According to a report by Umpqua Bank, the majority of manufacturing executives across the country are focused on efficiency to drive profitability in the next year. Plans to increase efficiency include programs to continue to digitalize areas of the business, invest in tools to further protect their payments systems, which will also improve cash management, and to enhance automation — the number one priority to manage potential revenue challenges.
These insights are part of a nationwide survey of small and middle market companies across the United States conducted by Umpqua Bank as part of its annual 2023 Business Barometer report.
According to manufacturing leaders surveyed, 68% plan to find ways to digitize new areas of their business, 70% plan to invest in tools to protect payments systems, and 23% are likely to further enhance automation. Additionally, 79% expect to make significant changes to their lines of products and services and pricing models over the next 12 months to improve profitability.
"Manufacturing businesses are among the most resilient, and the results of the Umpqua Bank Business Barometer study show they continue to stay focused on managing their efficiencies and profitability to remain competitive," said Richard Cabrera, Umpqua's head of middle market banking. "Regardless of the headwinds, they are optimistic about their abilities to take on the challenges ahead and more confident to invest in their businesses than a year ago."
The survey findings also reveal the onshoring trend continues. More than 6 in 10 leaders, who want more control over their supply chains, indicate it is very or somewhat likely they will bring manufacturing or supply chains back to the United States in the next 12 months. The research also found that 42% are very or somewhat likely to increase their commercial real estate footprint in the year ahead.
Furthermore, nearly half of the middle market businesses (49%) surveyed across industries have already brought supply chains or manufacturing back to the U.S. in the last year. Another 57% indicate they will likely continue that trend in the year ahead. When asked why, the top three responses were that it’s more profitable, it gives them increased control, and it’s the best opportunity to grow business.
In terms of economic sentiment, 59% of manufacturing leaders think current economic conditions in the U.S. are excellent, and 69% expect their revenue to increase. 64% also believe economic conditions will further improve in the next year, compared to 56% of healthcare and 55% of agriculture business leaders. Moreover, almost half of respondents expect demand for their products or services to increase this quarter into 2024.
Although more than half of manufacturing executives are optimistic about their prospects, they are especially focused on managing their company's profitability. 88% of manufacturing executives report prices of goods have gone up and 65% had to source materials in different ways in the last 12 months. As a result, 73% report having raised prices on their products and services. The most popular actions taken to control these prices included, adding new goods or services with higher profit margins, raising prices, increasing efficiencies through automation, leveraging artificial intelligence to analyze data and support decision-making, and cutting costs of goods sold.
According to respondents, top concerns for the industry are inflation, potential recession, talent acquisition and retention, and effects of climate change. Inflation continues to be one of their top challenges, while climate change moved up as a top concern and is almost at the same level as staffing challenges this year.
On behalf of Umpqua Bank, DHM Research conducted an online survey of 1,250 owners, executives, and financial decision-makers of U.S. small and middle-market companies during July 27 to August 8, 2023. 22% of middle market respondents are minority-owned, while 23% of small respondents are certified woman-owned and 17% are minority-owned. The margin of error is ±2.8%.
To learn more, visit www.umpquabank.com.