Manufacturers

Manufacturers adjust to the ‘new normal’ business environment

By Bridget
McCrea

With 2012 in
the books, it’s time to look ahead to see what lies ahead for manufacturers,
distributors, and end users within the electrical segment. With 2012 turning
out to be a mixed bag for the industry – with some organizations faring better
than others – most companies are anticipating a fresh start in 2013.

One constant
that holds true across most industry segments is this:  this is not the same
business environment that manufacturers and distributors were dealing with five
years ago. According to the 2012 McGladrey
Manufacturing and Distribution Monitor
, a survey of industry leaders who
assess the current state of the industry and to determine what steps CEOs, CFOs
and other executives are taking to grow their businesses and stay competitive,
83% of firms are optimistic about conditions for their own businesses. However,
the number of companies reporting that they are “thriving” is 39%, a 6%
decrease since 2011.

The decline
in the number of “thriving” companies has been accompanied by deteriorating
confidence in both the domestic and global business environment. In 2012, less
than half (46.7%) of the 924 respondents maintain an optimistic outlook on the
U.S. economy, down from 62% in the spring of 2011. Confidence in the world
economy has plummeted, as well, with only 16.9% of respondents reporting some
optimism about the world economy – down from 50% during the same period.

While a
healthy percentage of manufacturers and distributors are thriving or at least
holding their own, most have come to grips with the fact that they’re not
working in the same economy or business environment they were operating in
prior to the recession. Adjusting to the “new normal” has been easier for some
companies than others.

“Companies
are faced with making fundamental adjustments to their business and operations
models,” said Karen Kurek, national manufacturing leader for McGladrey, in a
press release. “While concerns about the economy continue, firms are investing
in their futures by spending on information technology to enhance systems and
processes, and adding employees who can help them become more efficient.”

Stepping
up to the Plate
 

It’s no
secret that manufacturers and distributors alike are tackling the new normal by
becoming leaner, more efficient businesses. They’re focusing on making more
long-term, structural changes to process and technology infrastructures that
boost productivity while cutting costs, according to McGladrey, which found
that 93% of manufacturers were lowering costs through operational efficiencies
while 57% said they were working with suppliers and/or customers to improve
their processes and costs.

At
Connecticut Electric, Inc., in Anderson, Ind., Bruce Dunham says company sales
were flat in 2012 due to the sustained recession within the nation’s housing
market.  As a designer, manufacturer and distributor of specialty electrical
components, the company’s business is closely aligned with the existing housing
market, which has an ongoing need for upgraded and replacement circuit breakers,
manual transfer switches, and related products.

“We’re
looking for an increase in business in 2013 as the housing market starts to
come back a bit,” says Dunham, national sales manager, electrical distributor
division. “With the market showing some improvement and interest rates still
pretty low, we’re optimistic about the coming year.”

Connecticut
Electric isn’t waiting around for the housing market to improve. Over the last
year the manufacturer has stepped up its distributor program and shifted its
selling model to include more “direct sales to distributors, as opposed to
mainly working through wholesalers,” says Dunham. “We see this as a better way
of going to market.” The company is also experimenting with a solar line that
has “yet to be fully brought to light,” says Dunham, but that may be introduced
in the coming year. 

Much like
the high percentage of McGladrey survey respondents who were seeking ways to
improve operational efficiencies, Connecticut Electric has adopted a “leaner”
mindset in order to counteract the economic challenges that it’s dealing with.
“Like everyone else, we’ve gotten leaner as a company,” says Dunham. In 2012,
for example, the company combined its warehouse operations and corporate
headquarters in the same site in order to gain efficiencies and “get everyone
working together in one place.”

Inventory
management is another area that manufacturers like Connecticut Electric have
started monitoring on a daily basis. The goal, says Dunham, is to get those
inventories as lean as possible while always being able to meet customers’
needs with current stock. That’s not always an easy balance to achieve and
maintain, but the exercise has become increasingly important for manufacturers
that are grappling with lower sales volume and thinning margins in today’s
competitive business environment.

“We want to
be right on the mark when it comes to meeting customer needs without overstock,” Dunham explains. “We’ve put a lot of time and effort into achieving
this goal and we continue to work at it daily.”

Connecticut
Electric has also stepped up policing of counterfeiters – a nemesis that the
manufacturer has been dealing with for about four years, but even more so over
the last 12 months. Dunham says that effort will continue into 2013, with the
manufacturing using online outlets like eBay and Amazon to identify and address
counterfeiters of its products. “You wouldn’t think the counterfeiters would be
interested in the older products that are on the market,” says Dunham, “but they
definitely are and we’re taking the steps to deal with them accordingly.”

Full
Steam Ahead

Craig
Mitchell, operations manager at Belding, Mich.-based Stahlin Non-Metallic
Enclosures, a division of Robroy Industries, says 2012 was “a fabulous
year” for the company, which just posted its third straight year of sales
growth. Mitchell points to the growing interest in renewable energies as a key
sales driver for the firm, which produces electrical and oilfield products. He
says Robroy’s solid partnerships and distributor relationships also helped the
company realize its third straight year of sales growth. 

“We’re
pretty strategic and constant about how we go to market; that hasn’t changed
much over the last few years,” says Mitchell, who – outside of the current
political landscape – is optimistic about the year ahead. “We expect modest
growth in 2013. I don’t have a crystal ball, however, and the political climate
is somewhat of a concern. We’ll just have to see how that all shakes out.”

As
electrical manufacturers and distributors assess their performance in 2012 and
look ahead to 2013, many of them will be keeping a close eye on both internal
and external factors that could impact business in the year ahead. “We’re
constantly watching the data and then forecasting and planning accordingly,”
says Joe Saganowich, vice president of sales and marketing for IDEAL
INDUSTRIES, Inc., in Sycamore, Ill.

A manufacturer
of tools and supplies for professional electrical and data communications cable
installation and maintenance, IDEAL’s sales “approached 2008’s levels in 2012,”
according to Saganowich, who adds that the company continues to grapple with
the effects of a sluggish national construction industry. “On a positive note,
there have been signs of hope on both the residential and commercial building
side.”

To manage
the new normal business environment, Saganowich says the company has remained
dedicated to its robust field sales force model. “While we certainly tweaked
deployment during the slowdown,” he says, “we’re going full steam ahead with
strong, well-rounded direct sales deployment.”

Halsey Cook,
president of Legrand North America’s electrical wiring systems division in West
Hartford, Conn., says 2012 was an important year for the company, which set its
sights on improving operational efficiencies. “Across our manufacturing
facilities, we made multiple lighting retrofits and updated or repaired
inefficient equipment for significant energy and cost savings,” says Cook. “We
take these initiatives very seriously and plan to continue to seek out ways to
be more sustainable and cost effective in our manufacturing processes.” 

Like Dunham
and Saganowich, Cook says glints of improvement in the U.S. residential housing
market could play out well for electrical manufacturers and distributors during
the coming year. “With the recent resurgence in the residential market,”
Cook adds, “we are optimistic about business in 2013.”

Want to
Learn More?

Results from
the 2012 McGladrey Manufacturing and Distribution Monitor are available online.
Detailed breakdowns of industry segments, including automotive; food and
beverage; chemicals, oil and plastics; industrial machinery, biotech and
medical; metal fabrication; and more are incorporated in the report, which is
available by clicking here.

McCrea is a Florida-based writer who covers business, industrial, and
educational topics for a variety of magazines and journals. You can reach her
at bridgetmc@earthlink.net or
visit her website at www.expertghostwriter.net.

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