Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent. The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3 and "Comparisons of Revisions to GDP" on page 5). The "second" estimate for the first quarter, based on more complete data, will be released on May 30, 2013. The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, residential investment, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. The Bureau of Economic Analysis downgraded third-quarter growth from 2.5 percent, as estimated a few weeks ago, to 2.0 percent. The consumer continued to be the largest driver of this growth; however, spending was less than originally estimated. There were also downward revisions for business inventories and investment. Over the course of the last year, the U.S. economy has grown 1.5 percent, which is well below where it should be at this point in the recovery. Nonetheless, the outlook for 2012 is somewhat brighter, with the National Association for Business Economics estimating 2.4 percent growth next year in its most recent survey
U.S. Manf sector employment was about 12.5 million jobs in the beginning of recession (2009)Lost 1.5 million jobs during recession over last several yearsApril 1, 2013 - sector has added 500,000 jobs since the recession endedEmployment will never again be at the 17.3 million numbers Other notes- On the reboundU.S. manufacturers have enjoyed a nice bounce since the end of the recession, adding nearly a half-million jobs. The industry now employs almost 12 million workers and is growing employment for the first time since the mid-1990s.Yet those gains pale in comparison to the nearly 6 million U.S. jobs that vanished from 2000 to 2010, when manufacturing employment shrank to 11.4 million from 17.3 million. Many of those jobs ended up in China or other low-cost countries.Can some or all of those jobs come back? Right now the evidence is thin. Most manufacturing jobs created in the past three years are the result of a recovering economy. Companies that slashed payrolls in the Great Recession have been beefing up to handle rising demand.Take carmakers and parts dealers. They’ve hired 125,000 workers since the end of the recession, accounting for one-quarter of all new manufacturing jobs, according to Labor Department data.The companies have padded payrolls to meet a 39% jump in sales since the industry bottomed out in 2009. The number of vehicles sold climbed to 14.5 million in 2012 after hitting a decades-low of 10.4 million four years ago.At the same time, though, reams of anecdotal evidence suggest employment in the manufacturing sector is getting a boost from U.S. companies returning operations back home. And foreign firms increasingly see America as a good place to establish deeper roots.The hard proof, however, is lacking. No one is quite sure if the U.S. is reaping a net benefit once all the manufacturing jobs entering and leaving the country are added up.
Traditional industry sectors have shown growth. Unfilled positions are key strategic positions Engineers Welders CNC operatorsAverage age of Welders and Carpenters is mid to late 50’s
FOR IMMEDIATE RELEASE THURSDAY, MAY 16, 2013 AT 8:30 A.M. EDT CB13-87 Raemeka Mayo or Stephen Cooper Manufacturing and Construction Division (301) 763-5160 NEW RESIDENTIAL CONSTRUCTION IN APRIL 2013 The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for April 2013: BUILDING PERMITS Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,017,000. This is 14.3 percent (±1.0%) above the revised March rate of 890,000 and is 35.8 percent (±1.3%) above the April 2012 estimate of 749,000. Single-family authorizations in April were at a rate of 617,000; this is 3.0 percent (±0.9%) above the revised March figure of 599,000. Authorizations of units in buildings with five units or more were at a rate of 374,000 in April. HOUSING STARTS Privately-owned housing starts in April were at a seasonally adjusted annual rate of 853,000. This is 16.5 percent (±5.2%) below the revised March estimate of 1,021,000, but is 13.1 percent (±5.1%) above the April 2012 rate of 754,000. Single-family housing starts in April were at a rate of 610,000; this is 2.1 percent (±4.8%)* below the revised March figure of 623,000. The April rate for units in buildings with five units or more was 234,000. HOUSING COMPLETIONS Privately-owned housing completions in April were at a seasonally adjusted annual rate of 689,000. This is 14.3 percent (±11.2%) below the revised March estimate of 804,000, but is 3.3 percent (±11.9%)* above the April 2012 rate of 667,000. Single-family housing completions in April were at a rate of 536,000; this is 9.8 percent (±10.2%)* below the revised March rate of 594,000. The April rate for units in buildings with five units or more was 149,000. Bitmap New Residential Construction data for May 2013 will be released on Tuesday, June 18, 2013, at 8:30 A.M. EDT. Our Internet site is: http://www.census.gov/newresconstNEW RESIDENTIAL CONSTRUCTION IN MARCH 2013The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residentialconstruction statistics for March 2013:BUILDING PERMITSPrivately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 902,000. This is3.9 percent (±0.9%) below the revised February rate of 939,000, but is 17.3 percent (±1.4%) above the March 2012 estimate of769,000.Single-family authorizations in March were at a rate of 595,000; this is 0.5 percent (±0.7%)* below the revised February figure of598,000. Authorizations of units in buildings with five units or more were at a rate of 283,000 in March.HOUSING STARTSPrivately-owned housing starts in March were at a seasonally adjusted annual rate of 1,036,000. This is 7.0 percent (±11.8%)* abovethe revised February estimate of 968,000 and is 46.7 percent (±13.9%) above the March 2012 rate of 706,000.Single-family housing starts in March were at a rate of 619,000; this is 4.8 percent (±10.8%)* below the revised February figure of650,000. The March rate for units in buildings with five units or more was 392,000.HOUSING COMPLETIONSPrivately-owned housing completions in March were at a seasonally adjusted annual rate of 800,000. This is 11.0 percent (±20.6%)*above the revised February estimate of 721,000 and is 36.3 percent (±23.3%) above the March 2012 rate of 587,000.Single-family housing completions in March were at a rate of 593,000; this is 2.6 percent (±13.1%)* above the revised February rate of578,000. The March rate for units in buildings with five units or more was 202,000NEW RESIDENTIAL CONSTRUCTION IN JANUARY 2013The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residentialconstruction statistics for January 2013:BUILDING PERMITSPrivately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 925,000. This is1.8 percent (±0.9%) above the revised December rate of 909,000 and is 35.2 percent (±1.5%) above the January 2012 estimate of684,000.Single-family authorizations in January were at a rate of 584,000; this is 1.9 percent (±0.8%) above the revised December figure of573,000. Authorizations of units in buildings with five units or more were at a rate of 311,000 in January.HOUSING STARTSPrivately-owned housing starts in January were at a seasonally adjusted annual rate of 890,000. This is 8.5 percent (±11.3%)* belowthe revised December estimate of 973,000, but is 23.6 percent (±13.4%) above the January 2012 rate of 720,000.Single-family housing starts in January were at a rate of 613,000; this is 0.8 percent (±11.7%)* above the revised December figure of608,000. The January rate for units in buildings with five units or more was 260,000.HOUSING COMPLETIONSPrivately-owned housing completions in January were at a seasonally adjusted annual rate of 724,000. This is 6.0 percent (±7.2%)*above the revised December estimate of 683,000 and is 33.6 percent (±17.1%) above the January 2012 rate of 542,000.Single-family housing completions in January were at a rate of 565,000; this is 7.0 percent
May 2013 "The PMI™ registered 49 percent, a decrease of 1.7 percentage points from April's reading of 50.7 percent, indicatingcontraction in manufacturing for the first time since November 2012 and only the second timesince July 2009. This month's PMI™ reading is at its lowest level since June 2009, when itregistered 45.8 percent. The New Orders Index decreased in May by 3.5 percentage points to48.8 percent, and the Production Index decreased by 4.9 percentage points to 48.6 percent.The Employment Index registered 50.1 percent, a slight decrease of 0.1 percentage pointcompared to April's reading of 50.2 percent. The Prices Index registered 49.5 percent,decreasing 0.5 percentage point from April, indicating that overall raw materials pricesdecreased from last month. Several comments from the panel indicate a flattening or softeningin demand due to a sluggish economy, both domestically and globally."April 2013 Manufacturing ISM Report On Business®PMI™ at 50.7%DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of April 2013.New Orders, Production and Employment GrowingInventories ContractingSupplier Deliveries Slowing(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in April for the fifth consecutive month, and the overall economy grew for the 47th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 50.7 percent, a decrease of 0.6 percentage point from March's reading of 51.3 percent, indicating expansion in manufacturing for the fifth consecutive month, but at the lowest rate of the year. The New Orders Index increased in April by 0.9 percentage point to 52.3 percent, and the Production Index increased by 1.3 percentage points to 53.5 percent. The Employment Index registered 50.2 percent, a decrease of 4 percentage points compared to March's reading of 54.2 percent. The Prices Index registered 50 percent, decreasing 4.5 percentage points from March, indicating that overall raw materials prices remained unchanged from last month. Comments from the panel indicate a range of strong/steady growth, to flat/declining volumes, depending upon the particular industry."Of the 18 manufacturing industries, 14 are reporting growth in April in the following order: Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Fabricated Metal Products; Paper Products; Machinery; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Petroleum & Coal Products; Plastics & Rubber Products; Transportation Equipment; and Computer & Electronic Products. The three industries reporting contraction in April are: Wood Products; Food, Beverage & Tobacco Products; and Chemical Products.WHAT RESPONDENTS ARE SAYING …"Business can be described as flat at best." (Food, Beverage & Tobacco Products)"Production is still strong; several new projects to support alternative energy." (Primary Metals)"Slight uptick in business, but overall continuing slowdown in defense due to budget/sequester." (Computer & Electronic Products)"We have concerns about safety of doing business in South Korea. Our largest customer and part owner is in South Korea." (Electrical Equipment, Appliances & Components)"Automotive demand remains firm." (Fabricated Metal Products)"Business continues at a steady pace." (Machinery)"General business conditions and industrial markets remain strong." (Transportation Equipment)"Seasonal pick-up underway in the office furniture industry." (Furniture & Related Products)"Market has slowed this month — weather in some parts of the country, also customers built inventory in anticipation of building increase, but the economy is still slow to pick up this spring." (Wood Products)"Overall, volume is steady or slightly declining. Q1 sales volume is lower than projected." (Chemical Products)
The 2012 McGladrey Manufacturing & Distribution Monitor was conducted using an online questionnaire promoted by McGladrey and various industrial associations to principally U.S.-based manufacturing and distribution organizations. There were 924 total valid respondents to the 2012 McGladrey Manufacturing & Distribution Monitor (categorized as 554 manufacturers and 370 distributors), with completed questionnaires received in May and June 2012. Responses were received by The MPI Group, an independent research firm, and then entered into a database, edited, and cleansed where necessary to ensure answers were plausible. All respondent answers to the 2012 McGladrey Manufacturing & Distribution Monitor are confidential.
PR/Media Coverage (related to the Monitor)In 2011, Monitor results have received extensive coverage on Fox News, CNBC, WSJ-CFO Journal In 2011, the Monitor garnered over 182 million daily media impressionsShared results of the Monitor with key policy and law makers on Capitol Hill
Business conditionsStop-and-start economic activity—both in the United States and elsewhere—is restraining growth. Most businesses reportin 2013 that they are holding steady (61 percent) or thriving (32 percent), but the percentage of thriving businesses hasfallen from 39 percent in 2012 (Figure 1).Since the Monitor began tracking the state of the industry in 2006, the survey has asked participants to rank theircompanies as thriving, holding steady or declining. While responses often appear to be based on company revenue,domestic and international sales, and other measurable factors, it has become clear that ranking a company’s businesscondition is as much a qualitative assessment as it is quantitative. To say a company is thriving, for example, may meandifferent things to different people. In our focus groups of industry executives, some defined thriving as growing fasterthan the industry; others described it as double-digit growth; still others defined it as being able to turn business away.However they define it, thriving as a business could remain out of reach as long as concerns regarding economicconditions, regulatory hurdles and other potential threats to prosperity continue.Businesses in manufacturing and distribution are, in other words, trending toward a holding pattern. Having weatheredthe recession, executives seem impatient with results that are better than before, but have not risen to a level where theycan feel comfortable investing in their companies. Midsize businesses ($50 million to $499 million revenue) are more likely to be thriving (36 percent) than large businesses(29 percent of businesses with revenues of $500 million or more) and small businesses (30 percent of businesses with lessthan $50 million sales)—evidence of strength in the middle market.
Sectors in which businesses are most likely to be thriving are food and beverage (40 percent thriving) and biotech (38percent). Yet, the percentage of thriving food and beverage companies in 2013 is down from 2012 (47 percent). Overall,the health of the segment may be attributed to a growing consumer confidence and more discretionary spending beingdirected towards dining. Innovation is playing a role as well, providing consumers with a greater variety in food choices,locations and ways to purchase. Food and beverage manufacturers and distributors, however, will increasingly be expectedto absorb more costs, as retailers are reluctant to pass price increases onto consumers. The overall success of this segmentcontinues to make it a major focus of private equity firm investments.Although the biotech, life sciences and medical equipment and supplies sector has been performing well—it is thesecond-highest among the sectors in the survey for its percentage of thriving companies—that percentage is down to38 percent in 2013 from 46 percent in 2012. Arguably, the medical device tax and Affordable Care Act, together with theongoing global economic concerns, may be contributing to this decline. Nearly 80 percent of the executives in this sectorfeel that implementation of the Affordable Care Act will limit or significantly limit growth.Industries in which businesses are least likely to be thriving are metal fabrication (19 percent) and cleantech (19 percent)(Figure 4). The percentage of thriving cleantech companies has fallen precipitously from 48 percent in 2012, reflecting thesector’s downturn.One sector with an increase in the percentage of thriving companies, year over year, is the building materials sector.This can be attributed to some of the encouraging numbers that are being reporting in new home sales (which have risen18.5 percent since March 2012,2 permits (new home construction in the United States reached to a 1.04 million annualrate in March 2013,3 the highest since June 2008); and average increases in home prices (with average price increases ofup to 9.3 percent in the 12 months ending in February 2013).4 Similarly, businesses whose primary customers were in theconstruction market reported a 9.6 percent (average) sales increase in the past 12 months and expect an 8.8 percentincrease in the next 12 months.There has been a decrease in the percentage of thriving businesses in industrial and commercial machinery, as well asmetal fabrication. Companies appeared to gear up in 2012, but low or stable energy prices, cuts in defense spendingstarting in 2012 and continuing through the sequestration reductions, and a slowing world economy likely have put thebrakes on expected growth and confidence of companies in this sector. A concern about rising component costs has alsohad an impact on confidence in future results. Yet because business executives are anticipating an almost 10 percentincrease in equipment and machinery expenditures in the upcoming year, this bodes well for industrial and commercialmachinery manufacturers, a sector that expects a 7 percent increase in sales in the upcoming year. On a brighter note, one of the biggest drivers of sales increases for industrial and commercial machinery manufacturersis the robust agricultural economy. Companies in the supply chain for large agricultural equipment manufacturers havehealthy backlogs and anticipate hiring in 2013.Transportation has declined, due in part, to a downturn in the heavy truck sector. There is, however, room for optimism,as orders for heavy trucks have been above 20,000 per month and rising since late 2012 due to the need to replace oldercarriers as well as an increase in home construction material and durable goods transportation.5In Aerospace, there is significant pressure applied by OEMs on suppliers for pricing concessions to keep long-termcontracts in place. At the same time, hard metals used in the manufacturing process are commodities with prices thatfluctuate based on the underlying market conditions. When commodity prices go up, margins in the sector are furthersqueezed when the supply chain is locked in with long-term contracts.
OptimismNearly 85 percent of executives are optimistic about their business prospects (Figure 5). These percentages are comparableto 2012, and are consistent for manufacturers and distributors across all categories.Prior-year Monitor reports have noted that executives are usually more optimistic regarding factors under their control,such as their own companies and even extending to their perspectives of their industries. Optimism regarding those areasoutside of their control—that is, the U.S. and global economies—changes from year to year.Notably, many executives who sell outside of the United States are more optimistic in 2013 than they were in 2012regarding the health of the global economy; they see world markets as a contributor to growth. These executives arethinking holistically and see pockets of opportunity around the world. As previous Monitor reports have noted, thrivingcompanies are more likely to sell their products and services outside of the United States.The Monitor has identified significant swings in the perception of the world economy in the past three years. It may be thatas the frequency of economic news about Greece, Spain and China has diminished, the current state of the world economydoes not appear as dire as it did only one year ago. Even negative perceptions regarding the U.S. economy appear to haveleveled off for now, awaiting, perhaps, the next steps by Congress
Business environmentDespite their optimism, executives are most worried about the potential negative impact on growth from governmentpolicies and actions. Topping the list of factors that are expected to limit or significantly limit growth in the next 12months are:• Government regulations (74 percent of executives)• Implementation of the Affordable Care Act (71 percent)• Increase in payroll taxes for Social Security and Medicare (69 percent)• Federal deficit (67 percent)These factors rank higher than concerns over skills shortages or increases in material and component prices. Manyexecutives have trepidations concerning how these government regulations and policies are going to have an impact ontheir bottom lines.
Approximately 71 percent of businesses posted U.S. sales increases in the past 12 months. Additionally, some 83 percent ofbusinesses expect U.S. sales to increase in the next 12 months (Figure 9). Regarding the rate of increase, businesses postedan average U.S. sales increase of 7 percent in the past 12 months, with distributors’ rate of increase modestly leadingthat of manufacturers. Despite the hesitancy and uncertainty expressed by many participants, most are more optimisticlooking forward, with expectations of a nearly 8 percent increase in the next year.Not surprisingly, thriving businesses were far more likely to post U.S. sales increases in the past 12 months—94 percentof thriving businesses reported an increase as compared to 63 percent of businesses holding steady and 32 percent ofdeclining businesses—and thriving businesses reported higher average increases. They similarly are more likely to expectU.S. sales increases in the next 12 months and to expect higher average increases.Sales outside the United StatesMiddle-market manufacturers and distributors are very active in selling into the global marketplace. In fact, approximately73 percent of Monitor participants reported some level of sales outside the United States (85 percent of manufacturers and51 percent of distributors). Overall, manufacturing plays a key role in the $2.7 trillion U.S. export industry. Many sectors—from transportation to chemicals to electronic and computer products—have enjoyed double-digit growth over the past18 months. Strong demand for U.S.-made products, coupled with the relative low value of the U.S. dollar compared toother countries, has resulted in this increase.This good news is also reflected in the Monitor results. A majority of businesses that sell outside the United States (57percent) posted non-U.S. sales increases in the past 12 months, and 63 percent of businesses expect non-U.S. sales toincrease in the next 12 months. The average rate of increase on non-U.S. sales has been around 8 percent, looking back andalso looking forward 12 months (Figures 12 and 13).Thriving businesses were far more likely to report an increase in non-U.S. sales for the past 12 months; 71 percent ofthriving businesses reported an increase as compared to 51 percent of businesses holding steady and 42 percent ofdeclining businesses. As the Monitor has shown in the past, there is a strong correlation between companies that areexporting and companies that are thriving and growing.6Drilling down further into growth for Monitor participants, there are several sectors that are anticipating double-digitgrowth in the next 12 months, reinforcing the increased levels of optimism for the world economy expressed by Monitorparticipants (Figure 14).
Strategies to maintain or improve profit margins- Increasing prices to majority of customersAll Businesses 41%Manf 39%Dist 43%Increasing prices to a select few customers and marketsAll businesses 41%Mnf 43%Dist 38%
Costs and expendituresThe vast majority of executives—more, in fact, than in 2012—anticipate increases across all major cost categories in thenext 12 months, with the exception of the cost of debt:• Inventory, materials and components: 84 percent of executives expect increases in 2013 (average increase of 4.5percent) compared to 72 percent who expected an increase in 2012• Transportation and fuel: 89 percent of executives expect increases in 2013 (average increase of 6.0 percent) comparedto 72 percent in 2012• Energy and utilities: 80 percent of executives expect increases in 2013 (average increase of 4.1 percent) compared to65 percent in 2012• Cost of debt: 37 percent of executives expect increases in 2013 (average increase of 1.4 percent) compared to30 percent in 2012Executives at declining businesses are more likely to expect increased cost of debt (46 percent)—probably due to creditworthinessconcerns—compared to executives at businesses holding steady (37 percent) or those at thriving businesses(37 percent).
Employment outlookMost companies are looking to expand their workforce. Approximately 63 percent of business executives expect toincrease employment in the next 12 months and 10 percent will reduce employment (Figure 23)—compared to 67percent expecting an increase in 2012 and 11 percent expecting to reduce workforces. It is interesting to note thatMonitor participants are more likely to increase their U.S. workforce than their non-U.S. workforce. The average expectedemployment increase is 4.3 percent (Figure 24).Not surprisingly, 81 percent of executives at thriving businesses will increase total employment, compared to 59 percent ofexecutives at businesses holding steady and 25 percent of executives at declining businesses.
Employee costsThe vast majority of executives expect costs for wages, health care and other benefits to increase in the next 12 months.Executives are most concerned about health care costs as the Affordable Care Act is implemented, anticipating anaverage increase of 10.2 percent (Figure 25). Approximately one in 10 businesses expect health care costs to rise by 20percent or more.These trends are forcing executives to expand wellness programs in an effort to control premiums, along with shifting aportion of these cost increases to employees.Distributors expect higher average increases for employee-cost categories than manufacturers. Small businesses are morelikely to expect higher health care costs (average 11.4 percent increase) (Figure 26).
Skills gapsMost businesses find the skilled talent they require most of the time, but baby-boomer retirements are beginning to havean impact on key positions at all levels in organizations. Yet, until businesses and educators can forge deeper and moresustainable relationships to develop the U.S. labor force, the skills gap will continue.While unemployment rates continue to remain high, some companies have made little headway in closing skills gaps: 57percent of businesses always (or most of the time) find skilled talent, but 43 percent of businesses find skilled talent onlysome of the time or rarely (Figure 27). These findings are nearly identical to data from the 2012 Monitor and will continueto drive executives to develop and enhance variable compensation programs to attract, reward and retain key talent.Businesses are most likely to address skills gaps with internal training and skills-development programs (78 percent ofbusinesses, an increase from 71 percent in 2012) (Figure 28). Collaboration with vocational or technical skills (33 percent)and with colleges and universities (31 percent) are also methods being used to address skills gaps.The findings imply that there may be a disconnect between manufacturers and their local education systems.Manufacturers apparently remain willing to shoulder the responsibility for virtually all training of new employees,despite the fact that they could rely more often on high schools and community colleges. This means that not only aremanufacturers paying new trainees (who often do not contribute in meaningful ways for a year or more following their hiredate), but productivity is hampered because top-performing workers are often pulled from production lines to becometrainers. There are many training and educational institutions that have heard the call for solving the skills gaps and aredeveloping programs that will supply a greater number of skilled workers.Manufacturers are more likely than distributors to use all the approaches listed here to address skills gaps; and, in fact, 16percent of distributors do nothing to address skills gaps. Internal training and skills-development program can be found atmost thriving businesses (80 percent) to address skills gaps; declining businesses rely on these programs as well, but to alesserextent (69 percent) (Figure 29).
Business proximity, offshoring and onshoringBusiness proximityApproximately 52 percent of all respondents stated that is it important or very important to be in physically closeproximity to their customers; this is even more pronounced for distributors. In addition, 42 percent of manufacturersbelieve the importance of having their engineers and product developers close to their manufacturing facilities. Even withthe ability to communicate instantaneously around the globe, there are advantages—speed, agility, cost efficiencies andimproved communications—to having developers close to the production process (Figure 30).In fact, some companies and their suppliers are literally neighbors. In the automotive segment, close proximity to suppliersis a competitive advantage. Global companies typically have little time to make changes to meet fluctuating consumerdemand, so it pays to have all members of the supply chain in close proximity.At Ford Motor Company’s assembly plant on Chicago’s South Side, for example, a number of suppliers have set up shopwithin blocks of the facility. The approach saves delivery time and transportation costs, and allows the company tospot and address quality issues quickly. GM, Chrylser and other auto makers are using the same “in the neighborhood”approach at their assembly plants in Michigan, Ohio, Indiana, Tennessee and other states across the country.Businesses are also importing less in 2013. An average of 16.8 percent of inventory is purchased outside the United States,down from about 21 percent in 2012. Distributors are more likely to purchase a higher average percentage of inventoriesoutside the United States than manufacturers (Figure 31).OffshoringWhether or not they export to foreign markets, only 5 percent of Monitor participants are likely or very likely to relocateoperations offshore. This lackluster tendency for middle-market companies to offshore is significantly lower than seen inprevious Monitor studies, when 27 percent reported in 2011 that their companies were highly likely or somewhat likely toestablish their first or an additional direct presence in a foreign market in the coming 12 to 18 months. (Note that for a highpercentage of businesses, this issue was not applicable.)OnshoringWhile large global companies such as Caterpillar and GE have been bringing back operations to the United States, middlemarketcompanies are not currently following suit. According to the Monitor, only about 14 percent are considering(somewhat likely and very likely) to onshore operations within the next 12 months. (Figure 33). However, this percentagemay increase in the near future as the Monitor participants believe it is important to locate their operations close to theircustomers and their R&D and engineering departments. (Note that for a high percentage of businesses, this issue wasnot applicable.)
Corporate IT risksExecutives are more aware of the risks associated with business information and data, particularly as social mediastrategies become more widespread and corporate cyber-attacks make headlines: Approximately 68 percent of businessexecutives report that their data is at little risk or no risk, a drop from 77 percent in 2012 (Figure 34). Perceptions of IT riskare comparable between manufacturers and distributors.In addition, the Monitor survey found that 65 percent of businesses have an IT risk-management process, and 74 percent ofbusinesses regularly monitor systems to find threats and attacks that may have occurred.Executives at large businesses are more likely to believe their information is at some level of risk: 44 percent as comparedto 31 percent of midsize businesses and 32 percent of small businesses (Figure 35). It seems as if executives at these largebusinesses understand something that executives at smaller businesses do not. This may reflect an assumption by smallerbusiness executives that their data holds no interest for those seeking unauthorized access. This is a commonly held belief,but it is insufficient as a risk management strategy.The perception by a majority of executives that their data is at little or no risk, however, runs counter to the rising threats toinformation security. Account takeovers and fraud are widespread: During 2010 alone, Symantec, a business informationsecurity and management firm, documented 286 million unique threats, a 400 percent increase from just the year before.10According to a report conducted by Verizon in 2013, there was a 275 percent increase in breaches in the manufacturingindustry alone over the prior year.11 Notably, if the breach data was filtered for incidents of corporate espionage (caseswhere the data lost was the result of disgruntled or exiting employee), manufacturing was the No. 1 victim of these typesof incidents.While organizations may finally be taking notice of information security and IT risk management, their controls are ofteninsufficient or ineffective. Executives typically do not believe that their organizations have sensitive data. However,cybercriminals—like most criminals—are financially motivated, and every organization, regardless of size, has critical data:patents, technology, personnel records, corporate credit cards, health benefits, intellectual property and the like. That datacan be sold to identity thieves, rogue states or competitors via the Internet quickly and quietly for a fast profit.Attackers have been successful at accessing information in all organizations, regardless of size, often due to weak orstolen access credentials. Attackers target the lowest hanging fruit to get access to data quickly and easily. Companiesneed to take proactive steps to minimize their security risks and, as a result, mitigate any potential financial losses andcompromised reputations.
“The State of Manufacturing”
Regional Business Development Leader, McGladrey