Friday, June 27, 2014

Recent Study Cites Competition as Top Concern for Michigan Manufacturers

BDO USA, LLP, in a press release dated June 17th, highlighted results from the 2014 Manufacturing RiskFactor Report.* 100% of the publicly traded U.S. manufacturers HQ in Michigan cited Industry competition, consolidation, and pressure on pricing as the #1 risk factor keeping them up at night. This puts it ahead of all other identified risk factors, including general economic conditions, U.S. and foreign supplier/vendor concerns and a commonly recurring cited risk of Federal, State and/or local regulations.

There are some pretty interesting comments from the original press release including a clear focus on rebuilding the U. S. manufacturing industry, making it well worth reading. "As the manufacturing industry undergoes a renaissance in the U.S., Michigan continues to be a state poised to benefit from the growth," said Fred Rozelle, Detroit-based regional managing partner and member of the BDO Manufacturing & Distribution practice. "But that is not without its challenges. Manufacturers will contend with strong competition as well as regulatory and labor challenges."

2014 Rank
Risk Factor Cited in 10-K Filing
2014
1
Competition and consolidation in manufacturing
100%
2
General economic conditions
97%
3
Federal, State and/or local regulations
94%
4
U.S. and foreign supplier/vendor concerns and distribution disruptions
88%
4t
Currency/Foreign exchange fluctuation
88%
6
Less demand for products
85%
6t
Threats to International operations
85%
6t
Management of mergers and acquisitions
85%
6t
Legal proceeding
85%
10
Restrictive international trade policies
79%
11
Environmental laws, regulations and liability
76%
11t
Commodity/raw material prices
76%
11t
Access to capital
76%
11t
Labor concerns; underfunded pensions
76%
11t
Failure to properly execute business strategy
76%
16
Intellectual property violations/challenges
74%
16t
Product quality issues/recalls
74%
16t
Health of the major industries they serve
74%
19
Ability to innovate to meet changing customer needs
68%
20
Loss of key management/new management
65%
*risk factors are analyzed and ranked according to frequency cited, based on risk factors expressed in the most recent 10-K filings of the largest 100 publicly traded U.S. Manufacturers across five sectors, including fabricated metal, food processing, machinery, plastics and rubber, and transportation equipment. A t indicates a tie in the risk factor ranking.

While Michigan’s small and medium sized enterprises (SMEs) may not cite these risk factors as frequently, there are some that are worth noting. Many, such as general economic conditions and regulatory environments are largely outside of a manufacturer’s control. There are some, like commodity prices or access to capital, which may actually be of greater concern to an SME. However, there are others that may provide Michigan SMEs with an advantage. When it comes to innovating to meet changing customer needs, an SME may be more agile and better equipped to accommodate a design or material change.  

Michigan’s cluster of new product contract manufacturers are a great example of a nimble group of companies ready to launch new-design products quickly, bringing new product concepts to market. Several were featured at our Third Annual Proud to Manufacture in Michigan conference earlier this month.

Understanding your core efficiencies, adding design and material capabilities, identifying and implementing a business strategy that helps diversify your customer base, all these things can help alleviate Michigan SME’s exposure to risk factors and better condition them to withstand industry and economic ambiguity.

MMTC has many tools that can help. For more information, click here or contact us at inquiry@mmtc.org

Have thoughts on Risk Factors for Michigan's Manufacturers? Share them in the comments below. 

Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.

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