To say that times are good for Minnesota manufacturers would be an understatement. 

Manufacturers have a high level of optimism when it comes to revenues, profitability, level of investment in their companies, and wages, according to Rob Autry, president of Meeting Street Research, which has conducted the State of Manufacturing for the past 10 years for Enterprise Minnesota.

“Manufacturers base their optimism on even stronger underpinnings about the economy than last year’s report,” Autry said in his analysis of the survey results. “They expect record revenues, record profitability, to invest in their company at a record level, and to increase wages.”

Economy

Sixty-four percent of manufacturers anticipate economic expansion — a record high in the survey’s history and twice the rate it was two years ago.

In addition, more than half (54 percent) said the business climate is better than it was five years ago.

Manufacturers’ optimism was revealed in several other record-high predictions for 2018:

  • 60 percent predict higher gross revenues; 26 percent predict those revenues to be at least 10 percent better than last year.
  • 47 percent predict high-profit margins; 27 percent predict profits will exceed 10 percent.
  • 32 percent expect to make capital expenditures; 22 percent predict the amount will exceed last year by 10 percent.

Workforce

The counterweight to this enthusiasm is the anticipated workforce shortage. 

The challenges of attracting and retaining both skilled and unskilled workers loom large and could impede the growth of the industry. 

For the first time, large and urban manufacturers are indicating an increased urgency about workforce issues, narrowing the traditional gap that past State of Manufacturing surveys have revealed between Twin Cities and Greater Minnesota’s concerns over attracting and retaining qualified workers.

This could signify employers in Greater Minnesota will face even more intense levels of competition for employees, according to Autry.

Specifically, 48 percent of survey respondents said that attracting and retaining a qualified workforce is one of the biggest challenges they face that might negatively impact future growth; that’s up 13 points from 34 percent in 2017. 

Preparations

Yet, a small number of manufacturers are preparing their operations for this shortage, whether by improved leadership training, increased productivity, or strategic planning. For example, a little more than half (53 percent) are using a formal strategic planning process to prepare for the shortage.

“This year’s survey is as much about revealing questions as it is uncovering answers,” said Bob Kill, Enterprise Minnesota president and chief executive officer. 

“The ability of Minnesota’s manufacturers to weather the crisis — and come out stronger — will depend on how well they prepare for its challenges rather than react to them,” Kill said. “Comprehensive strategic planning, automation and technology, deliberate training and recruitment programs, along with community collaborations will be more important than ever.”  

Health care

Health care continues to be a major concern for Minnesota’s manufacturers, topping the list of issues for the 10th time in the 10 years of the survey. 

Respondents’ worry about health care has shown a slow rise in intensity, topping out this year at 60 percent and beating out “attracting qualified workers” by 13 percent.

Autry attributes the health care concerns to the uncertainty of what’s going to happen in Congress to the Affordable Care Act and how Republican plan to deal with it.

Tax reform

Two-thirds (67 percent) of respondents support the recent Federal Tax Cuts and Jobs Act, though the actual impact to a company is uncertain. 

Manufacturers are not ready to say the tax cut has benefited their companies, with 45 percent of respondents saying it will help their business, 42 percent predicting it will have no impact, and 6 percent saying it has hurt their companies.

Juliana Thill is editor of Crow River Business, Zest magazine and Dockside magazine, which are published by the Hutchinson Leader and Litchfield Independent Review.

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