Each year IndustryWeek sets out to identify the 50 Best Manufacturing Companies (IW50 BMC) in the United States. The list not only affirms that manufacturing is alive and well in the U.S.A., but it also enables us to get a glimpse into what makes a manufacturer world class.
What is it, for instance, that sets apart a company like petroleum refiner Sunoco Inc.? In today's economic climate, it's more remarkable to not make money if your business is operating oil refineries. And yet, the very volatility of the petroleum market makes long-term production forecasts something of a high-stakes poker game.
When Sunoco's fourth-quarter 2006 profits and revenues underperformed to Wall Street's expectations, John Drosdick, the company's CEO, along with other senior managers took the unusual step of voluntarily relinquishing several C-level perks. The benefits include tax payments on Drosdick's behalf for personal use of the corporate aircraft and use of a company-owned car, which the CEO returned in July 2006.
It's this kind of leadership, coupled with a commitment to the company's best interests, that makes Sunoco a repeat visitor to the IW50 BMC list. And even with the fourth-quarter stumble, Sunoco ended up posting more than $38 billion in revenue (revenue growth of nearly 15% compared with 2005 results) and 47.7% return on equity for the year. With or without the corporate jet, that's flying high. To calculate which companies from the IW U.S. 500 make it to the coveted IW 50 BMC list, a formula is applied that considers financial measures that pertain to operational efficiency and market success. We compare financial performance for the last three years (2004 to 2006) in revenue growth, return on equity and profit margin, as well as manufacturing-specific metrics that address the capital/asset intensive nature of manufacturing. These metrics are asset turnover, inventory turnover and return on assets.
IW 50 Best Manufacturers -- Methodology
The 2007 IW 50 Best Manufacturing Companies
This year's list includes representatives from 18 industries. As expected, petroleum & coal producers dominated the charts with 14 companies represented.
Other industries include primary metals, computers & other electronic products, medical instruments, motor vehicles, and chemicals.
This year we welcome 20 newcomers to the list. Encore Wire Corp., which boasts a 99.95% order fill rate for its copper electrical wire in the fabricated metal products industry, had $1.2 billion in revenue for 2006 -- not bad for a freshman Best Manufacturing Company. The company also had a 33% return on assets and a 54% return on equity.
Another newcomer, Florida Rock Industries Inc. -- which manufactures construction aggregates, concrete products and cement and calcium products -- posted $1.3 billion in revenue for 2006, 15% profit margin and a 28% return on equity.
Of the metrics used to extract the IW 50 BMC, it is interesting to note how they compare with the remaining 450 companies on the IW 500 list.
Indeed, for IW 50 companies, the average profit margin is 11%, revenue growth is 24%, return on assets is 19% and return on equity is 44%. For the remainder of the IW 500, average profit margin is 6.9%, revenue growth is 10.9%, return on assets is 6% and return on equity is 18%.
Certainly the companies that didn't qualify for the IW 50 aren't exactly slouches, but it does prove that when it comes to best-in-class, the metrics reflect standout performance.