IW 50 Best Logo used in 2018

Simply the Best: A Round of Applause for the 2018 IW 50 Best

Much like the Olympic decathlon chooses the "world's greatest athlete" via combined performances in 10 track and field events, IndustryWeek looks at a host of measures to determine the IW 50 Best U.S. Manufacturers.
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Welcome back Patrick Industries Inc., manufacturer of building products for the RV market. You've nabbed the top position once again.

Welcome aboard Align Technology Inc., producer of Invisalign orthodontics, and Cirrus Logic Inc., maker of signal processing products. Neither of you were on the radar in 2017, but here you are in 2018. And congratulations NVIDIA Corp. for your amazing climb up the ranks as a manufacturer of leading edge computing technologies.

These four companies, as well as 46 others, comprise the 2018 IndustryWeek 50 Best U.S. Manufacturers, IW's exclusive annual ranking of America's top-performing public manufacturers. They are simply the best.

Patrick Industries wrestled the top spot from Apple Inc. in last year's IW 50 Best U.S. Manufacturers ranking and retained the position this year on the strength of double-digit revenue growth (33.9%) in 2017 and return on equity of 46%. Apple Inc., meanwhile, continued to slide, from No. 6 in 2017 to No. 13 in this year's ranking. Revenue growth for this technology giant grew a more sedate 6.3%, although its 2017 profit margin was a mind-boggling 21.09%.

Top moves aside, if there is one blanket statement that this year's IW 50 Best U.S. Manufacturers tells us, it is that no single industry – or one single type of manufacturer – has a stranglehold on being the best.

Five chemical companies make the 2018 list, as do three manufacturers in the apparel industry, a single player in medical instruments, two companies in furniture and fixtures, and four manufacturers in computers and electronics.

Further, about 20 of the manufacturers could be categorized as process manufacturers, while the remainder are discrete or a hybrid. And 11 manufacturers on the 2018 IW 50 Best ranking held no position in 2017.

Interesting, perhaps, but before we explore further, let's discuss what we mean by "the best."

How They Got There

There's no question every manufacturer wants to be the best. A Clorox company value spells it out in these words: "Our success is measured by our ability to consistently win in the marketplace by exceeding the expectations of our consumers, customers, shareholders and each other."

Pilgrim's Pride Corp.'s vision is "to become the best and most respected company in our industry, creating opportunities for a better future for our team members."

And NVIDIA says simply, "First choice in signal processing products."   

But how to select the best, exactly, is up to eternal debate. For manufacturing companies, is it revenue growth? Is it profit margin? Can any single measure carve out "the best" – or in this case, the IW 50 Best?

Our answer to the last question is "no." No single measure can adequately identify the best. Much like the Olympic decathlon chooses the "world's greatest athlete" via combined performances in 10 track and field events, IndustryWeek looks at a host of measures to determine the IW 50 U.S. Manufacturers. (Just don't expect the javelin throw as one of the options.)

Our selection of the IW 50 Best U.S. Manufacturers is based on very specific criteria, chosen by us and meant to reflect both financial and operational success. If you don't meet the criteria, then you can't be in.

For example, the IW 50 Best emerges from the IW U.S. 500, the 500 largest publicly held U.S. manufacturing companies based on revenue. From there, IW compiles the IW 50 Best list by ranking the IW U.S. 500 companies based on their performance in six key areas over a three-year period. These areas are inventory turns, profit margin, sales turnover, return on assets, return on equity and revenue growth. The most recent year (2017) accounts for 50% of the calculation, while 2016 is weighted at 30% and 2015 contributes 20%.  Our review of three years of data aids in avoiding the flash-in-the-pan company, the manufacturer that emerges by happenstance for one year and then fades away nearly as quickly.

Do the math, and 19 separate measures factor into building the IW 50 Best.  

Speaking of Durability

Now, with the playing field more well-defined, the IW 50 Best ranking requires another perusal. A second look shows that many of the top-ranked manufacturers are as far from flash-in-the-pan manufacturers as you can get.

Meet the resilient ones, the long-termers, the masters of longevity – manufacturing companies that have been around for a century or more. About 35% of the IW 50 Best live in that community. They include such manufacturers as Clorox, which this year turns 105; Sherwin-Williams Co., in business since 1866; Illinois Tool Works, launched in 1912 when a group of inventors teamed up with a Chicago financier; and Hormel, producing foods for more than 125 years.  

Moreover, three of the top 10 companies among the IW 50 Best have achieved that century mark. Joining the already mentioned Clorox and Sherwin-Williams is motor vehicle parts maker Lear Corp., which moved up 12 slots from its 19th position last year. Two others in the century club – Lennox International Inc. and Deluxe Corp. – just missed making it into the top 10 slots. Lennox gained one position compared to the previous year while check printer Deluxe slid eight positions.

It should, perhaps, come as no surprise that 100-year-old manufacturing firms own a good chunk of the IW 50 Best. Their sheer longevity proves their ability to weather financial turmoil, political upheaval and changing consumer and industrial tastes. That's not entirely unexpected.

However, their appearance in such healthy numbers on this "best" list should put to rest ideas that companies well past their first youth can't continue to grow and innovate with the same energy as their younger cohorts.

Additional members of the century club include Toro Co.; Valvoline, which did not make the ranking last year but joined the 2018 ranking in the 25th position; Hershey Co.; A.O. Smith Corp.; Herman Miller Inc.; Church & Dwight Co. Inc., ranked 37 but absent from the previous year's list; Rockwell Automation Inc., Carter's Inc.; NewMarket Corp.; Coca-Cola Bottling Co. Consolidated; Packaging Corporation of America; and Altria Group.

Meet the Cliques

Twenty-two different manufacturing industry verticals are represented on the 2018 IW 50 Best, a veritable variety pack of industries. However, it's also true that several industries own more ground in the ranking than others. Four industries – chemicals, which was mentioned previously, electrical equipment, food and motor vehicle parts – each claim five spots among the 2018 ranking.

Moreover, it would not be a stretch to combine food and beverage for ownership of eight positions on the IW 50 Best, or to marry motor vehicles and motor vehicle parts to nab another eight positions.

However, the most amazing clique sits right atop the 2018 IW 50 Best. Patrick Industries, Thor Industries and LCI Industries not only all participate in the recreational vehicle market, but also all three – ranked one, two and four – have their headquarters in Elkhart, Ind., home of nearly 83% of all RV manufacturing in the United States. That industry has been on a tear, with the number of RV units shipped up more than 40% between 2014 and 2017.

Meet the Movers and the Shaken

Exactly half of the 2018 IW 50 Best community rose in the rankings compared with last year, including the 11 manufacturers that were not represented at all. Among the biggest climbers was NVIDIA, which jumped 30 spots, from 45 to 15 and American Axle & Manufacturing Holdings Inc., which gained 15 spots, from 31 to 16. Align Technology Inc., which was not even eligible for the consideration in the 2017 IW 50 Best Manufacturing Companies, went straight to the No. 3 position, while another RV manufacturer, Winnebago Industries Inc., leaped into the 14th position following ineligibility in 2017.

On the flip side, Hormel slid 26 positions to land at No. 44 of the IW 50 Best, Altria Group Inc. dropped 22 positions, and Tenneco Inc. and Nike Inc. each slid by 17 positions.  

Additional Points of Interest:  

  • Five of the 11 new members in 2018 were ineligible for the previous year's IW 50 Best. Their revenue numbers did not qualify them for the IW 500, from which the IW 50 Best is drawn.
  • The average 2017 profit margin among the IW 50 Best U.S. Manufacturers is 11.64%, while the median is 9.74%.
  • The average 2017 revenue growth among the IW 50 U.S. Manufacturers is 16.30%, while the median is 8.58%.
  • Nine of the Top 50 Best U.S. Manufacturers qualify for the double-digit club – they showed double-digit growth both in profit margin and revenue growth. Those manufacturing companies are Align Technology, Sherwin-Williams, NVIDIA, Cirrus Logic, Skyworks Solutions Inc., Monster Beverage Corp., Packaging Corporation of America, Westlake Chemical Corp., and Louisiana-Pacific Corp. Add inventory turns to the double-digit mix, and only Align Technology can claim ownership of double digits in all three measures.

Now, with these data as a backdrop, drop in and peruse the complete, searchable database of the 2018 IndustryWeek 50 Best U.S. Manufacturers.

In addition, over the next several weeks we will take a closer look at the top 10 companies in the 2018 IW 50 Best to explore the strategies, practices and individuals in each company that helped raise them to the top. 

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