PLANT Outlook survey shows companies are looking close to home for growth.
All the same, 60% of respondents to PLANT’s 2015 Manufacturers’ Outlook survey view the year ahead with some uncertainty and describe themselves as “cautiously optimistic” about their prospects, compared to 29% who see market conditions as “very favourable” (and 10% who do not).
The survey, conducted by Bramm Research for PLANT in partnership with sponsor Grant Thornton LLP, is based on 416 replies from senior manufacturing executives, and has a margin of error of +/- 4.6%, 19 times out of 20.
Most companies (65%) fall into the small business category (under 100 employees), 25% are medium-sized (100 to under 500) and 9% are large firms (500 employees or more). As cautiously optimistic as many of them may be, they will be investing in their businesses, tackling productivity issues and pursuing growth.
Average sales are expected to be $83 million in 2015 compared to $75.9 million this year and $72 million in 2013.
Just over half (57%) of the senior executives are expecting orders and their value to increase next year, while 50% expect pricing to remain the same (34% anticipate an increase), and 44% are predicting higher profits.
More than 90% derive most of their business from trade in North America (63.1% in Canada) and 50% intend to focus on North America as a key growth strategy. Thirty-one per cent of companies will seek new markets in the next one to three years within Canada, 37% in the US, 15% in Mexico, 15% in other Central America, South America, and 12% in Brazil. Currently 2% are doing business in China but 10% plan to enter that market.
Jim Menzies, national leader of manufacturing for Grant Thornton LLP, an accounting, tax and advisory firm and sponsor of Manufacturers’ Outlook 2015, observed that senior executives acknowledge the significant opportunities that exist in new and emerging markets. But with the re-emergence of the US market, they appear to be more focused on taking advantage of the closer, more familiar opportunities.
“There is no question that the opportunities in the US are well worth taking advantage of, however I do wonder whether our Canadian manufacturers are foregoing some more significant and longer term opportunities in the newer markets.”
He said the level of optimism that continues to exist amongst manufacturers, although slightly more cautious than in the past, is very encouraging. “As we turn that optimism into opportunism, it will be exciting to see the positive impact on manufacturing and the Canadian economy as a whole.”
With many manufacturers looking to hire more employees, add new lines of business, expand existing facilities and enter new markets, he said there is no question they’re very focused on taking advantage of the growth opportunities in their markets.
“The continued importance placed on innovation and productivity improvement will no doubt help Canadian manufacturers in achieving their growth goals going forward,” he added.
Indeed, 95% of respondents say productivity is key to business growth and 45% are pursuing a formal productivity improvement strategy while 20% are in the process of developing one. Managing productivity is most challenging on the shop floor for 61%, followed by marketing and sales (42%) and purchasing (29%).
Fifty-two per cent of companies are very or somewhat likely to connect the shop floor with the top floor’s enterprise management systems in the next 12 months, but 45% are not.
Over the next three years 79% of companies intend to invest in machinery and equipment, and 44% say they’ll invest up to $1 million next year, although the overall average spend is $2.16 million. Average investment in expansions, upgrades or new facilities is $1.2 million.
The survey results highlight areas where manufacturers could raise their game.
Menzies said in addition to taking a broader view of the opportunities in new and emerging markets, they should also take a longer-term approach to managing their businesses.
“During the difficult economic times experienced in 2008 through 2012, it was clear many manufacturers were very short-term focused and more or less in survival mode,” he said.
“With the more recent favourable economic conditions, now is the time for manufacturers to step back and take that more sophisticated and strategic approach to their businesses.”
He recommended focusing more on enterprise risk management, succession planning and exit strategies, tax structures and long-term skilled labour solutions that will help them to better anticipate and address issues that can have a significant impact on their long-term success.