2010 Manufacturing Trends Survey: The Glass Is Half Full
Optimism grows as managers predict a post-recession rebound. Safety interest continues to rise, followed by more attention to energy, labor and sourcing.
By Bob Sperber, Plant Operations Editor | 01/04/2010
It looks like 2010 is going to be a good year, judging by the responses from the 388 food & beverage manufacturing managers in our ninth annual Manufacturing Trends Survey. Better than we expected, anyway.
An astonishing 68 percent of respondents project some increase in production next year; 16 percent foresee increases of 20 percent or more. Only 8.6 percent expect a decrease. Significant majorities predict maintaining or increasing staffing levels, production lines and salaries. Two-thirds feel optimistic going into the new year.
Of all the issues that mark our 2010 Manufacturing Trends survey, many are perennials. Food safety tops the list of priorities for the ninth year, and a host of operational issues jockey for second place. But it’s the economy that has occupied food and beverage manufacturers’ concerns – and expectations – as processors try to pick their path through the recession and halting recovery.
Two years ago, before the financial meltdown could be predicted, nearly 77 percent of processors surveyed expected a production increase of at least 5 percent in 2008. Last year at this time, even after we dropped the minimum production increase to 3 percent, only 56 percent saw that rise possible. Today, as mentioned, 68 percent anticipate that production will increase by at least 3 percent.
These expectations for production correspond with good feelings for growth at the corporate level: 72 percent say their companies plan to either stay the same size or grow with new plants or expansions.
This point was driven home in last month’s Processor of the Year coverage of Nestlé USA. Allan McIntosh, senior vice president of technical and manufacturing, sees an era of “growth and investment” following years of industry-wide restructuring. He characterized what appears to be broad optimism for realizing "even more potential now to develop our manufacturing operations and deliver improvements in performance than we've delivered over the last 10 or 15 years."
With expectations such as these, it’s no surprise that when managers were asked how they “feel” going into 2010, their attitudes have picked up from a year ago. Last year, 43 percent said they were optimistic about 2009, and 22 were pessimistic. Now, looking to the coming year, 66 percent report feeling optimistic and only 7 percent are pessimistic.
How manufacturers “feel” is no more scientific, but no less significant, than consumer confidence, a key economic indicator valued by economists.
Some belt-tightening permanent
When asked how their companies are dealing with the economy, 37 percent said “we’re growing,” a significant rise from 27 percent last year. Responses generally were split into three groups of companies: those that continue to grow, those that are reducing staff and those that are making no significant changes. Despite the optimism, there still is some constriction:
- 34 percent are undergoing staff reductions vs. last year’s 31 percent.
- 15 percent are closing plants or consolidating, up from 12 percent last year.
- 9.3 report widespread salary cuts, up from 8.4 last year.
In these and other areas, it appears that companies are reacting to economic recession in a delayed manner, or in a way that says “business as usual is over; the belt-tightening is permanent.”
Amid the optimism, staffing and pay issues reveal further belt-tightening. In reporting outsourcing as a means of dealing with the economy, 4.1 percent report production outsourcing to North American contract manufacturers (up from 3.8 percent last year) and 5.9 percent report outsourcing to overseas manufacturers (up from 3.1 percent last year).
At the same time, staffing levels seem to be somewhat optimistic in light of economic uncertainty. Asked about staffing expectations for their facilities in 2010, 48 percent plan to maintain staffing levels; 35 percent expect to add to their workforce and 17 percent plan to reduce the workforce, mainly through attrition.
On pay issues, managers are cautiously optimistic. For this new year, 40 percent expect their facility to maintain salary levels, 35 percent expect increases and only 3.2 percent expect their facilities to cut paychecks. Asking respondents to recall last year, 30 percent saw salary increases and 11 percent saw decreases.
Safety issues still rising
While food safety remained the top-rated issue in our survey, it seems to have taken on greater importance going into 2010. The number of processors giving it top rating hit 60 percent (last year, a change in reporting caused it to get an anomalous 37 percent score), while the issue rated 8.4 on a scale of 10. Labor and sourcing & materials were tied at a 6.5 rating, and energy issues were close behind. Third-party inspections and certifications got the second most first-place votes (18 percent) but a slightly lower aggregate rating (a 6.2 score).
Current activity on the food safety front coincides with requirements by major customers for greater HACCP, third-party certifications and ingredient and product tracking and tracing – including supply chain partner practices. These demands often exceed regulatory requirements.