Global Outlook: Uncertainty on Growth Goals

What is the global outlook for the manufacturing industry throughout 2008? Of course, there is no crystal ball that can be relied on for absolute certainty. However, a recent study conducted by IndustryWeek provides some interesting insights into the thoughts of manufacturing executives.

The results of the study, compiled in 2007, included responses from individuals who have the job titles of President, Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Information Officer (CIO), Chief Financial Officer (CFO) and Chief Marketing Officer (CMO).

Significantly, fewer than half of these high-ranking officers (approximately 40%) remain confident about their ability to increase revenues to help maintain or improve their standing in the global marketplace over the next three years. The study also showed that manufacturing performance may be hampered by problems in the revenue-generating areas of product innovation, operational excellence and customer retention.

As a result, many manufacturers are considering a wide variety of initiatives to stimulate growth throughout 2008. Some of most popular ideas are:

• implementing continuous improvement practices outside of production (56.5%);
• increasing training (49%);
• making larger investments in capital assets (38.3%);
• outsourcing some current functions (32.4%);
• hiring more people (32%); and
• seeking mergers and/or acquisitions (28.5%).
  

About 67% of the respondents cited strategies for improving performance and growth that relate to people management. Some additional findings of the study are:

• Only a small percentage think their companies are “world class” in product innovation (18%), operational excellence (14%) or customer retention (21%). In each of these critical areas, the respondents say they could strengthen their positions by learning more about their customers.
• Approximately two thirds of the manufacturing executives indicate that the main challenges to customer attraction and retention are demands imposed by customers and global competition.
• To a large degree, the executives would reinvest cost savings in the business to improve their ability to deliver in changing market conditions. Specifically, they would buy new machinery (53.4%), improve processes (45.8%), create new products (30.0%), improve product innovation (24.5%) or build new plants (20.9%).

To improve their overall operations to world-class levels—particularly in regard to customer relations—manufacturers can no longer afford to operate in a vacuum. Instead, they should aggressively pursue outside resources and partnerships intended to achieve long-term growth and profitability. This appears to be the emerging trend at the end of the decade.

In any event, it is strongly recommended that manufacturing executives develop a business plan for stimulating growth in 2008 and beyond.

December 2007