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A new survey shows optimism among manufacturers who believe that the new administration will reduce regulations and positive market trends will continue.

In this age of increasing machine internet connectivity, the survey also unearthed potential cyber vulnerabilities

April 11, 2017…Despite current uncertainty about how the political battles raging in Washington will ultimately shape sectors including healthcare and education, Greater Philadelphia’s manufacturing leaders remain optimistic about the economy. This optimism stems in part from a belief that the new presidential administration will lessen regulations and that recent positive market trends will continue, Kreischer Miller’s 2017 Greater Philadelphia Manufacturing Survey finds.

Sixty-six percent of the 101 manufacturers who responded to the survey felt some level of optimism, up from 60 percent last year. Pessimism dipped from 16 percent to 5 percent. The source of this optimism mostly comes from outside the plant walls: Nearly two-thirds indicated the Trump administration will have a positive impact on the overall economy and on their business. The mood locally lines up with national and regional trends.

While the manufacturers predict growth, they also report hurdles in the way of achieving it. These industry leaders, from middle market companies across many sectors, are on the frontlines of a manufacturing renaissance fueled by innovations in automation and technology.  This new type of manufacturing requires a new type of labor force, and there is increasing concern about the lack of qualified workers – 41 percent versus 28 percent in last year’s survey.

New advantages, new risks

The 2017 survey spotted a modern manufacturing challenge to which survey respondents may want to pay more attention: Cyber security.  The machines on the plant floor are more and more often connected to the internet. While nearly half of respondents’ companies provided data security training for employees last year, a majority did not conduct any type of vulnerability assessments of their information security capabilities. And 80 percent did not conduct any disaster recovery or business continuity reviews or testing.

“We are in a period of great change in manufacturing, and that comes with previously unconceivable possibilities and opportunities, but also significant unanticipated challenges,” said Kreischer Miller Audit & Accounting Director and Manufacturing Industry Group Leader Michael A. Coakley.

Modern manufacturers would be wise to make cyber security plan review a routine part of doing business, said Kreischer Miller Technology Solutions Director Sassan S. Hejazi, PhD. “Joining a shop floor to the Internet of Things can yield tremendous gains in efficiency without human guidance,” he said. “Unfortunately, there are human beings who are ready to exploit that internet connection to steal data.”

Reasons for the qualified worker problem, and possible solutions

The lack of qualified workers is an ongoing problem that the region’s manufacturers have consistently identified in the Kreischer Miller survey. “False but persistent negative imagery about manufacturing keeps some young people away from choosing to pursue a career in the industry,” Coakley said. “Add to that technological advances in equipment and processes, as well as an aging workforce, and the result is more skilled labor positions available than there are workers to fill them.”

In an effort to reverse this trend, local companies are increasing their efforts to educate students in the region about manufacturing careers. One such initiative is the student video contests sponsored by the region’s manufacturing alliances through the “Dream It. Do It. PA” partnership, pairing manufacturers with middle schools and high schools to answer the question “What’s So Cool About Manufacturing?”

Other key findings

  • Growth: Sixty-six percent of respondents said their main growth opportunity over the next 12 to 18 months is increasing market share or organic growth. Fifteen percent hope to grow by adding new products. Notably, the number of local manufacturers planning on growing via merger, acquisition or alliance was down 11 points, from 23 percent last year to 12 percent this year.
  • International business: About 75 percent of respondents have some export sales, but for nearly two-thirds, international sales account for 10 percent or less of total sales. 75 percent say they do no manufacturing outside the U.S.

Methodology

A 33-question survey was distributed electronically to middle market manufacturers in Greater Philadelphia – southeastern Pennsylvania, southern New Jersey, and northern Delaware. The survey was conducted from mid-November 2016 through early-January 2017. The 101 respondents included privately-held (90 percent) and public companies (10 percent).

Based, in Horsham, PA, Kreischer Miller is one of the leading accounting firms serving manufacturers in the Greater Philadelphia and Lehigh Valley areas. Our experience with a diverse range of organizations—from smaller, local manufacturers to large, Fortune 500 companies with national and international operations —gives us the background and depth to understand the challenges and opportunities that face the industry. Kreischer Miller is also a member of the Manufacturing CPAs, a nationwide network of independent accounting firms specializing in serving the manufacturing industry. Learn more at www.kmco.com.

Note to editors: For a copy of the survey or to interview participants, contact Leza Raffel at Leza@comsolutionsgroup.com or 215-884-6499.



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