What is in this article?:
- Indiana Manufacturers Have Weathered the Storm of the Great Recession
- Seeking Superior Quality and Lower Prices
According to results of the 2012 Indiana Manufacturing Survey: “Halftime” for Indiana Manufacturing, Indiana manufacturers have weathered the storm of the Great Recession and are well positioned to compete in the future.
The report, commissioned by Katz, Sapper & Miller certified public accounting firm, was conducted by Scott A. Brown, partner, Katz, Sapper & Miller, LLP in conjunction with Mark Frohlich, associate professor of operations management and Steven Jones, associate professor of finance, on the faculty of the Kelley School of Business Indianapolis, Indiana University.
This report has tracked Indiana manufacturing for six years, from the end of the economic boom through the Great Recession to the present. The authors “view the past year as a ‘halftime’ break for Indiana manufacturing after what proved to be an incredibly difficult first half.”
The vast majority of companies surveyed (82%) responded at the company level, while 10% did so as individual plants and 7% are divisions of larger organizations. Privately owned companies represent 87% of respondents and the other 13% are publicly traded companies. The average number of employees is 306, and the largest organization has 8,000 employees.
About 40% of companies rely on job shop-type production, and 41% use batch manufacturing. Very few companies operate assembly lines (8%) or continuous flow processes (11%), both of which are capital intensive and used to produce relatively standardized, high-volume items.
The three largest industry groups represented are industrial equipment (19%), automotive (19%), and aerospace and defense (10%). Another 18% of respondents are almost evenly distributed between high-tech (5%), healthcare (6%), and furniture/home goods (7%).
In the four years since the financial crisis of late 2008, “manufacturers have faced challenges ranging from credit crunches and supplier bankruptcies to slumping consumer demand, soaring energy costs, and relentless foreign competition.” The report chronicles that “in 2008-09, Indiana manufacturers were mainly focused on cost-cutting and economic survival. By 2010-11, targeted investments aimed at growth began to reappear on the agendas of many manufacturers.” In 2012, “a significant majority now report that their business is either ‘healthy’ or ‘stable,’ with tougher times behind them” and “investment for growth is a priority for many companies around the state,” while “almost three out of every four manufacturers surveyed are investing for growth.”
“From a financial perspective, I think small- to medium-sized manufacturers have made it through the Great Recession, and they’re starting to recover,” said Jones. “That is revealed in the survey responses indicating there’s less concern about working capital management and renewed focus on investment strategy, rather than cost cutting.”
“One in 10 companies surveyed plan to open new manufacturing facilities in Indiana over the next two years, and 44% rate their financial performance as “healthy,” a significant increase from last year’s response of 30%.”
The survey did find that net profit margins increased more for firms that introduced new products sometime in the two years prior. In the 2012 survey findings, the companies introducing new products increased to 44% (up from 38% in 2011), and they saw a 24% improvement in net profit margin (down from 26% in 2011).