Small and Mid-sized Manufacturers Are Still Important to the Nation's Industrial Economy

NAM report unveils contributions and challenges facing small and medium manufacturers in America.

A new report underscoring how small and mid-sized manufacturers (SMMs) are playing an increasingly important role in the nation's industrial economy -- despite unprecedented challenges -- was released yesterday by the National Association of Manufacturers (NAM);  The Manufacturing Institute, NAM's research and education arm; and RSM McGladrey, a provider of business services for mid-sized manufacturers.

"Even though we've experienced some attrition of small manufacturers in the last five years, small and mid-sized companies still represent more than 99% of America's manufacturers, account for 40% of the value of U.S. production and are increasingly critical to our country's economic success," said NAM President John Engler.  "But small manufacturers are facing unprecedented challenges such as exorbitant energy and health care costs.  The cost burden of complying with regulations falls disproportionately on small businesses in all sectors of the economy, but it is especially onerous for small manufacturers because regulatory costs for manufacturers are 81% higher than for all types of businesses.  We simply must bring down these costs if we want to strengthen the hand of SMMs and enhance America's manufacturing economy," Engler said.

"Two trends are increasingly shaping the future of SMMs," commented Manufacturing Institute President Jerry Jasinowski.  "First, large manufacturers are increasing their dependence on suppliers of components as they streamline their operations to increase productivity.  This has been a positive growth story for many SMMs as they have innovatively expanded businesses into areas formerly owned and operated by large manufacturers.  SMMs are the dominant part of the global supply-chain network of large corporations."

"The second trend - the development of increasingly competitive production in developing countries - cuts the other way and has toughened the landscape for all manufacturers, including SMMs," Jasinowski continued.  "To stay in business, SMMs have been entrepreneurs offering value to their customers that low-cost overseas competitors cannot match -- such as proprietary high-technology products, a willingness to customize, extraordinary service and parts support, flexible production runs and fast turnaround times.  These trends make it clear that the performance of all of U.S. manufacturing is tied more than ever to the success of SMMs."

"Small and mid-sized manufacturers benefit from an array of inherent competitive strengths.  We are close to the customer base and exceptionally responsive, flexible and entrepreneurial.  But we face enormous challenges that hamper our ability to win in the global marketplace," said Stephanie Harkness, chairman/CEO of Pacific Plastics & Engineering in Soquel, California, and chair of the NAM Small & Medium Manufacturers. 

 "My company and countless others are having difficulty finding employees with advanced technical and design skills to work closely with customers and keep production lines humming. We currently have 11 openings for engineering, program management and production workers that remain unfilled.  This problem will only get worse as the baby boomers retire with no generation of skilled workers in the pipeline to replace them.  Another huge challenge is rising health care costs, which are just killing us.  Our health care costs climbed 12% last year, and we received notice of another 11% this year...and we have a low experience rate!  We simply can not pass along these costs to the customer if we want to stay in business," Harkness noted. 

 A copy of the full SMM Report is available at www.nam.org/SMMReport.

 

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