Report highlights perils facing US manufacturing and distribution
Monday, October 12, 2015
Chicago-based business services provider McGladrey recently released its annual Manufacturing and Distribution Monitor Report for 2015. The report covers the manufacturing and distribution industry based on information from 1,660 manufacturing and distribution executives across the globe.
As wages and employment continue rising and the dollar becomes stronger, many are enticed into believing the United States has made a complete recovery from the Great Recession. However, manufacturers' expectations were higher at the beginning of 2015 than they were by this summer.
Nevertheless, based on the findings of the McGladrey survey, the forecast for U.S. manufacturing is positive, with industry executives anticipating good profits for the next 12 months.
According to the report, U.S. companies are seeing new and more difficult challenges in the domestic marketplace as manufacturers across the world set their sights on exporting their products to the U.S. At the same time, other countries are less stable economically or have been inundated with local competitors.
Globally, American manufacturers are outspent by foreign competitors investing in their companies. Many of these same companies are also outperforming their U.S. competitors too. Investments include:
- information technology
- strategic planning
The McGladrey report shows that manufacturers in most countries, including the United States, view the U.S. market as the best chance for increased sales.
Only 40 percent of U.S. manufacturing companies say their businesses maintain a strong strategic planning know-how, compared with foreign competition where the percentage is higher at 55 percent. Will the United States manufacturing sector be able to compete without beefing up their planning competency?
Although U.S. manufacturing firms continue to invest in IT, it is not for new software and hardware. For every dollar spent on IT, 74 cents goes to maintaining legacy applications and/or infrastructure. But a large percentage of foreign manufacturing competitors have been successful with cloud computing and customer relationship management (CRM) tools, as well as big data and analytics.
The report says many long-time observers of the manufacturing sector in the U.S. believe there will be significant, highly disruptive modifications in the manufacturing and distribution industry due to the learning curve related to embracing change in their company cultures so they are prepared for competition on a global level.
IT advancement is a must for companies in the U.S., especially in the middle market. The need is for American companies to effectively manage things including,
- supply chain
- running operations
- reducing risks
- competing in the global marketplace
Although the U.S. manufacturing industry believes it is the most innovative in the world, the report's authors think the United States is losing the battle. As a result, the U.S. is in danger of following and not leading in the competition for commercializing profitable, high-margin products and services.
In the United States, there are just five institutes driving innovation and coordinated by the U.S. National Network for Manufacturing Innovation. In Germany however, there are 66 institutes coordinated by Germany's Fraunhofer Society.
Besides foreign competition, the United States manufacturing sector faces a number of ongoing struggles that include:
- currency manipulation
- regulatory issues
- trade policies
- recruiting and keeping younger workers
- dealing with the impact of a strong dollar on U.S. exports
These findings about the health of the U.S. manufacturing and distribution industry are a wake-up call for increased spending on improving technology and planning if the competition between the U.S. and the rest of the world is to even out.
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