Going into 2018, Colorado manufacturers have many reasons to be optimistic. The overall economy remains robust, and the state continues to be strong in manufacturing. However, according to the 2018 National Manufacturing Outlook and Insights report, based on a survey conducted by EKS&H in conjunction with Leading Edge Alliance, leaders’ positive outlooks are tempered by some ongoing barriers. Here is a closer look at findings in the report, possible explanations of the outcomes, and suggestions to help manufacturers make smart decisions in 2018.

Optimism about the economy

The report revealed that Colorado manufacturers are considerably more optimistic about the regional economy than about that of the nation and the world. Further, Colorado manufacturers are more optimistic about Colorado than leaders in other regions are about those regions.

Figure 1: Optimism about various economies for 2018

Contributing factors:

  • Colorado overall has seen a strong recovery from the Great Recession, and its economy is doing objectively well compared to other regions.

  • Many news stories and articles about workforce initiatives have appeared within manufacturing, highlighting the industry’s need for additional workers and pointing to the industry’s success.

Recommendation: Rather than making decisions based on these or any other results, companies should look at their own key performance indicators to determine which regional, national, or global trends might be most impactful in the new year.

Priorities for 2018

According to the report, growing sales is the top priority for Colorado manufacturers for 2018. Diverging from the national trend, developing new products and services is a priority for nearly 60 percent of Colorado manufacturers, but for only 40 percent of manufacturers nationally.

Figure 2: Top priorities for 2018

Contributing factors:

  • Given the optimism about the local economy described above, Colorado companies may view future sales growth as a natural result.

  • The push for sales growth could be the impetus for developing new products and services for potential new markets.

Recommendation: Developing new products and services is one way to push sales growth, but companies should remember to balance the costs of R&D with prudent projections. Leaders may want to consider whether something entirely new is really needed, or if customers would just as likely respond to a new spin on existing offerings.

Opportunities to grow sales

Overwhelmingly, Colorado manufacturers see their main opportunity to grow sales as being organic growth within the U.S., 86 percent, compared to 72 percent nationally. The second-most selected opportunity was new product or service development (46 percent).

Figure 3: Main opportunities to grow sales in 2018

Contributing factors:

  • Many Colorado companies develop products that are more appropriate for increasing sales within the U.S. rather than outside it. For example, the booming brewery industry expands its market by shipping to more states each year.

  • A large percentage, 29 percent, of Colorado respondents plan to invest at least 5 percent of sales into new product research and development in 2018. This is higher than the national result of 20 percent.

Recommendation: Manufacturing leaders should look at their own offerings and determine the most appropriate avenues for growth. For some companies, it will be sales in new geographies; for others, it will be new markets or strategic alliances with other companies to expand their reach.

Staffing strategies

A total of 60 percent of Colorado manufacturers expect hiring to increase in 2018, compared to 54 percent of manufacturing companies nationally. The top strategies identified by Colorado respondents to meet rising staffing needs are increased compensation (65 percent) and internal training programs (65 percent). These strategies were also at the top of the list for manufacturing companies nationally; notably, however, nationally only 42 percent of manufacturers identified internal training programs.

Figure 4: Critical strategies for meeting staffing needs

Contributing factors:

  • Because of the robust economy in Colorado, manufacturers need incentives to attract workers. Yet, salary can’t be the only draw, so companies are looking for less costly perks to offer.

  • Many Colorado companies have already successfully applied the “make instead of buy” model to staffing by instituting effective internal training programs.

Recommendation: Colorado companies can take advantage of the state’s support of internship programs. Additionally, they might want to seriously consider some of the staffing strategies that are popular nationally, such as more deliberate succession planning and increased over-time use.

Barriers and risks

Both Colorado-based and national manufacturers indicated that labor/talent (57 percent for Colorado respondents and 55 percent for national respondents) and competition (40 percent for Colorado respondents and 42 percent for national respondents) would be their top barriers to business growth in 2018.

Figure 5: Expected barriers and risks to business growth

Contributing factors:

  • The labor shortage for the manufacturing industry is a natural outcome of Colorado’s strong economy and plenty of available jobs.

  • Competition is particularly fierce among Colorado manufacturers in booming markets, such as brewing and other food and beverage.

Recommendation: Colorado manufacturing leaders should be proactive by thinking about their key success factors and planning ahead for things that could prevent them from happening. For example, supply chain concerns can be mitigated by identifying local backup sources wherever possible.

Conclusion

Manufacturing success involves a complex set of variables for companies in Colorado and nationwide. With many positive developments in 2018 will come challenges (e.g., the strong economy leading to a talent shortage) and vice versa (e.g., greater competition leading to more innovation). To move forward with confidence, leaders should be clear-eyed about success factors versus threats within the industry and, more importantly, within their own organizations.

View the entire 2018 National Manufacturing Outlook Survey Report.

EKS&H helps manufacturers with a range of issues, from accounting to tax and audit, to technology and talent. To find out more about how EKS&H can help your manufacturing company navigate today’s challenges, contact Audit Partner Chris Otto at 970/282-5400 or cotto@eksh.com.

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