In 2018, property and casualty insurance company, Chubb, collaborated with the Ohio State University Fisher College of Business and the National Center for the Middle Market to conduct a survey of manufacturers. The resulting report was dubbed “Middle Market Manufacturing: How to thrive in a transforming environment.”
Of the manufacturing trends highlighted in the report, many were accelerated by conditions created by the 2020 pandemic. Here’s what to know about each trend and how to engage with risk-averse SMB clientele going forward.
The Three Ts of Middle Market Manufacturing: Talent, Trade & Technology
Constituting roughly 3% of all U.S. companies, the middle market nevertheless accounts for one-third of the nation’s private-sector GDP. To fall under the “middle market” label, a company must collect a yearly revenue of at least $10 million and up to $1 billion. That’s a significant margin, and manufacturers represent at least 17% of the middle market demographic.
Tom Stewart, Executive Director of the National Center for the Middle Market, understands the manufacturer’s role in driving the U.S. economy, and he centers the main competitive challenges facing the industry on the three Ts of manufacturing: talent, trade, and technology.
“The best midsized manufacturers,” he says, “are showing how to turn new challenges and risks into new markets and rewards.”
In the Chubb report, these three Ts break down into five isolated manufacturing trends to keep an eye on.
5 Manufacturing Trends
1. Greater adoption of manufacturing technologies.
Chad Moutray, Chief Economist of the National Association of Manufacturers, identifies the push toward embracing digital technologies and automation to improve productivity as a trend that rapidly accelerated during the pandemic.
In an interview with Fabricating & Metalworking, he states, “The sector will become increasingly advanced, with technology dramatically altering the way manufacturers think about innovation, production, and after-sale services.”
2. Increased service offerings
After-sale services—installation, monitoring, and maintenance—is another trend highlighted in the Chubb report, with the services component of middle-market manufacturers growing by 17% in 2017.
3. New-skilled labor shortage leading to talent management struggles
New technologies and service offerings have created a “skills mismatch” in an aging-out workforce, resulting in a labor shortage. The pandemic exacerbated this trend as manufacturers struggle to fill hundreds of thousands of newly open, increasingly technical positions.
A priority for the industry going forward is workforce development initiatives such as Manufacturing Day (October 1st) and the Creators Wanted campaign launched in 2019 by the Manufacturing Institute.
4. Globalization challenges paving the way for domestic growth
As sales globalization requires navigating ever-changing foreign trade policies and customs regulations, the Chubb 2018 report identified the fastest-growing middle-market manufacturers as those whose domestic sales made up at least 85% of their annual revenue.
Moutray also shared how the pandemic stressed the need to reevaluate supply chains to focus on production in the U.S., which was already in motion due to trade trends, global events, and rising international costs.
5. Increased supply chain interdependence
Another trend that was fast-tracked by the pandemic is the move toward greater collaboration throughout the supply chain, such as data sharing up and down the chain and with customers. According to Moutray, the World Economic Forum and the Boston Consulting Group estimates that optimizing operations through data sharing could potentially reduce operating costs in manufacturing by $100 billion overall.
What Current Trends Can Teach Us About Selling to Risk-Averse SMBs
SMBs have been hit hard by the pandemic. They can’t or won’t invest in their businesses right now because traditional B2B lenders have made it harder than ever to qualify for loans. Cash flow is a make-or-break issue for many, which is why alternate payment platforms like Clicklease exist to secure the relationship between buyers and sellers.
As a no-fee, point-of-sale purchase option, Clicklease limits the risk of investing in essential equipment for your risk-averse consumers while connecting you to an on-trend fintech solution.
“Uncertainty about COVID-19...will serve as a drag on growth,” says Moutray. Capital spending and hiring have been hindered across the board and consumer and business behaviors are probably changed forever. Still, despite the drag, Moutray’s research shows strong rebounds in production and revenue in 2021.
This is because manufacturers, equipment sellers, and SMB owners are adapting, leaning hard on new technologies, refocusing on domestic trade, and investing in each other up and down the chain.