th straight quarter where well over 25% report their companies are investigating reshoring as a strategy for the future.

Manufacturing Closer to Consumption

In the past 3 months, has your company adopted or considered a strategy to establish production of your products closer to or within their markets of consumption?

  • Yes: 21%
  • No: 72%
  • Don't Know: 7%

 

ANALYSIS

The trend continues that product manufacturing companies are considering adjusting their global supply chains to move operations or production closer to consumer markets.

Factors Threatening Sourcing/Supply Chain Strategies

What are the most important factors threatening your current sourcing or supply chain strategies?
(Numbers in parentheses are responses from the previous quarter)

  • Fuel/Oil Prices: 29% (29%)
  • Logistics & Shipping Costs: 52% (37%)
  • Intellectual Property Protection: 14% (14%)
  • Separation of Production from Design or R&D: 9% (11%)
  • Product Quality Compliance: 35% (37%)
  • Unstable Labor Costs: 9% (11%)
  • Civil Instability: 0% (2%)
  • Supplier Financial Health/Stability: 14% (17%)
  • Availability of Competent Suppliers: 45% (36%)

 




ANALYSIS

Direct costs and supplier capacity remain the greatest threats to North American manufacturers as reported in Q1 ’12. While fuel costs have diminished or stabilized as a specific threat, overall logistical costs associated with supply chains have become a concern, jumping 15% from the previous quarter. Locating preferred, qualified suppliers for production increased 9% to become the second ranked threat to North American-managed supply chains.

Intentions for hiring, investment and expansion

Which of the following best describe your company’s intentions for hiring, investment & expansion for the last half of 2012? (Numbers in parentheses are responses from the previous quarter)

  • We are aggressively investing in new technology & expanding our workforce: 25% (26%)
  • We are aggressively investing in new technology but not expanding our workforce: 30% (28%)
  • We are hiring, but not investing in new technology: 8% (11%)
  • We are neither hiring, nor investing in new technology: 40% (35%)

 

ANALYSIS

Although some North American industrial buyers appear to be improving their investment appetite for the coming months, 40% report that they are neither hiring nor investing in new technology – the highest percentage (by 5%) reported in the past year. This noteworthy rise may indicate a perception of uncertainty in the economic markets abroad, and a ‘wait-and-see’ approach in regard to near-term domestic economic conditions.

SUPPLIERS (Job Shops & Contract Manufacturers)

Business Growth

Which best describes current/future business conditions?

  • Grown: 52%
  • Decline: 19%
  • Same: 25% 
  • Don't Know: 3%

 

ANALYSIS

North American small and medium sized manufacturers continue to post stronger gains & enjoy better business conditions than their buyside customers. But these stronger business conditions are marginal, with the greatest gains over the previous quarter accounted for by fewer companies that saw contraction.

Employment Conditions

How has your company adjusted staff?

  • Increased: 36%
  • Decreased: 14% 
  • Same: 50%
  • Don't Know: 0%

 

ANALYSIS

The 36% of small and medium manufacturers that added jobs in Q1 ’12 represents a 7% increase from the previous quarter, and matches the highest response in this category since MFGWatch began in Q3 ’09. It remains to be seen if these North American plants can sustain this level of growth in the face of slowing business conditions as reported by North American manufacturers.

Supply Chain Disruptions

In the past 3 months has your company received queries or actual work from companies suffering from supply chain disruptions and in need of immediate assistance?

  • Yes: 43%
  • No: 43%
  • Don't Know: 14%

 

ANALYSIS

While the number of small and midsized manufacturers receiving work from distressed buyers remains relatively unchanged from the last quarter, Q1 ’12 represents the third quarter in a row that over 40% of respondents have made this claim. This level of activity, combined with the relatively high level of buyers reporting disruptions, suggests a material level of global supply chain instability.

Inquiries and Prospects

In the past 3 months, have you seen inquiries from customers or prospects:

  • Increase: 47%
  • Decrease: 12%
  • Same: 39% 
  • Don't Know: 2%

 

ANALYSIS

A significantly high number of North American suppliers report higher overall quoting and inquiry activities in Q1 ’12. Along with this positive sign for suppyside businesses, the fewest have reported decreased activity since the inception of MFGWatch.

Future Capacity

Describe your company’s export strategies for the coming months?

  • We will be exporting to foreign markets for the first time: 5%
  • We will be increasing our exports to foreign markets: 13%
  • We will be decreasing our exports to foreign markets: 3%
  • We are maintaining our current exports level to foreign markets: 29%
  • We are not considering exporting at this time: 50%

 

ANALYSIS

The little variation in these responses (1/2%) suggests that very few small and medium manufacturers remain motivated to take advantage of emerging markets via exports. As previously observed, this lack of aggression toward entering global markets is indicative of the tasks at hand to encourage these behaviors among supplyside manufacturers in North America.

Export Strategies

Which of the following issues will have the most impact on the economic & competitive future of manufacturing in your region? (Numbers in parentheses are responses from the previous quarter)

  • Extensive Government Regulations: 21% (20%)
  • Logistics, Shipping & Energy Costs: 10% (5%)
  • Operating Costs: 24% (27%)
  • Rising Taxes: 8% (8%)
  • Trade Policy Reform & Deficit: 6% (8%)
  • Budget Deficit: 5% (2%)
  • Availability of Qualified Labor: 13% (20%)
  • Access to Capital: 13% (10%)

 

ANALYSIS

Overall operating costs continue to dominate the concerns of small and midsized manufacturing businesses in 2012, with government regulations and the access to capital and manufacturing talent closely behind.

Intentions for Hiring, Investment & Expansion

Which best describes your company’s intentions for hiring, investment & expansion for the last half of 2011? (Numbers in parentheses are responses from the previous quarter)

  • We are aggressively investing in new technology & expanding our workforce: 24% (27%)
  • We are aggressively investing in new technology buy not expanding our workforce: 24% (25%)
  • We are hiring, but not investing in new technology: 13% (11%)
  • We are neither hiring, nor investing in new technology: 39% (37%)

 

ANALYSIS

Like their buyside counterparts, small and medium manufacturing businesses are tentative with regard to hiring and technology purchases, as indicated by the nearly 40% that made few investments in Q1 ’12.

 

MFGWatch is an annual, recurring survey conducted by MFG.com of North American OEMs/Sourcing Professionals of manufacturing goods and services. The survey is conducted via e-mail from a sampling of MFG.com member companies, and is intended to reflect projected and reported behaviors of companies in the North American manufacturing sector. MFGWatch data and its analysis are provided to share openly – however, MFG.com does ask for responsible acknowledgement as the source of MFGWatch data. Industries represented include aerospace/aeronautics, automotive, medical, defense, textiles and consumer products manufacturers.