The 2015 Manufacturing RiskFactor Report examines the risk factors in the most recent 10-K filings of the largest 100 publicly traded U.S. manufacturers across five sectors including fabricated metal, food processing, machinery, plastics and rubber and transportation equipment. The factors were analyzed and ranked by order of frequency cited.
Every year, manufacturing contributes more than $2 trillion to the American economy, according to NAM (National Association of Manufacturers). It is also estimated that for every dollar spent in manufacturing, $1.37 is added to the economy, giving the industry the highest multiplier effect of any economic sector. In the midst of resurgence, the industry has the potential to provide immense opportunity for the American economy and workforce if it can continue to evolve in response to rapidly changing regulatory, economic and technological landscapes. Doing so will, however, require determination, innovation and management of rising risks.
As the manufacturing industry grows, concern over the widespread talent shortage is escalating. Ninety-eight percent of manufacturers mentioned risks related to labor, up from 97 percent in 2014 and 75 percent in 2013.
Manufacturers face a one-two punch of a struggle to attract workers coupled with the approaching retirement of much of the talent on the factory floor and in the C-suite. The U.S. Census Bureau estimates that by 2030, more than 20 percent of Americans are projected to be aged 65 and over, compared with 13 percent in 2010 and 9.8 percent in 1970. As leading innovators and strategists reach retirement, 74 percent of manufacturers mentioned concerns around attracting, retaining and motivating key personnel and management, up from 69 percent in 2014 and 62 percent in 2013.
With many jobs to fill now and in the future, manufacturers and their employees feel the pinch to simultaneously execute business strategy and create next-generation product. Risks related to the implementation of corporate strategy are mentioned by 91 percent of manufacturers, up from 82 percent in 2014 and 74 percent in 2013. Continued product innovation is also a growing risk, mentioned by 85 percent of manufacturers, up from 78 percent in 2014 and 69 percent in 2013.
Supply Chains Are Only As Strong As Their Weakest Link
Supply chain concerns, including disruptions or issues from suppliers and vendors, remained the most-cited risk for manufacturers for the second year in a row, mentioned by 100 percent of manufacturers. It should come as no surprise, given that manufacturers’ supply chains were put through their paces with this year’s West Coast port strike, as well as record-breaking snowfall on the East Coast, among other extreme weather conditions. According to CNN, the West Coast port strike cost the economy approximately $2.5 billion dollars per day.
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This article originally appeared in BDO USA, LLP’s 2015 Manufacturing Riskfactor Report – July 2015. Copyright © 2015 BDO USA, LLP. All rights reserved. www.bdo.com.