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Home » CFOs of Small, Mid-sized Manufacturers Optimistic About Growth in 2013, Survey Says

CFOs of Small, Mid-sized Manufacturers Optimistic About Growth in 2013, Survey Says

April 25, 2013
Prime Advantage

The following are among the findings of the survey:

"¢ Sixty-four percent of executives feel more optimistic about financial prospects for their own companies, down slightly from 69 percent a year ago

"¢ Seventy-two percent of respondents rated their optimism about financial prospects as moderate to high, an increase of 10 percent over last year

"¢ Seventy-three percent of respondents forecast moderate to rapid growth for their key customers for the next 12 months

"¢ A record number of companies (72 percent) are planning capital expenditures in computer hardware and software

"¢ Health insurance premiums increased for most respondents in the past year and nearly every company (94 percent) is anticipating an increase in healthcare premiums this year

"¢ Top priorities in 2013 include cutting operational costs, developing new products and services, and seeking new markets for products and services

"¢ Nearly half of U.S. manufacturers (46 percent) have engaged with local educational providers in order to train workers (up from just 19 percent in 2012)

"¢ More companies are planning to increase the number of employees in 2013 (49 percent of respondents, up from 41 percent in 2012).

Still Bullish on Financial Prospects, U.S. Economy

Only five percent of companies feel the U.S. economy will contract this year and more than half of respondents (56 percent) 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 (and also a record high for the survey). 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 optimistic about the economy).

When asked to cite the top potential threats to economic growth in the United States, 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.

Focus on New Markets & Products

As companies actively explore new markets, they are also increasing investment in R&D. Fifty percent of Prime Advantage's member companies are planning to increase their spending for new product development, the highest percentage since 2009.

Top Priorities

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 7th position it occupied in 2012.

Employment

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.

Yet, 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.

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 named customer demand as the top external concern; two in three companies 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.

"We're very encouraged to see our members' optimism regarding business for 2013. To see continued growth in revenue, capital expenditures and hiring expectations, following a record setting 2012 for many, is a true indication of a solid manufacturing economy," said Louise O'Sullivan, founder, president and CEO of Prime Advantage. "While our members continue to develop new products and enter new markets, our goal remains to make sure we're presenting the best suppliers to them as strategic partners in growing their business."

Source: Prime Advantage

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KEYWORDS Business Strategy Alignment Global Supply Chain Management Industrial Manufacturing manufacturers bullish on economy Prime Advantage SC Security & Risk Mgmt Sourcing Solutions Sourcing/Procurement/SCM Supply Chain Analysis & Consulting Supply Chain Management Supply Chain Management: Business Strategy Alignment Technology U.S. economy U.S. manufacturers optimistic Value chain
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