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Manufacturers adjust to the 'new normal' business environment

Published 6/13/2014 12:16:14 PM

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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.

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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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