2012 manufacturing & distribution monitor 10-4-12.pdf · united kingdom $ $60,842 $63,992 $, it...

2012 Manufacturing & Distribution MonitorPaul Marvel

N th t P ti L d M f t i d Di t ib tiNortheast Practice Leader Manufacturing and DistributionAssurance Practice Leader at McGladrey

October 4, 2012NEPIRCNEPIRC

© 2012 McGladrey LLP. All Rights Reserved.

About McGladrey

• 80+ year history

• 5th largest accounting, tax and business consulting fi i th U Sfirm in the U.S.

McGladrey provides services to more than 8 000• McGladrey provides services to more than 8,000 midsize manufactures and distributors across the nation

• 75 U.S. offices; offices in 85 countries worldwide

• 6,500 professionals nationally, 32,000 worldwide

1

Real GDP forecast

Real Gross Domestic Product6%6%

Real Gross Domestic Product(Chained 2005 Dollars)

NAM Forecast

2%

4%

2%

4%NAM Forecast

‐2%

0%

‐2%

0%2007 2008 2009 2010 2011 2012 2013

‐4%‐4% Real GDP Forecast:↑ 1.8% (2011)↑ 2 1% (2012)

‐8%

‐6%

‐8%

‐6% ↑ 2.1% (2012)

↑ 2.1% (2013) – No Fiscal Cliff↓ 0.5% (2013) – Fiscal Cliff

Source: Bureau of Economic Analysis, NAM calculations , Moody’s Analytics simulation model

‐10%‐10%

2

NAM forecast: Assuming a fiscal cliffAssuming a fiscal cliff

• There will be a recession in 2013 with negative real• There will be a recession in 2013, with negative real GDP in the first half of the year.

• The unemployment rate will increase to over 9 percent by mid-2013. y

• Industrial production will slow to a near-standstill inIndustrial production will slow to a near standstill in 2013.

• Manufacturing employment will decline by at least 300,000 in 2013.

3Source: NAM calculations using Moody’s Analytics simulation model

Percentage growth in real GDP and contributions to real GDP of goods

d iand services

5.0%

4.1%

4.0%

2.4% 2.5%

%

3.0%

1.3%

2.0

1.7%

1.1% .0%

9%% %1.1%

.0%

9% 9% % 1.1%

2.0%

0.1%

1

0.5%

-0.2

% 0.4%

1 0.9

0.0%

0.7%

0.7%

-0.1

%

-0.1

% 0.3%

0.3%

0.1%

1 1 0. 0.9

0.2%

0.6%

0 0%

1.0%

-

-1.0%

0.0%Q4:2010 Q1:2011 Q2:2011 Q3:2011 Q4:2011 Q1:2012 Q2:2012

Source: Bureau of Economic Analysis

Real GDP Durable Goods Nondurable Goods Services4

ISM manufacturing indices

60 0

70.0

50.0

60.0

40.0

30.0

20.02008 2009 2010 2011 2012

Purchasing Managers Index New Orders Index Employment Index Inventories Indexg g p y

Source: Institute for Supply Management 5

U.S. is the global leader in labor productivity

Manufacturing value-added per worker

labor productivity

$92,960

$118,419

Japan

United States

$71,529

$76,346

$84,565

Canada

Republic of Korea

United Kingdom

$

$60,842

$63,992

$ ,

It l

Germany

France

$28,226

$51,576

$56,208

Mexico

Spain

Italy

$13 266

$14,105

$28,051

China

Brazil

India

Source: United Nations, Bureau of Labor Statistics, International Labor Organization

$13,266China

6

Employment situation

Employment SituationMillions Unemployment Rate

10%

11%

13

14

of Workers

9%

10%

11

12

7%

8%

9

10

5%

6%

7

8

9

4%6

7

2008 2009 2010 2011 2012

Source: Bureau of Labor Statistics

Durable Goods Nondurable Goods Unemployment Rate

7

Largest net employment gains by sectorgains by sector

Manufacturing Sectors with the Largest Net Employment Gains YTD, in Thousands of Employees

158.5Transportation Equipment

p y(December 2009 to August 2012)

61 4128.7130.4

148.6

Primary MetalsMotor Vehicles and Parts

MachineryFabricated Metal Products

17.623.2

39.261.4

Electrical Equipment and AppliancesSemiconductors and Electronic Components

Plastics and Rubber ProductsPrimary Metals

12 513.216.217.0

Mi ll M f t iComputer and Electronic ProductsBeverages and Tobacco Products

Food Manufacturing

1.63.3

8.912.5

Leather and Allied ProductsChemicals

Computer and Peripheral EquipmentMiscellaneous Manufacturing


1.4Petroleum and Coal Products

8

Top 20 states for manufacturing job creationmanufacturing job creation

December 2009 to July 2012(in Thousands of Workers)

51.052.1

72.7

TexasOhio

Michigan

(in Thousands of Workers)

26.629.4

44.648.3

WisconsinWashington

IllinoisIndiana

16.219.1

20.220.7

OklahomaTennesseeMinnesota

Iowa

9.211.5

13.516.0

GeorgiaPennsylvania

KentuckySouth Carolina

8.48.48.48.7

MissouriUtah

ColoradoNorth Carolina


5.8Oregon

9

Manufacturing job hires and separations

(January 2007 to June 2012)

and separations

450

500

550

350

400

450

250

300

100

150

200

50

100

2007 2008 2009 2010 2011 2012


Job Openings Hires Separations

10

Building permits, starts and completions higher in June 2012 vs. J 2011

Housing Market Situation NAHB Housing Market Index

Housing Starts, Permits (in thousands of units)

June 2011

70

80

2 000

2,500( )

50

60

1,500

2,000

30

40

1,000

10

20500

002005 2006 2007 2008 2009 2010 2011 2012

Housing Starts Housing Permits NAHB Housing Market Index

Source: U.S. Census Bureau, National Association of Home Builders

Housing Starts Housing Permits NAHB Housing Market Index

11

State profile- Pennsylvania

• State job growth decreased 0.2% in August 2012 from a year ago; j g g y g ;national job growth rose 0.2%

• State unemployment averaged 8.1% in August 2012; the national 8 1%average was 8.1%

• Per PBJ on September 21, 2012, 12,000 PA. Companies are exporters nearly 90% are small midsize companies with fewer thanexporters, nearly 90% are small-midsize companies with fewer than 500 employees.

• Penna Collected $2 4B in General Fund in September which was• Penna. Collected $2.4B in General Fund in September, which was $44 million above estimates. YTD September 2012 was $60 Billion, which is $10.7 million above estimates.

• Exports rose 1.0% to $20.5 billion in the first four months of 2012 pfrom a year ago.

• Venture capital investments in PA increased by 34 deals in the 2nd

Q t d t 44 d l i 1st Q t 2012 ($175 7 illiQuarter compared to 44 deals in 1st Quarter 2012 ($175.7 million compared to a year ago).

12

Demographics and key findingskey findings

• Report released September 12• Report released September 12

• 924 total participantsp p- 554 Manufacturers

370 Di t ib t- 370 Distributors

- 42 PA respondents

• 77% private or closely held businessesMostly CEO’s and CFO’s- Mostly CEO s and CFO s

• 12% private equity-owned businesses

14

Topics covered in the McGladrey 2012Manufacturing & Distribution Monitor

• Business conditionsBusiness conditions

• Sales

• New products and services

• Workforce

I t• Inventory

• Process improvementsProcess improvements

• Information technology

15

The number of thriving and growing companies remained steadycompanies remained steady

56%

16Source: 2012 McGladrey Monitor

Thriving and growing:Manufacturing and distributionManufacturing and distribution

42%

53%53%

6%

PA Respondents


Thriving companies by industry segmentindustry segment

2012 2011* 2010 2009 2008

Food and Beverage

Energy and Cleantech

Transportation

Automotive (OEM and Aftermarket)

Biotech, Life Sciences and Medical Equipment/ Supplies

Food and Beverage

Computers, Electronics and Electrical Components/ Appliances

Metal Fabrication

Industrial and Commercial Machinery

Aerospace

Furniture and Fixtures

Chemicals, Petroleum and Plastics

T til A l d A i

Building Materials

Wood/Paper Products and Printing

p


0% 10% 20% 30% 40% 50% 60% 70%

Textiles, Apparel and Accessories

Industrial and Commercial Sector in biggest declineSector in biggest decline

Industry Sector Thriving in 2011 Thriving in 2012Industry Sector Thriving in 2011 Thriving in 2012Aerospace ‐ 34%

Automotive (OEM and Aftermarket) 57% 45%

Biotech, Life Sciences and Medical Equipment/Supplies 38% 45%

Building Materials 24% 28%

Ch i l P t l d Pl ti 48% 40%Chemicals, Petroleum and Plastics 48% 40%

Computers, Electronics and Electrical Components/Appliances 52% 41%

Energy and CleanTech 41% 48%Energy and CleanTech 41% 48%

Food and Beverage 44% 47%

Furniture and Fixtures 17% 34%

Industrial and Commercial Machinery 63% 43%Metal Fabrication 47% 41%

Textiles, Apparel and Accessories 29% 16%

20% Decrease

19

Transportation Equipment 52% 50%

Wood/Paper Products and Printing 25% 29%

Business optimism and the outlook for growthoutlook for growth

World Economy dropped 33%

U.S. Economy dropped 15%

dropped 33%


Business optimism by PA respondentsrespondents

All Respondents PA Respondents

84%Your Company

All Respondents PA Respondents

60%

86%

71%Your Industry

Your Company

61%

60%

57%BRIC Countries Economy

41%47%U.S. Economy

14%17%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

World Economy

21Source: McGladrey 2012 Distribution Monitor

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Corporate objectives in the next 12 monthsnext 12 months


Taxes pose a major concern


Thriving and growing companies expect increases in salesexpect increases in sales

U.S. sales increase by business condition (averages) Non-U.S. sales increase by business condition (averages)y ( g ) y ( g )


Increase expectations in U.S. sales by industry sectorsales by industry sector

Percent increase expected over next 12 months

12.2%

9.6%

Biotech, Life Sciences and Medical Equipment/ …

Transportation Equipment (other than Aerospace …

9.4%

8.8%

8.8%

Food and Beverage

Building Materials

Chemicals, Petroleum and Plastics

8.7%

8.7%

8 4%

Energy and Cleantech

Industrial and Commercial Machinery

Computers Electronics and Electrical 8.4%

8.3%

8.1%

Computers, Electronics and Electrical …

All Responses

Metal Fabrication

7.4%

7.0%

6.6%

Automotive (OEM and Aftermarket)

Wood/Paper Products and Printing

Aerospace

25

6.2%

6.0%

p

Furniture and Fixtures

Textiles, Apparel and AccessoriesSource: 2012 McGladrey Monitor

Importance of new products and services to company growthservices to company growth


Cost expectations over the next 12 monthsnext 12 months


Inventory level changes


Inventory level changes for PA respondents in the next 12 monthsp

44%45%

50% PA Respondents

29%30%

35%

40%

15%20%

25%

30%

7%

15%

5%5%

10%

15%

0%

5%

Decrease11% or >

Decrease1-10 %

No Change Increase1-10 %

Increase11% or >


Strategies to maintain margins


Approximate percentage increase in sales prices in next 12 monthssales prices in next 12 months


Net income is expected to increaseto increase


Capital expenditure changes in the next 12 monthsin the next 12 months

Information technology is the biggest ggtarget for all companies

33

Source: 2012 McGladrey Monitor

Most midsize companies likely to increase workforcelikely to increase workforce

• Two thirds of companies (67%) are expected to increase employment levels- 67% 2012 vs. 56% in 2011- Private equity companies are most likely to increase hiring (76%)- 85% of T&G companies plan to increase workforce where 42% of

declining companies plan to reduce workforce34


Finding skilled talent

35


Companies are attempting to address the skills gapaddress the skills gap

36


Skills Gap Initiative: The Manufacturing InstituteThe Manufacturing Institute

State OrganizationState Organization

Alabama Business Council Of Alabama

Arizona Arizona Chamber of Commerce and Industry

Arkansas Arkansas State Chamber of Commerce

California California Manufacturers and Technology Association

Connecticut Connecticut Center for Advanced Technology &Connecticut Business and Industry Association

Florida Manufacturers Association of Florida

Illinois Illinois Manufacturers Association &Tooling and Manufacturing Association

Indiana Conexus &Indiana Manufacturers Association

Iowa Iowa Association of Business and Industry

Kentucky Kentucky Association of Manufacturers

37

Kentucky Kentucky Association of Manufacturers

Michigan Michigan Manufacturers Association

Skills Gap Initiative:The Manufacturing InstituteThe Manufacturing Institute

Minnesota Minnesota Chamber of Commerce

Mississippi Mississippi Manufacturers Association

Missouri Missouri Association of Manufacturers &Missouri Chamber of Commerce and Industryy

Nevada Northern Nevada Development Authority

New York Manufacturers Association of New York/MACNY

North Carolina North Carolina Chamber of Commerce

Ohio Manufacturing Advocacy and Growth Network &The Ohio Manufacturers Association

Pennsylvania Manufacturers Association of South Central Pennsylvania

South Carolina South Carolina Chamber of Commerce

Tennessee Chattanooga Regional Manufacturers Association

Texas San Antonio Manufacturers Association

Washington Association of Washington Business &

38

Washington Association of Washington Business &Impact Washington

Wisconsin Wisconsin Manufacturers and Commerce

Process improvements


Use of business analytics by senior leadership by business conditionleadership by business condition


Social media


Perception of information and data risksdata risks


Best practices of thriving and growing companiesgrowing companies

• Have increased and plan to increase U S and non-U S salesHave increased and plan to increase U.S. and non U.S. sales

• Corporate objectives are all about infrastructure

• Plan to use the following sales strategies to drive growth:

- Increased penetration in existing markets p g

- New customer segments

New products and line extensions- New products and line extensions

• Hiring talent by proactively addressing skills gap

• Have a mature continuous improvement culture

• Annual investment in R&D is higher compared to others• Annual investment in R&D is higher compared to others43


Corporate objectives of thriving and growing companiesand growing companies


Best practices of thriving and growing companiesgrowing companiesCompanies that indicated they were thriving and growing plan to use the following sales strategies to drive growth and think that they are “important” or “extremely important”

• Increased penetration in the existing markets • New customer segments g• New products & line extensions

100%

70%80%90%

77% 75%85% 80%40%

50%60% Declining

Holding SteadyThriving & Growing

10%20%30% All Respondents


0%Sales Strategy: Increase Penetration


• Increased penetration in the existing markets • New customer segments • New products & line extensions

90%

100%

60%

70%

80%

90%

D li i

62%%

40%

50%

60% DecliningHolding SteadyThriving & GrowingAll Respondents58% 58% 62% 59%

10%

20%

30% All Respondents


0%Sales Strategy: New Customer Segments


• Increased penetration in the existing markets • New customer segments • New products & line extensions

90%

100%

60%

70%

80%

90%

D li i

61%%

40%

50%

60% DecliningHolding SteadyThriving & GrowingAll Respondents

51% 53%61% 55%

10%

20%

30% All Respondents


0%Sales Strategy: New Products/Line Extensions

Continuous improvement at thriving and growing companies

Thriving businesses are more likely to have a mature CI culture

thriving and growing companies

g y


R&D initiatives of thriving and growing companiesgrowing companies

Annual investment (as a percentage of sales) into R&D/development by businessAnnual investment (as a percentage of sales) into R&D/development by business condition (average)


Experience the power of being understood.SM

I dditi t th k fi di tli d i thiIn addition to the key findings outlined in this presentation, results from the 2012 McGladrey

Manufacturing and Distribution Monitor can be found at

http://www.mcgladrey.com

Manufacturing and Distribution Monitor can be found at

50

Open Discussion- Q&A

Questions?Questions?

51

Contact me

Paul MarvelPaul MarvelMcGladrey LLPAssurance Practice LeaderAssurance Practice [email protected]

52

2012 manufacturing & distribution monitor 10-4-12.pdf · united kingdom $ $60,842 $63,992 $, it...

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