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Many of the business headlines in recent weeks have been somewhat concerning. While major market indices have plowed forward, news of slowing growth in China and fears of a slowdown in the U.S. economy have surfaced and have caused some to begin talking about the need for another market correction. Prices for major commodities such as steel and energy have slid. Consumers are less bullish than they were a few months ago as world-wide worries persist.
The Oracle of Omaha, Warren Buffet, saw over a billion dollar decline in portfolio wealth as some of his larger holdings waned. According to the Private Bank, this week, The Wall Street Journal writes that quarterly profits and revenue at big U.S. companies are poised to decline for the first time since the recession, as some industrial firms warn of a pullback in spending. Profit and revenue are falling in tandem for the first time in six years. Analysts expect Q3 earnings to decline 2.8% over a year ago, while sales are expected to fall 4%--the third straight quarterly decline. U.S. multinationals are facing multiple headwinds, including a slump in energy prices, which has dented business investment, a slowdown in global growth, and a stronger dollar, which is eroding the value of overseas profits.
But while some larger manufacturers are projecting lower growth, some smaller manufacturers have continued to see and project growth and profits. Don’t get me wrong, one would have to be naïve to think that smaller businesses would be impervious to a pending economic slowdown, but perhaps a new model for American manufacturing will prove to be more resilient in a downturn.
The future of manufacturing in America may be hinged on the idea of having multiple, smaller-scale production plants, where the focus is keeping headcount manageable, maintaining exemplary on-time delivery rates and building customized product. I’m not suggesting that gone are the days of the large manufacturer that employs thousands of people across a handful of very large production facilities, but there are some real benefits of operating smaller across more locations in today’s manufacturing environment. One could challenge whether the business model is scalable and could translate into large profits, but the concept is not unreasonable given advances in today’s technology such as 3D printing, access to real-time data and enhanced connectivity. Indeed, it has become much easier to manage vendors, customers and a smaller labor force across multiple smaller-scale locations with today’s technologies.
America’s manufacturing landscape has been changing for quite some time. The success of manufacturers operating with multiple, smaller scale plants is one model that seems to be working for some and may just be a model for the future.
Visit our webpage featuring the services that we offer to manufacturing companies and read the Schneider Downs Our Thoughts On blog for more articles pertaining to the industry.
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