Presidential Selection with an Eye on Manufacturers

As November 6^th fast approaches, manufacturers across the country are patiently waiting to see the outcome of the election.  While many of us have our own views, opinions, and political preference, for many manufacturers the outcome is crucial for what the next four years will entail.  Although both candidates have made references to manufacturing during the debates, and their plans for an economic recovery strategy, I found my selection after hearing both parties to be simple.

While many Americans vote strictly by political affiliation, I urge everyone to evaluate both Romney and Obama, and take a scope outside the media jargon to ensure the best political candidate takes office.  Even though neither of the candidates are “perfect”, I would push voters who are undecided to educate themselves completely on ALL of the major issues, as well as taking an in depth look at both candidates over the past four years.

With a number of important issues to keep in mind, you can find many resources online along with fact checkers to insure the information you are reading is factual.  Unfortunately, since anyone can make claims and write them “as a matter of fact,” most are not true and should be verified before rendering a conclusion who you should vote for come November 6^th.

Since the President of the United States is a global icon, it is very important that we pick the candidate that most resembles our nation as a whole and who has the ability to guide our nation effectively.  With our national debt exceeding 17 trillion dollars and rising, I also would urge voters to elect the candidate you believe has the best plan to reduce the national debt.  In addition to the nation’s debt, lowering unemployment, and rejuvenating the United States economy should be major areas you take a look at.

Choosing the Best Presidential Candidate Takes Time and should not be selected using “ennie meanie minnie mo” on Election Day.  Selecting the President is a very important civic duty we each have for the future of the United States and the image we wish to administer across the world.  So I ask each of you on November 6^th, to Please Vote Responsibly with an Educated Vote for the candidates.  Manufacturers across the United States are patiently waiting for the answer to unfold, in order to better plan for what the next 4 years could entail.         

Is the Presidential Election Driving an Increase in Manufacturing?

Is the Presidential Election driving an increase in Manufacturing?  With less than a month remaining on the campaign trail, manufacturing across various industries are showing significant increases from this time last year.  Over the past 2 months manufacturing has continued to strengthen, and has many businesses booked into the middle of next year.  With manufacturing having been so slow for so long and then the rapid spike of production, many manufacturing facilities are playing catch up hiring additional employees in order to fill orders being placed.  In addition to hiring additional employees, getting them trained, filling orders, and taking additional product orders many have asked what caused this sudden increase in production? 

Although there is still turbulence abroad, with the 4^th quarter of 2012 well under way, one could speculate that an increase in consumer confidence is driving the increase, or that the presidential election is playing a role in driving the increase for manufacturing.  Since fuel prices still remain high, yet consumers continue to spend disposable income freely, it is difficult to determine what has actually occurred in order to cause this spike. 

Since oil prices are still high we can rule that out, and since people’s wages have remained relatively constant or slightly down, we can rule out that everyone has more money.  Is the spike caused by the slow trickle of the federal stimulus? ...I doubt it.  While I can’t pinpoint the exact cause for the increase in manufacturing, I can only presume that with the national election near, that it is causing this manufacturing boom.  Staying away from the party line debates, I am thankful for the manufacturing increase no matter what the cause.  Since manufacturing is a staple of our economy, it is great to have the increase, but hope it isn’t temporary.

Manufacturing facilities nationwide have been experiencing this boom and say, it will help close the year out and start off 2013 in the right direction.  No matter what the cause, lets all remember to help support U.S. business by buying Made in the U.S.A. goods whenever possible.  We also must push for bringing more manufacturing jobs back from overseas.  We have a very competent workforce within the United States that are capable of producing high quality goods at an affordable price, but we must have the facilities over here in order for that to happen.  Let’s join together and continue this push of supporting our fellow American, and insure this increase in manufacturing that we are currently experiencing is not short lived.

Market Showing Strength

In an effort to determine market trends, I monitor 30 stocks on a monthly basis, and was shocked to see September’s numbers so high.  With the current strength being the strongest since February when 27 out of 30 showed an increase in value, I am baffled to see this month that 28 out of 30 stocks monitored showed an increase in value with the volatility of world affairs, and sweet crude around $95/barrel.  Since last month when 15 out of 30 showed positive increases and sweet crude was around $93/barrel, this is an obvious shift of market strength. 

Whether it be an increase in consumer confidence or inflated numbers from family vacations and back to school, seeing such an incline in market strength is a positive for our economy.  While not all the questions can be answered by these results, one must hope for this trend to continue.

Included in the list of stocks I follow, there is a wide array of industries including retail, construction, health care, consumer goods, food & beverage, along with others to establish a viable basis to determine market strength and trends.  Although the list only includes 30 companies, I believe it provides a sound base in order to provide enough evidence to make an educated determination of market strength and industry trends in a timely fashion.

Although there is a number of variables that control a stocks increase or decrease in value, I monitor sweet crude oil to determine the effects fuel prices have on a particular industry.  While we are all aware, when fuel prices increase in value, we usually notice a reduction in consumer confidence, and then see a reduction in stock value based on less spending of non needed items.  In addition, the longer the trend exists the harder the consumer confidence is to rejuvenate or restore to a respectable level.  Since peoples incomes do not fluctuate up and down as fuel prices increase and decrease, we are forced to alter our budgets and spend money more wisely.

Whatever the case may be for September’s trends, although it is still too early to tell what the following months will bring, I hope the trend continues.  While we can stand to see fuel prices fall to a more moderate level, with a continuation of positive market strength across all industries, we will ensure a strong and healthy economy.                       

Fuel Prices Adversely Effect Manufacturing

Although fuel prices have recently crept back to record highs, we anticipate the fallout to cause unfavorable effects soon.  Since we know fuel prices adversely affect manufacturing, it is only a matter of time until consumer confidence falls and spending of discretionary income comes to a halt.  While many retailers have recently relinquished funds for capital improvements, when consumers quit spending, they too quit spending until consumer confidence is restored.  With 2012 being an election year and many other variables, we can only hope that fuel prices fall before consumers pull back on spending.  Although manufacturing has been very favorable over the past few months and projections are solid for the next couple of months with plenty of contractual obligations, it is the scope beyond that is unknown.

We have spoken about consumer confidence before, but it is imperative for manufacturers to monitor.  Since we are directly affected by the amount of business that retailers receive, we must monitor consumer confidence in order to be cognizant of the potential shortfalls in work, and excess labor.  Unfortunately, when consumers quit spending it is a vicious cycle, and causes many negative affects to occur.

While the workload for the next couple of months is favorable, with many retailers having released funds to complete capital improvements, it is the first quarter scope that could prove troublesome if work is not acquired and consumer confidence is not restored.

Having spoken with several manufacturers throughout various industries, they too are “feeling the heat” caused by the increase in fuel prices.  Although we all know fuel is crucial in our lives, economic leverage is often barred on its price being low and affordable for most. 

Since the government has required oil companies to produce a cleaner fuel which now includes ethanol which is derived from corn, and bean crops, our food prices have increased as well.  Although alternative energy is important, I would point to the ineffectiveness of ethanol as a viable source.  While the concept of cleaner energy is wonderful, when incomes and inflation can’t keep up with the increases, it causes negative affects on the economy.  Fuel is vital in all of our lives weather we like it or not, but should not dictate our economy.  With plenty of oil and alternative energy sources like hydrogen (most abundant element on earth), we have the potential to be sustainable for numerous years, and generate a strong economy with a consumer confidence that is unparalleled.  You probably are asking yourself “If ethanol isn’t the best alternative fuel source, why did oil companies go this direction?”, the answer is, it was the best short term solution to a long term problem.  In order to meet the regulations that the government had implanted, they had to act fast in order to satisfy the guidelines.  Although hydrogen is the most abundant element on earth and “pollution-less”, it is very hard to extract, which would cause it to be expensive, but with some government help could likely be achieved more easily.  I also would say that when the extraction takes place on economies of scale that the price would become more affordable, and is by far a better alternative fuel source than ethanol.

By using a viable alternative energy source that is sustainable, we as a nation would be less dependent on oil and our economy would be rejuvenated with jobs and expendable income that could be used within retail establishments, restaurants, entertainment, etc, or to start a new company.  Since consumer confidence is based off of expendable income, I believe we should look ahead at the real problem and fix the problem at hand which is FUEL PRICES.  If we can get closer to a controlled fuel price meaning alternative fuel source, we can create a STRONG Economy and Manufacturing Will Be Sustainable.  Until then, we are tied to the hips of oil companies and must hope that fuel prices fall, consumers keep spending, retail establishments continue to flourish, and that a viable fuel source is created to lessen our dependence on oil companies.  

Manufacturing in the 21st Century

Manufacturing has been established for thousands of years, but distinctly different now.  Although time has evolved manufacturing, the basic principle of producing an end product has remained the same.  Along with the evolution of tools for manufacturing, now comes automated machinery.  While Manufacturing in the 21^st Century is significantly different than even 25 years ago, we must continue to look to the future in order to continue staying profitable and remain a valid competitor within the industry.  In this blog post, I will be focusing on the vision of automated machinery and how it will forever change the manufacturing of store fixtures and industries alike.

Although some believe automated machinery is causing fewer jobs, from our experience and from what numerous statistics show, I find that claim to be FALSE.  While automated machines Do Not Cause staff reductions, They Do Cause a shift in job placement.  With the need for fewer employees doing what once was performed manually, there often is an employment shift to running the new machines, some into various departments like assembly, as well as some in to management roles.  Since automated machines improve performance, it allows for the ability to increase production, which in turn will increase gross revenue, profits, and continue to generate jobs throughout the future.

With automated machinery being the true direction of the manufacturing industries future, investing into automation is a MUST.  In an effort to reduce the labor factor per unit and increase precision, moving in the direction of automated machinery is a great solution.  In addition, by switching to automated equipment it allows the ability to moderate production times, and provide little variance unlike humans.  By converting to automated equipment, it also allows a company to become more competitive within the global marketplace. 

Since many products we produce within the United States are also produced in countries like China, Japan, the Philippines, and other similar countries where labor is significantly less, we are forced to operate within the spectrum of the global marketplace for fear of losing business to foreign competition.  While some clients are still very focused on supporting U.S. businesses, the loyalty to buy made in the United States products has fallen to “price” by foreign competition.  In an effort to remain globally competitive, automated machinery is vital.

Even though the cost involved to purchase automation machinery comes with a hefty price tag, the Savings involved are Huge.  While automation equipment can range from $60,000 to $250,000 per machine or more, with all of the capabilities they allow in addition to the growth potential, the machines often pay for themselves relatively quick.  Obviously, depending on how much automation equipment you have installed will determine your ability to increase efficiency and manufacturing productivity.

Having monitored the trend and watched fellow competitors move toward automation throughout the last 10 years, I would conclude that automation is the developing trend of the 21^st Century for Manufacturing Companies throughout the United States and abroad.  In order to evolve with Manufacturing it is crucial to switch to automated Equipment before the evolution passes and you are no longer globally competitive and out of business.  While we at Interior WooDesigns have several pieces of automated equipment within our current manufacturing facilities, it is with time, that we too will slowly transform with more automation to remain globally competitive and allow the ability to increase our capabilities. 

Automation Equipment is the key to success for Manufacturing in the 21^st Century and should not be overlooked as a fad, but more as a developing long term trend of manufacturing.  With tools having evolved a long way over the years, it is with great pleasure we welcome automated equipment into our lives, to increase productivity and enhance our capabilities.  With such measures, we can ensure sustainability throughout the future near and afar.  

Account Diversification a Must for Manufacturing Companies

While statistics nationwide show U.S. Manufacturing to be down, diversifying your client portfolio is a MUST.  Just like stock brokers diversify their portfolio over high risk, low risk, and a variety of stocks, it is equally important for manufacturers to establish themselves into various types of the market as well.  Having All of your Eggs in One Basket would be considered high risk, and potentially catastrophic if you are solely focused rather than having a scope on a broader spectrum for company revenue. 

Although a horizontal diversification strategy should be implemented first, with a relatively low amount of risk it will help penetrate into similar businesses that the manufacturer is already serving.  With this strategy it requires the creation of additional product/products that would likely serve the clients you already have captured.  While a horizontal diversification strategy is important, it should not be implemented alone, in order for the company to be fully sustainable if a particular industry calls for a decrease in manufacturing output. 

Along with the horizontal diversification strategy, it is suggested that a concentric diversification strategy is also in place.  Even though it is a basic principle which identifies the strategic advantage your manufacturing plant has over your competitor, managers often forget to monitor this on a regular basis.  Identifying what or where you have a strategic advantage manufacturing your current products over your competitors is something that should be monitored regularly and be tweaked when necessary.  Monitoring a concentric diversification strategy also helps identify inefficiencies and helps to ensure industry quality standards are being achieved.

Another diversification strategy which can be implemented, but should be monitored closely due to it volatility and riskiness is a lateral diversification strategy.  Because a lateral strategy calls for the creation of new product/products that are unrelated and completely different than currently produced, they hopefully will reach an all new client base.  Due to the high risk associated and significant investment which is required to develop and market a completely new product to a different client base, it must be monitored closely.  While leveraging a manufacturers other profits to establish a lateral diversification strategy, it can generate a great ROI, but must be monitored to ensure smooth operations.

Even though a Horizontal Diversification Strategy is most common with the least amount of risk, and has the best ratio of success, one cautions no matter what strategy your manufacturing plant is implementing that maintaining profitability throughout the transition is crucial.  Like a stock broker monitors stocks, manufacturers should monitor there diversification strategy to ensure a company is sustainable if an industry in which you serve is negatively affected and there production needs are reduced.  Diversifying your client portfolio is a must, but should be implemented with caution and a close eye.  Consulting with a team of experts is often a good idea, and should be instituted with due care.

Repair VS Replace During Times of Struggle

Recently we have been plagued with automation malfunction which sparks the question, “Repair VS Replace during times of struggle?”  Although there are many Pros and Cons for both ways (if thinking optimistically in regards to the economy), one must choose wisely.  While manufacturing has been relatively slow over the past 8 months, and the economy is still sluggish to regain strength, many questions are raised.

Although we believe the economy is going to slowly regain strength and retailers will begin investing back into capital improvements, at Interior WooDesigns we haven’t seen the increase in production that speculators have stated.  Having spoken with other manufacturers, they too are embracing similar issues.

While some automation equipment can range in replacement value from $100k to $250k or more, they come with a significant investment decision.  On the other hand, when a piece of automated equipment goes down, it could be as little as $500 to as much as $3000 or more in a single visit.  Although our occurrences for needing repair are not frequent, with several machines more than 10 years old, one must ask, “Is Replacement Needed?”  Although automation equipment when properly maintained can last a long time, when repairing at the tune of $3000 or more per visit, it can certainly add up quick. 

Although most machines are depreciated out over 6 years, with the replacement value so great and manufacturing having been so slow, justifying capital improvements VS repairing a machine is a brain battle, and a strategic decision that doesn’t come easy.

Many manufacturing plants are facing similar situations, and some that have chosen to purchase new machines instead of repairing are no longer in business.  Although having new automated machines could provide a strategic advantage and would likely allow additional benefits, during struggling times spending excess cash on capital improvements could be a “cut throat” decision causing a company collapse.  At Interior WooDesigns we are constantly re-investing profits back into the company, maintaining the machines we have to the best of our ability and praying they last for a while longer.  With the economy having remained relatively stable over the past 18 months with a  slow progression, we believe that the best choice is to maintain what we have, invest back into the company, hold cash, spend wisely, continue to produce top quality store fixtures for our clients, and wait for the recession to fade and the golden economy to emerge.

Even though this is our plan of action, with aging machines and a sluggish economy for manufacturing, big investments with little work are nightmare decisions I can only pray we are not forced to make.  For those manufacturing plants that do have to replace machines, I wish you the best for I know the challenge of relinquishing cash in order to continue company operations.

The decision of “Repair VS Replace During Times of Struggle”, is not an easy choice, but one that should be well thought out and administered with due care.