October 17, 2023 Manufacturers to Invest in Improving Efficiency

These insights are part of a nationwide survey of small and middle market companies across the U.S. conducted by Umpqua Bank.

• Majority of manufacturing leaders poised to make significant changes to products and services and digitize new areas to enhance profitability, efficiency
• 70% likely to invest in tools to protect payments systems

LAKE OSWEGO, Ore. ― Manufacturing executives across the country have efficiency in mind as they look 12 months ahead to drive profitability. They are expected to roll-out programs to digitize additional business areas, invest in tools to further protect their payments systems, which will also improve cash management, and enhance automation ― their number one priority to manage potential revenue challenges.

These insights are part of a nationwide survey of small and middle market companies across the U.S. 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 (67%) 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 U.S. in the next 12 months. The research also uncovered 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 brought supply chains or manufacturing back to the U.S. in the past 12 months. Another 57% indicate they will likely continue that trend in the year ahead. When asked why, the top three reasons are: (21%) more profitable, (11%) increased control, and (11%) 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. They also believe economic conditions (64%) will further improve in the next 12 months, 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.

Other notable insights from Umpqua Bank’s Business Barometer research include:

• Actions to Manage Profitability: Although more than half of manufacturing executives are optimistic about their prospects, they are laser-focused on managing their company’s profitability ― especially given that 88% of manufacturing executives surveyed 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 important actions they plan to take in the months ahead include adding new goods or services with higher profit margins (29%), raising prices (14%), increasing efficiencies through automation of tasks (14%), leveraging artificial intelligence to analyze data and support decision-making (12%), and cutting costs of goods sold (12%).
• Top Areas of Investment: The top areas executives are likely to invest in to bolster their competitive positioning include: (23%) enhanced automation, (13%) purchasing or upgrading equipment, and (14%) new ways to use artificial intelligence.
• Areas of Business Most Crucial to Business Success: Manufacturing business leaders believe the most crucial areas to focus on for business success are (49%) revenue and/or sales, (39%) products and services, (39%) supply chains, and (37%) expanding their market/s.
• Top Industry Concerns: According to respondents, top concerns for the industry are inflation (48%), potential recession (36%), talent acquisition and retention (28%), and effects of climate change (27%). Inflation continues to be one of their top challenges, similar to the 2022 survey, while climate change moved up as a top concern and is almost at the same level as staffing challenges this year.

Methodology

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%.

About Umpqua Bank
Umpqua Bank is a subsidiary of Columbia Banking System Inc., (Nasdaq: COLB) and a premier regional bank in the Western U.S., with offices in Oregon, Washington, California, Idaho, Nevada, Utah, Arizona and Colorado. With over $50 billion of assets, Umpqua combines the resources, sophistication and expertise of a national bank with a commitment to deliver personalized service at scale. The bank consistently ranks as one of America’s Best Banks (ranked by Forbes) and supports consumers and businesses through a full suite of services, including retail and commercial banking; Small Business Administration lending; institutional and corporate banking; equipment leasing; and wealth management. The bank’s corporate headquarters are located in Lake Oswego, Oregon. Learn more at https://www.umpquabank.com.

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