INDIANAPOLIS, Ind.—Much like a Colts second-half comeback, Indiana manufacturing companies are ready to compete. They’ve weathered the storm of the Great Recession, according to results of the 2012 Indiana Manufacturing Survey: “Halftime” for Indiana Manufacturing. The report, commissioned by Katz, Sapper & Miller certified public accounting firm, was conducted in conjunction with Mark Frohlich, associate professor of operations management and Steven Jones, associate professor of finance; both are faculty at the Kelley School of Business Indianapolis
“From a financial perspective, I think it small- to medium-sized manufacturers have made it through the Great Recession, and they’re starting to recover,” said Jones. “That is revealed in the survey responses indicating there’s less concern about working capital management and renewed focus on investment strategy, rather than cost cutting.”
One in 10 companies surveyed plan to open new manufacturing facilities in Indiana over the next two years, and 44 percent rate their financial performance as “healthy,” a significant increase from last year’s response of 30 percent.
“This is the most optimistic picture of manufacturing I’ve seen in in half a decade,” said Frohlich.
Last year Indiana ranked third in the nation for GDP growth, which Frohlich credits to the manufacturing sector. More companies are “on-shoring” manufacturing back into the United States. Company-reported reasons for Indiana’s competitive edge include:
- Better access to new technologies
- Better control over production
- Locations closer to customers, markets and suppliers
- Great accounting and auditing oversight
"What now are recognized as systematic errors in offshoring over the past 10-15 years were a lot of mistakes based on myopic financial decision making,” said Jones. “Firms made offshoring decisions assuming exchange rates wouldn’t change, which is wholly unrealistic in currency markets. Many made these financial decisions using only the data in front of them. Additionally, the real cost of labor has gone up in China. All of this represents what, in retrospect, may be an excessive amount of offshoring in the previous decade."
The major remaining concern for the state is having a trained workforce that is qualified to pursue advanced manufacturing strategies.
“These results clearly indicate a growing concern about access to an adequately trained Hoosier workforce, more so than in past years,” the report reads. “Consistent with the previous results indicating growing concerns about worker training, only 30 percent of respondents view Indiana’s workforce as a competitive advantage for the state.”
Based on survey results, Frohlich and Jones recommend that Indiana manufacturing companies stay focused on the customer, avoid underestimating the importance of technology and know that collaboration remains critical.
"These results indicate a reason to be optimistic about the manufacturing sector and jobs investment in the State of Indiana,” said Jones.
Survey results are available online here.