Kokomo Tribune; Kokomo, Indiana

October 20, 2013

Survey sees Hoosier manufacturing upswing

Workforce readiness, regulations remain concerns

From staff reports
Kokomo Tribune

---- — There’s an often unnoticed but growing renaissance underway in Hoosier manufacturing, according to Indianapolis certified public accounting firm Katz, Sapper & Miller LLP, which Wednesday released the results of its seventh annual Indiana manufacturing survey.

The results from the 2013 Indiana Manufacturing Survey: Manufacturing’s Renaissance reveal nearly 80 percent of respondents to the last two annual surveys describe their businesses as “healthy” or “stable” — a strong rebound from the dismal days of 2009-10, when nearly half used the term “challenged” to characterize their operations.

“Indiana remains the nation’s most manufacturing-intensive state by employment and share of economic output,” noted Scott Brown, partner-in-charge of Katz, Sapper & Miller’s Manufacturing and Distribution Services Group. “The state’s economic future is inseparable from its production industries, and we see a cautious return to investment and growth that bodes well for all Hoosiers.”

Other key findings reveal:

• More than 70 percent of Hoosier manufacturers are actively investing in capital and labor again, while less than 5 percent are continuing to cut costs across the board. These results suggest that even in the current economic turbulence, companies are stepping up investment in their own employees and facilities, along with products and services out of a recognition that failure to do so will hinder their ability to compete in the future.

• The pro-investment attitude of Indiana manufacturers comes in the face of worries about the federal regulatory climate (notably the implementation of health care reform), concerns over global competition and a pragmatic outlook about the potential for market growth.

• Despite these headwinds, manufacturers realize that cost containment alone is not a sustainable business strategy and are willing to spend on superior product design, logistics and customer service to compete even in an uncertain economy.

• Human capital continues to be a major obstacle confronting Indiana manufacturers. Survey respondents identified skilled production workers as the most significant labor shortage facing their companies. Fortunately, there is significant momentum among industry leaders, policymakers and academic institutions to focus on the middle-skill challenge, align curricula with employer needs and re-energize vocational and technical education.

“Our findings from this year’s survey show cause for optimism, as Hoosier manufacturers continue to invest and grow,” said Mark Froehlich, associate professor of operations management at IU’s Kelley School of Business.

“But economic and public policy hurdles, plus our ongoing human capital challenges, mean that Indiana can’t take its position as the nation’s most manufacturing-intensive state for granted,” added Steven Jones, associate professor of finance at IU’s Kelley School of Business.

Froehlich and Jones went on to emphasize the need for continued focus on human capital and business climate to support the continued forward momentum in the manufacturing sector.

“While this year’s findings are a snapshot of attitudes and short-term reactions to the business cycle, it is the collective actions of employers, educators, economic developers and elected officials that will help determine the results of future surveys in years to come.”

The statewide study of employers in Indiana’s largest industry was commissioned by Katz, Sapper & Miller and developed in partnership with the IU Kelley School of Business - Indianapolis, Conexus Indiana and the Indiana Manufacturers Association.