BackgroundThomasNet's Industry Market Barometer (IMB) is a semi-annual survey of buyers (engineers and purchasing agents) and sellers (owners, managers, and sales and marketing executives) in manufacturers, distributors and service companies that comprise the industrial sector. Its findings are unique as the majority of respondents are from small and mid-sized companies, mirroring the makeup of the industrial/manufacturing segment.
The IMB serves to measure companies' performance, uncover strategies they are employing to grow their businesses, and present an overall segment outlook. This is the third consecutive IMB.
DemographicsThere were a total of 3,243 survey respondents of which 95% were located in the United States. The majority were from the Midwest (20%) and Mid-Atlantic (19%), followed by the Pacific Northwest (15%) and Pacific (12%).
IMB respondents represent the industrial marketplace with 50% from manufacturing facilities, followed by distributors, service providers (e.g. machine shops), institutions, business services and defense contractors. Mirroring the industrial marketplace, the majority of respondents are from small businesses. Nearly 6 out of 10 (58%) respondents have less than 50 employees and about half (50%) report revenues of $3 million and under. More than a quarter (26%) have between 50-500 employees and 19% are large companies. Respondents' positions represent multiple titles such as owners, purchasing, engineering and sales and marketing.
Detailed FindingsThe newest IMB shows North America's industrial/manufacturing sector surging forward, accelerating the momentum of its recovery with the promise of further expansion to come. Several key indicators all demonstrate a sector that's "caught on fire" - taking into account more company growth, fewer business declines, a resumption of hiring, a winding down of layoffs, and new investments. Moreover, the kinds of jobs that companies are adding indicate further growth to come.
Why does this matter?
These results complement and add to 14 months of the Institute of Supply Chain Management's (ISM) reports of consistent manufacturing growth. IMB differentiates itself from ISM because it goes beyond just the numbers, delving into why companies are growing and the strategies they are employing to succeed. The latest results have positive implications for the overall industrial supply chain, and consequently, the national economy.
Quickening Growth; Fewer Declines
One key indicator - company growth - shows a dramatic increase over the past 18 months. For the period January through June 2009, during the heart of the national recession, only 17 percent of respondents reported growth.
Since then, the figures have steadily improved, with 27 percent reporting growth for July through December 2009. The latest figures illustrate even more dramatic growth; 45 percent of respondents say their business grew during the first half of 2010.
The decreasing percentage of businesses reporting a decline is just as telling. Only 19 percent of respondents say that their businesses declined over the first half of 2010, down significantly from 41 percent six months ago and 54 percent when IMB was first fielded.
The majority of respondents cite overall sales and net profitability as their growth measurements.
Six out of ten (60%) respondents forecast growth for the remainder of 2010, while 32% expect to hold steady. In fact, of those who grew, the outlook is even better; 83% of them predict continued growth for the rest of 2010 while 15.4% anticipate staying the same and just 1.5% expect to decline.
Detroit-based Maxi Container, a distributor of eco-friendly containers for industrial and commercial use, is one such company that illustrates these trends. Maxi grew sales to record levels during the first half of 2010. Sales are up 37 percent over the same period last year and the company set four successive months of sales records.
New Job Creation; Layoffs Nearly Over
Despite the "jobless recovery," the industrial sector is bucking the trend with company growth leading to the creation of new jobs. A robust 34 percent of respondents say they plan to hire new employees this year. While many companies are adding new jobs, the IMB also shows layoffs winding down. Nearly 60 percent of respondents plan to keep head count level this year, and only eight percent plan to downsize.
The kinds of jobs companies are adding fall in line with the new product development and implementation of online strategies reported in prior IMBs and point to more growth ahead. For example, 25 percent of firms with new openings are adding line workers, an indication of increased product demand. Twenty-three percent (23%) are adding sales and marketing staff, showing confidence in customer buying power. Nineteen percent (19%) are recruiting engineers, supporting stepped up product development.
Much of this hiring will continue to remain in North America, where respondents' operations are located. Only 27 percent report that they have manufacturing operations overseas - and of those, 47 percent plan to make no changes, and 18 percent are making a concerted effort to move manufacturing back to the US.
The growth of their businesses is giving industrial companies the confidence to reinvest in themselves, in addition to creating new jobs. Putting the recession behind them, they are ramping up for additional growth, with investments in technology (40%), facilities/renovations (37%) and capital equipment (36%) for the second half of 2010. And, in the first half of 2011, technology is projected to be the dominant area of investment.
Strategies for Continued Success
Respondents also share their top four strategies for continued success: developing business in new US geographies, developing innovative products and services, pursuing business in new industries, and increasing online marketing. They've diversified their product lines - and rather than waiting for customers to find them, they're going after prospects who would never have considered them before, and turning them into clients.
A case in point is Keats Manufacturing Company, a 52 year-old family-owned and operated custom job shop that has recovered its momentum. Its metal parts are used in a wide range of products, from automotive fuel injection systems, to hearing aids and appliance timer controls. The recession initially was tough on Keats, which saw a double digit percentage drop in sales. To make up for the loss, Keats wanted to pursue business in new markets and locations. They deployed an effective online strategy to showcase their capabilities, equipment and projects to help market their business and expand worldwide. The result is a 30 percent increase in Keats' bottom line.
Importance of New Product Development and an Online Strategy
Looking ahead, new product development remains an integral part of strategic planning with 60% citing it as critical, if not important to the second half of 2010. Also, those who reported growth were twice as likely to rate new product development as key to their success. Equally important, 60% of respondents say that having an online strategy is either critical or important to their growth in the second half of 2010.
Small Businesses Ignite Industry Growth
In addition to examining the industrial sector, the IMB also paints a picture of a growing small and mid-size business (SMB) sector. The largest increase in business comes from these smaller companies.
The Industry Market Barometer's (IMB) 19 question survey was conducted during a 48 day period: July 10th through August 27th, 2010. There were 3,243 survey respondents throughout North America.
Respondents were invited to participate through the following:
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