Indiana's Manufacturing Companies Face New Challenges in Demand, Supply Chain, Workforce, and Automation as Pandemic Subsides, Survey Reveals
In 2020, manufacturers had to adjust practices to both maintain profit margins and ensure they were providing a healthy, safe environment for employees.
INDIANAPOLIS, March 30, 2022 /PRNewswire/ -- Katz, Sapper & Miller, a nationally recognized advisory, tax, and audit firm, has released the results of its annual manufacturing industry survey, "2022 Indiana Manufacturing Survey: Back to Work." While the COVID-19 pandemic remains part of operations planning, the survey found manufacturers are primarily focused on finding solutions to surging customer demand, high supply chain costs, recruitment and retention, and implementation of automation tactics.
Conducted by Katz, Sapper & Miller in partnership with Indiana University's Kelley School of Business at IUPUI and the Indiana Manufacturers Association, nearly 100 Indiana-based manufacturing companies were surveyed throughout the first quarter of 2022 on their overall successes and challenges during the COVID-19 pandemic and their expectations going forward. The average number of employees for participating companies is 478, with the largest employing 10,500. Manufacturing industries represented include automotive; industrial equipment; aerospace and defense; high-tech; healthcare; furniture and home goods; food and beverage; chemicals, metal fabrication; paper products; signage; and more.
In 2020, manufacturers had to adjust practices to both maintain profit margins and ensure they were providing a healthy, safe environment for employees. Survey respondents say this year that COVID-19 is either not a significant threat (53%) to their business, or it's a serious impact that they feel they'll be able to make it through (47%). Furthermore, most have been able to maintain or improve overall profit margins, with an average improvement of about 9% expected for 2022 over 2021.
"For more than a decade, respondents to our survey have said the state of Indiana does a good job supporting manufacturers, and this year is no different. It's exemplified in companies' abilities to weather the challenges COVID-19 brought and remain afloat," said Jason Patch, partner-in-charge of KSM's Manufacturing & Distribution Services Group. "Because of state and federal support, the industry was able to adjust and see profits increase over the past couple years. Now, they can apply that flexibility they learned during the pandemic to issues facing them today."
During the COVID-19 pandemic, respondents in the 2020 survey prioritized the following areas of business operations as leading to future change:
- Process and automation
- Workforce
- Supply chain
- Products
These areas are once again rising to the surface as the main priorities for many companies – with COVID-19 still being a mild factor.
Forty-five percent of this year's respondents experienced a surge in customer demand, and that's coupled with 81% of respondents dealing with supply chain shortages. Of note, for the first time in survey history, respondents unanimously responded to a question — 100% agreed that the costs of materials in their supply chains have recently increased.
This reflects the national climate of the manufacturing industry as well. The Institute for Supply Management Purchasing Managers' Index for January 2022 was 57.6%, a 1.2% decrease from December 2021. This indicates U.S. economic activity is performing well for the 20th straight month, but many across the country are having the same supply chain and customer demand issues Indiana companies are. Unfortunately, the Bloomberg Economics dashboard shows conditions aren't expected to improve significantly in early 2022.
Related, recruitment and retention of workers was a major challenge before the pandemic, but it has been exacerbated since 2020. Respondents report an average increase of 17% in labor costs, yet employers need to maintain a solid workforce. In an effort to attract skilled workers to many available positions throughout the state, 93% of survey participants are raising salary levels and adjusting benefits. On the other hand, 73% say the lack of workers is accelerating the need for automation, a trend that's been noted in previous Indiana manufacturing surveys.
"Companies are at quite a crossroads. They see the need to protect their businesses by layering automation into production, yet they don't want to discourage workers from applying for the jobs that need to be filled as soon as possible," said Mark Frohlich, associate professor of operations management at the Kelley School of Business at IUPUI. "While much of this year's data reveals numerous challenges, manufacturers are learning they have many tools at their disposal to be more capable and competitive in the coming years."
Download the full "2022 Indiana Manufacturing Survey: Back to Work" report here.
About Katz, Sapper & Miller
Katz, Sapper & Miller is a nationally recognized advisory, tax, and audit firm. Through our deep experience across multiple disciplines and industries, we help our clients make sense of where they've been, what's on the horizon, what's changing, and what they need to do to prosper in the years ahead. We leverage emerging technologies, combined with our people's differing perspectives, ingenuity, and creativity, to help our clients solve their most difficult challenges. KSM's mission is also our passion and our commitment: We inspire great people to do great things. Learn more at ksmcpa.com.
About the Kelley School of Business on the IUPUI Campus
The Indiana University Kelley School of Business has been a leader in American business education since 1920. With an enrollment exceeding 12,000 students across two campuses and online, the Kelley School is among the premier business schools in the country. Kelley features an innovative curriculum built on personal development, teamwork, and experiential learning with an emphasis on global and social responsibility, which is reflected in the accomplishments of more than 123,000 living alumni. The Kelley School at IUPUI is home to a full-time undergraduate program; a graduate certificate for healthcare professionals, master's and graduate certificate programs in accounting, internal audit and taxation; the Physician MBA and the Evening MBA, which is ranked 11th in the country by U.S. News & World Report. Learn more at kelley.iupui.edu.
About the Indiana Manufacturers Association
Formed in 1901, the Indiana Manufacturers Association is the second oldest manufacturers association in the country and the only trade association in Indiana that exclusively focuses on manufacturing. Manufacturing is the driving force of Indiana's economy, employing more people and contributing more to Indiana's gross domestic product than any other industry. The Indiana Manufacturers Association, representing more than 1,100 companies, is dedicated to advocating for a business climate that creates, protects, and promotes quality manufacturing jobs in Indiana. The staff of the Indiana Manufacturers Association are recognized experts in areas including tax, environment, labor relations, human resources, energy, workforce development and healthcare. Learn more at indianamfg.com.
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