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Darcy Wilson-Jones, CPA/Audit Partner

Overall, the outlook for the manufacturing industry is largely positive, according to the 2017 RSM Manufacturing Monitor. Rising revenues and profits are fueling enthusiasm and driving investments in information technology, equipment, research and development, and training. In addition, industry hiring is on the rise, and production is seeing slow but steady gains.

Indices such as the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index (PMI) and the J.P. Morgan Global Manufacturing PMI offer positive assessments of manufacturing in the United States and around the world. At the same time, however, the markets for some sectors have softened, leading to lower revenues and decreased client retention.

When making their strategic decisions, manufacturers will need a broad understanding of the issues at stake, which include the following:

GROWTH

Overall, the global manufacturing industry appears strong, and some manufacturing sectors have fared quite well. With some growth in other worldwide markets, overall activity is increasing and having a positive impact on U.S. activities. Many manufacturers are offering new or improved products and expanding into other markets as strategies for growth, but mergers and acquisitions appear to be active as well.

When it comes to sales growth strategies, almost half of manufacturers are offering new or improved products. Many have also expanded—or are planning to expand—in new or existing markets. These markets are predominantly domestic, but there is activity crossing borders as well. Collaboration with customers and investments in innovations as well as research and development are accelerating new product introductions.

TECHNOLOGY

While two-thirds of manufacturers in the survey plan to increase their investments in technology, many executives perceive an insufficient return for efforts on investments in technology. Data security is an ever present concern, but efforts to address it appear to be limited, which has been the trend over the past few years.

Manufacturers who are not utilizing technology strategically for operational efficiency, for customer relationship or risk management, supply chain data, just to name a few areas—may not be able to maintain an advantage over their competitors for long or will slip further behind. Customer expectations have changed, and companies must update their infrastructure and systems or risk declining results. As collaboration and innovation technologies become more widespread, they are eliminating barriers for organizations and changing how they go to market and interact with their customers.

PROFITABILITY

Nearly half of manufacturers are reporting operating profits of 6 percent or more (before interest and taxes), but the costs of components and materials have increased in the past 12 months and manufacturers plan on passing these higher costs on to customers in a price-conscious environment. Investments in process improvements by almost half of the respondents continue to be a priority.

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