Success in the manufacturing industry requires pushing your shop floor to run faster, leaner, and more efficiently. It also requires you to have sound systems in place to monitor and control all operation phases. The ability to manage unexpected scheduling and other surprises reflect management’s skills. However, management needs to be aware of trends and issues impacting the industry and develop a plan to address them beyond the day-to-day.
CURRENT MANUFACTURING INSIGHT AND TRENDS YOUR COMPANY SHOULD BE AWARE OF
A recently issued report by Enterprise Minnesota, State of Manufacturing, offers this important information. The study surveyed over 400 Minnesota manufacturers to uncover key challenges and issues. We have summarized vital information, survey insights, and significant issues impacting the industry below.
ECONOMIC OUTLOOK
The industry’s outlook for the economy has rebounded from the previous year’s survey following COVID. Those expecting a recession decreased from 36% in 2020 to 18% in 2021, and those expecting economic expansion increased from 20% in 2020 to 35% in 2021. This shows manufacturing companies are gaining more confidence that they will continue to succeed in the current economy.
KEY BUSINESS METRICS
The survey asked companies whether they expected to see increases in gross revenue, profitability, and capital expenditures for 2021. For gross revenues, 51% are expecting an increase in 2021, which is a significant increase from the 21% from 2020. For profitability, 41% are expecting an increase in 2021, which also is an increase from the 24% in 2020. However, gross revenues and profitability were not back to their pre-pandemic numbers at approximately 60% and 47%, respectively. Capital expenditures also increased in 2021 over 2020, at 44% versus 25% expecting to increase their capital expenditures. This is the most significant percentage for capital expenditures since the survey began in 2008, with the previous high being 32% in 2018.

TOP CONCERNS FOR 2021
The main concerns from Minnesota manufacturers revolved around supply chain and workforce issues. The supply chain was the leading concern, with 67% of respondents selecting it. This was a new item added to the options for 2021, so there are no historical comparisons. Supply chain concerns are more significant for companies outside the metro area. The top concerns related to the workforce include:
- Attracting qualified workers (61%)
- Retaining skilled workers (49%)
- Costs of employee salaries and benefits (46%)
Both attracting employees and costs of employees saw over a 20% increase from the 2020 survey. Large companies are having more problems attracting and retaining a qualified workforce than small companies, with around 70% of large companies and about 40% of small companies selecting it as a concern. Overall, 62% of companies said they have unfilled positions, and 87% said they have difficulties attracting candidates.
GROWTH DRIVERS
When asked the two or three most important drivers for future growth, most manufacturing companies selected hiring new employees (50%) and finding new customers (38%). This was the first year hiring new employees was included in the list, which pulled prior-year answers from new customers (59%) to this new option. Other important drivers for future growth selected include developing company leaders, maximizing productivity, creating new products, and implementing and using automation; all of these were chosen at similar rates in 2021 as 2020.
COVID-19 EFFECT
Almost all companies, at 94%, said the pandemic had impacted Minnesota’s business climate, which is similar to the prior year. Small companies say they felt the impact even more in 2021 versus 2020. However, small companies think the overall effect will be more short-term, while large companies expect the impact to be more long-term. Small companies are less likely to take additional safety measures related to the virus than large companies, likely due to the implementation costs. As far as safety measures go, overall, 12% of companies require masks for all employees, 8% require employees to get vaccinated, and 6% offer incentives to get vaccinated.
CONTACT US
While the challenges of attracting and retaining labor continue, so does the strong demand for manufacturing services. It appears management will need to continue to be innovative in finding new ways to leverage their existing labor force while attracting new labor. The integration of technology such as automation and other software will continue to help in this area. If you have questions about the survey and its findings or need assistance with Minnesota manufacturing tax, accounting, or audit issue, we can help.