2013 Manufacturing Trends Survey: Labor, not Energy, the Concern in 2013

While economic uncertainty remains, respondents expect more growth.

By David Phillips, Plant Operations Editor

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Manufacturing Trends 2013

Labor issues are of greater concern to food manufacturers as they enter 2013 – but not as important as cost control and food safety – while worries about energy cost escalation have all but disappeared (that was a surprise). Manufacturers are a bit less optimistic than they were at this time last year (or in the past three years, for that matter), yet more plant operations executives foresee production increases of 20 percent or more and additions to their workforces.

Those are some of the results of Food Processing's 12th annual Manufacturing Trends Survey. Invitations went out in November for the web-based survey. We had 249 total respondents, up from 205 last year.

Safety first

Each year the survey asks food processors to rank 10 pre-selected major concerns. As has always been the case, food safety ranks No. 1. This year 59 percent of respondents indicated this was their most important concern, up slightly from 53 percent last year. No surprise really, when one considers the catastrophic results of not prioritizing food safety. In second place for the second year is cost issues, with 27 percent naming it their top concern for the year (down 3 points from last year).

What's more interesting is how our respondents rank the other eight concerns. Last year, inspections and certifications came in third with 21 percent of the vote, but this year that vote fell to 10 percent – apparently most companies earned their Global Food Safety Initiative certificates last year. Instead, labor moved up to third place with 11 percent, about the same as last year. Sourcing and materials also won a 10 percent vote (totals exceed 100 percent because respondents could select more than one top priority).

Energy concerns recorded the biggest drop in first-place votes, from seventh place to dead last (10th) in the rankings this year – although it had higher second, third, etc. votes than most other concerns. So using a weighted scoring method, its 5.7 point score was in sixth place, higher than environmental concerns, automation, water issues and consolidation challenges. But still lower than its overall ranking last year.

We also asked voters to tell us about major concerns they did not find in our top 10 list. Among the responses were issues such as accurate forecasting for expansion, commodity price volatility, availability of raw materials, transportation costs, matching capacity with demand and implementing lean manufacturing. The Food Safety Modernization Act also was a concern for "lack of clarity in what the regulations will require and how some companies are anticipating and reacting to that lack of clarity." Another food processor pointed to the weather: "Our biggest concern now is the effect of the Midwest drought and how that will affect supply and price of our ingredients."

A long way to go?

We reworded our question about dealing with the economy. Last year we asked only if you were growing (45 percent said yes). This year, we split that response and found 12 percent "growing fast" and another 47 percent "growing slowly" – that adds up to 59 percent growing at least some. However, 27 percent were turning to staff reductions and salary cuts to deal with the lingering difficulties, and more than 12 percent indicated plant closings and consolidations. About 10 percent were outsourcing to save money.

Looking forward, most of those who took the survey say they expect to add to their employee ranks (37 percent) or maintain staff levels (41 percent), compared to around 14 percent who plan to further reduce staffing either actively or passively. That compares favorably with last year, when 18 percent were bracing for staff reductions and just 28 percent had planned on new hires.

Asked about plant production forecasts for 2013, 19 percent foresee increases of 20 percent or more, up significantly from 11 percent last year and 16 percent the year before. Altogether, 72 percent expect at least some increase in production at their own facility this year – within a percentage point of last year – while only 7.6 percent are planning for a decrease.

When asked about the production outlook for their entire company, 32 percent of respondents expect their company to expand the number of manufacturing facilities this year, up significantly from 23 percent the year prior. Just 12 percent (roughly matching last year's number) said they expect their companies to consolidate this year.

While these numbers are encouraging, respondents were cautious about their optimism. When asked "How do feel going into 2013?" only 60 percent express optimism, down from 63 percent last year and 66 percent in both 2011 and 2010.

As for salaries, just 4 percent of those surveyed anticipate a decrease, while 41 percent expect salaries to increase. A year ago, a similar number planned on payroll increases but a higher percentage (5.6 percent) expected to trim salaries.

Capital spending may be in for a drop in 2013. 35 percent of respondents say they will spend more this year than they did in 2012, whereas 47 percent expected to spend more last year at this time. This year 10 percent have trimmed their Capital Expenditure budget by some measure.

Also, 35 percent report they have delayed capital spending projects in the past year due to the economy. That is up from 32 percent a year ago, but not as drastic as 2011, when a full 45 percent hit the brakes on capital projects.

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