This marks a consistent trend downward over the past year. In March of this year, three quarters of manufacturers rated their optimism at a seven or higher – in line with 2021 ratings that hovered around 75% throughout the year. And in June of this year, 58% rated their optimism at a seven or higher.
manufacturers rated their optimism about business prospects over the next six months at a seven or higher on a scale of one to 10. This marks a consistent trend downward over the past year. In March of this year, three quarters of manufacturers rated their optimism at a seven or higher - in line with 2021 ratings that hovered around 75% throughout the year. And in June of this year, 58% rated their optimism at a seven or higher.
The manufacturers attributed a range of factors to their decline in optimism, with the looming economic recession being the most frequently named - 77% of survey respondents described it as a significant issue. Additionally, 62% of manufacturers named rising interest rates a contributor to their declined optimism, and 53% cited supply chain issues. Further, 46% of smaller manufacturers, companies with less than $50 million in revenue, described labor shortages as a challenge - though less than one third of companies with more than $50 million in revenue cited labor shortage challenges.
"While manufacturers are facing obstacles from many directions today, it is a resilient industry and I am confident business leaders can successfully navigate these challenges," said Jerry Murphy, partner-in-charge of manufacturing and distribution services at Sikich. "A focus on long-term strategies will be paramount to success. By implementing automation, companies can weather economic storms and continued labor shortages."
Factory floor automation is a priority
Manufacturers are considering a few different strategies to protect their companies from the recession. If needed, more than half (51%) would keep less inventory on hand, 39% would diversify their materials suppliers and 34% may freeze hiring.
And when it comes to automating, companies are focused on the factory floor. When asked which department in their company is currently implementing the most automation, 40% cited the factory floor. And, when asked which department manufacturers are planning to implement automation, an additional 22% named the factory floor. Further, two-thirds of respondents that currently implement the most automation on the factory floor are planning to double down and pursue more automation moving forward.
"Automation will reap long-term benefits for the manufacturers that invest in these systems," said Debbie Altham, senior director of enterprise technology at Sikich. "In addition to the factory floor, manufacturers should consider how automation can streamline back-office efforts - including finance, marketing and human resources. These tools will allow manufacturers to overcome labor challenges, implement more efficient processes, and eliminate errors."
Sikich surveys manufacturers and distributors multiple times throughout the year on a range of business topics to create industry benchmark data. In October, Sikich surveyed more than 120 executives from manufacturing and distribution companies across sectors including industrial equipment, wholesale and distribution, metal fabrication, food and beverage, apparel, footwear and textiles, and transportation. View the latest Sikich Industry Pulse: Manufacturing and Distribution report here.
About Sikich LLP
Sikich LLP is a global company specializing in technology-enabled professional services. With more than 1,500 employees, Sikich draws on a diverse portfolio of technology solutions to deliver transformative digital strategies and ranks as one of the largest CPA firms in the United States. From corporations and not-for-profits to state and local governments and federal agencies, Sikich clients utilize a broad spectrum of services* and products to help them improve performance and achieve long-term, strategic goals.
*Securities offered through Sikich Corporate Finance LLC, member FINRA/SIPC. Investment advisory services offered through Sikich Financial, an SEC Registered Investment Advisor.