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2019 Business Outlook Trends for Manufacturing

02/08/2019  |  By: John Mark McDougal, CPA, Shareholder, Practice Leader Audit and Advisory

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What does 2019 look like for the manufacturing industry? LBMC conducted a national survey covering business unit leaders in eight industries, including manufacturing. The survey is considered a pulse survey, which is opinion based and not scientific in nature. The survey collected responses to determine a baseline of optimism and strategy preferences over the past 12 months and the coming 12 months.

According to the survey, optimism is high overall. More than 35 percent of manufacturing leaders plan to increase compensation to retain top talent, while 44 percent are investing in training and development.

Revenue Picture

Manufacturing shows an improving picture from a year ago, with almost 21 percent listing revenue growth of 10-20 percent, and 34 percent listing growth of 3-10 percent. That compares to one-third of participants citing growth of 3-9 percent a year ago, and 22 percent of leaders reporting zero growth. While 25 percent of leaders noted that revenues were down 3-20 percent a year ago, just 13.7 percent of leaders reported losses in the last 12 months, and the ratio was also lower, between 3 and 10 percent.

2019 Expectations

Hiring increased for 55 percent of responding companies, even though leaders had anticipated limited hiring. Capital spending was also up among about 69 percent of responding companies. Similar to the 2018 projections, about 40 percent of leaders expect revenue to grow 3-9 percent in 2019. The surprise is that growth projections of 10-20 percent are expected by 56 percent of leaders, compared to 27 percent of leaders in 2017. Optimism for the regional and national economy is averaging 7 out of 10, tempered by concerns over raw materials and labor costs. About 59 percent of manufacturing leaders cite only an average ability to meet an unexpected increase in demand, with 48 percent citing too few employees. About 22 percent of leaders would consider selling their company in the next 12 months.

“We are focusing our efforts on buying more product and warehouses to hold the product.” - CEO/President in Manufacturing

Marketing and R&D are top priorities for capital spending in 2019, along with investments in acquisitions, new locations or new facilities. Leaders also emphasize investments in new ERP systems as well as a focus on new products and markets. To keep top talent, 36 percent of leaders plan to increase compensation, while 44 percent are investing in training and development. Another 16 percent are offering flexible or remote work arrangements.

Rather than investing in new IT, manufacturing leaders are seeking to improve the performance of existing systems, but about 14 percent are exploring technology innovations to positively impact their business such as artificial intelligence and robotics. About 36 percent of leaders also cite improvements in information management among their top three business goals.

In summary, the pulse survey illustrates how leaders in the manufacturing industry are increasing their capital spending in hopes to drive revenue growth. The increase in capital spending will be affected by the tariffs placed on U.S. imports. 2019 will tell the story of how President Trump’s tariffs impact the U.S. manufacturing market.

Click here to view the full 2019 Business Outlook Report!

John Mark McDougal, CPA, is Shareholder-in-charge for the accounting and assurance services and lead shareholder in the manufacturing/distribution industry at LBMC. He can be reached at jmcdougal@lbmc.com or 615-309-2474.

About the Survey:

The 2018 survey collected responses from 303 business unit leaders, 291 of those through online electronic survey and another 12 responses by third-party phone survey to gather additional detail. Approximately 65 percent of survey respondents were C-suite level leaders ranging from CEO to SVP/VP. About 9 percent were CFOs. Size of company by revenue was split between small and large companies, with about 47 percent listing revenues of less than $5 million, 18 percent at $5-$25 million, 16 percent at $25-$100 million and about 19 percent at more than $100 million. About 59 percent of respondents listed 50 or fewer employees, and 13 percent of companies listed 50 to 99 employees. About 18 percent have between 100 and 999 employees, while 10 percent list 1,000 or more employees. The majority of companies (69 percent) are 2019 Business Outlook Report About the Survey 24 regional, meaning that they have more than one office or geographic area served. About 20 percent of respondents are national, and 11 percent are international. Almost 24 percent of respondents have more than five locations, and 23 percent have two to four locations. Competitor locations were listed as mainly regional or national, with 12 percent listing international competition.