Survey Reveals Challenges for Manufacturers and Distributors

by Karen L. Kurek
McGladrey LLP

Manufacturing and distribution industry executives remain optimistic, despite worries of increased costs and a lack of skilled candidates.

Following a relatively positive year for sales performance and expansion, middle-market manufacturers and distributors are largely optimistic about their own businesses. Yet, they are grappling with a variety of challenges that include eroding confidence in economic conditions, struggles with finding a skilled workforce and uncertainty about government legislation.

According to the 2012 McGladrey Manufacturing & Distribution Monitor report, executives of midsized companies find themselves in an uncertain business landscape.

Tempered Optimism
Despite their concerns about the U.S. and world economies, executives are generally optimistic about their prospects in the next 12 months. The fact that most businesses reported they are thriving or holding steady may be a factor in their optimism. U.S. sales at most organizations rose over the past 12 months, and are expected to continue growing over the next year, albeit at a much lower rate.

Overall, survey respondents are looking to invest in the infrastructure of their businesses, particularly in process improvements. The primary objectives cited for improvement initiatives are to reduce costs, as well as to improve quality, customer satisfaction and speed.

Challenges Ahead
Most businesses expect costs in many categories to increase in the next 12 months, particularly in areas such as transportation and fuel costs, equipment and machinery, and energy. Some expect transportation and fuel costs to increase by more than 10 percent.

Additionally, years of reduced staffing may be catching up with the industry. A majority of businesses plan to increase total employment in the next 12 months. However, finding new hires with the right skill sets could prove challenging.

Intelligence Tool
The unique aspect of this data lies in the fact that most of the survey participants are privately owned or are private equity-owned organizations. Because most of the data referred to in the media is based solely on publicly available documents, it makes these results rather exceptional for the industry.

Conducted in May and June of last year, the 2012 McGladrey Manufacturing & Distribution Monitor included a total of 924 valid respondents (categorized as 554 manufacturers and 370 distributors). Responses were received by The MPI Group, an independent research firm.

Along with this report, survey participants receive a customized benchmark report that provides views of their responses to the questions posed, along with comparisons to the aggregate responses for their industry category and geographic location. The analysis in the Monitor report, along with the customized benchmark report, provides a comprehensive view of the business environment. iBi

Karen L. Kurek is a partner at McGladrey LLP. This is the seventh consecutive year McGladrey has polled manufacturing and distribution industry executives.

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