While recent research suggests that there is still more to do, it is clear that the US manufacturing sector has made great strides in leveling the global playing field. For small and midsize manufacturers (SMBs) the competitive environment has always been intense, but advanced technology is increasingly making a difference for firms looking to improve productivity and compete on a global scale.
The renewed strength of the US manufacturing sector in general has been shared by both small and midsized manufacturers, although not all firms have benefited. Coming off the Great Recession, and the decade long shift in manufacturing to lower cost labor geographies, US manufacturers seemed at a major disadvantage in competing in an increasingly global market. In response, manufacturers of all sizes sought ways to increase the value they provided to current customers while expanding in to global markets. In fact a new trend of "reshoring" has major companies expanding their manufacturing resources and contractors in the U.S. rather than in the Far East. Factors encouraging this trend include easier access to the domestic US market, appealing energy prices (especially natural gas), and what has been called "a very lightly regulated labor market."
A closer look at SMB firms in the manufacturing sector shows a "tale of two segments," with some firms thriving in the new environment while others having a more difficult time. IDC's just completed US SMB survey, which included 65 manufacturers, showed a divide among firms in terms of both success and level of technology investment. SMBs in general cited strong revenue growth over the past 12 months, but manufacturers indicated more mixed performance. While 24% of SMBs in general indicated revenue growth of 10% or more over the previous 12 months, 37.5% of SMB manufacturer indicated that same level of growth. On the flip side, though, while only 10.6% of SMBs in general cited lower revenue over the past 12 months, that percentage was more than four times greater (46.6%) among SMB manufacturers. While revenue declines were typically less than 10%, it is still clear that not all manufacturers are benefitting from better economic times. In fact, when we asked if firms agreed that today's increasingly competitive environment represented more challenge than opportunity, 53.1% of SMB manufacturers agreed (6 or 7 on a 7-point agreement scale) compared to just 8.5% of SMBs overall.
Business goals show where SMB manufacturers are looking to go. Two-thirds (67.6%) cite improving business efficiency and productivity as a key business goal for the next 12 months, compared to 43.0% of SMBs in general. Geographic expansion is also a key goal for SMB manufacturers, cited by 48.4% of firms, compared to 8.3% of SMBs over all. And in keeping with improving productivity, 25.6% of SMB manufacturers cite improving mobile worker enablement and management as an important business goal, compared to 7.8% of SMBs in general.
Technology attitudes also suggest that SMB manufacturers (at least a significant share of them) recognize the key role that technology can play. Over half (53.1%) agree that advanced technology is an important competitive tool to help differentiate themselves. Just over one third of all SMBs (36.6%) have the same level of agreement. It is no surprise, therefore to find that SMB manufacturers have higher levels of cloud adoption (SaaS in particular) than SMBs in general. In fact, when asked to identify key areas for future technology investment almost half of SMB manufacturers (46.9%) cite online, off-premises resources, compared to 36.6% of SMBs in general.
Of course both cloud and on-premise resources have been actively embraced by SMB manufacturers, especially enterprise resource planning (ERP) and customer relationship management (CRM) software. One-third of SMB manufacturers (35.4%) indicate use of ERP software, compared to 12.8% of SMBs in general. The difference is almost as striking when it comes to CRM, with 30.4% of SMB manufacturers citing use, compared to 17.2% of SMBs in general.
For technology providers looking to capitalize on the SMB market, a focus on verticals with a relatively high share of knowledge workers has made good sense. Increasingly, though, manufacturers are reorganizing themselves into that category. Those small and midsize manufacturers that have had major increases in revenue are not necessarily adding new staff at the same expanding rate. Advanced technology has been providing the kinds of improved productivity that SMB manufacturers actively seek. While this does not create employment opportunities for lesser skilled workers, it does let firms expand capabilities, improve flexibility, and potentially open up new markets. For SMB manufacturers that have not yet stepped up to the next generation of advanced technology the message is clear - the changing competitive environment does represent a threat, but one that can be effectively addressed through updated products and processes in keeping with global markets that are in a state of continuous reinvention.