Manufacturers Fail to Take Full Advantage of Tech

Sikich survey highlights how manufacturers and distributors can overcome current challenges to organic growth and gain an edge in today’s economy

NAPERVILLE, Ill. — July 29, 2015 — While manufacturers remain optimistic about the U.S. economy, a majority fail to either implement or leverage important technological advancements that can help them capitalize on the recovery, according to a new survey from Sikich LLP, a leading professional services firm.

Sikich surveyed 116 manufacturers and distributors – almost 75 percent of which have annual revenue of $1 million to more than $100 million – for its 2015 Manufacturing Survey and found that 53 percent of respondents still rely on spreadsheets and other manual processes to prepare key performance indicators (KPIs) such as productivity, utilization and availability, among others. According to the survey, which examines industry trends as well as the strategic and economic issues companies face, only 26 percent said they use a financial application module such as an enterprise resource planning (ERP) system for KPIs.

“In a time of rapid change, tracking accurate KPIs can mean the difference between stagnation and long-term growth,” said Jim Wagner, partner-in-charge of Sikich’s manufacturing and distribution practice. “The persistence of manual processes in the industry is troubling. Technology can help companies grow more efficient, lower costs and better serve customers. It has the potential to transform the industry and drive success, but companies need to make full use of it to realize gains.”

Though many companies lag on technology when it comes to KPIs, they do turn to technology to support business growth and improve customer service, according to the survey. The top ways respondents said they use technology is to improve manufacturing processes and business intelligence and reporting.

Manufacturers Bullish on U.S. Economy, But Face Challenges

Beyond technology, the Sikich survey reveals manufacturing and distribution companies’ priorities, expectations for the future as well as ongoing challenges.
About half of survey respondents are more optimistic about the U.S. economy compared to 2014. A majority (54 percent) expect their revenue to increase by more than 5 percent this year, and 96 percent said they anticipate their hiring to increase or stay constant in 2015.

Still, in the wake of the financial crisis, many companies remain hesitant to move into new markets or expand product offerings. Nearly 40 percent of survey respondents view increased share in existing markets as their top opportunity for gains in the next 12-18 months. Meanwhile, almost a third of respondents spend less than 1 percent of sales on research and development for new products.

“Many manufacturers continue to adopt a cautious approach to growth,” Wagner said. “But while a focus on existing markets presents less risk, it won’t sustain manufacturers forever. Eventually, companies will need to become more aggressive and invest in new markets and products to drive differentiation and future success.”

Additional challenges manufacturers and distributors face include the need to both cut costs and make needed capital investments in equipment and technology. More than 90 percent of respondents expect taxation and labor costs to either increase or remain the same in the next 12 months, while 86 percent said the same about the cost of raw materials. Meanwhile, 32 percent plan capital expenditures on equipment while 42 percent expect to spend on computer hardware and software.

As they seek to square the need for more investment with ongoing cost pressures, manufacturers point to the supply chain as a key. A majority (59 percent) of respondents identified supply chain management as either important or highly important to their companies’ success over the next five years.

“An effective supply chain can help companies increase production and delivery and better manage materials, labor and overhead,” Wagner said. “Advanced technology and machinery can further improve potential efficiency gains from the supply chain. Implementing a strong supply chain management strategy is one of the most important decisions a manufacturer can make.”

For more information about the 2015 Manufacturing Survey, download a copy of the findings here: http://bit.ly/MFGReport2015.