From upgrading facilities to buying technology, industrial companies are confidently investing in their businesses to build upon a period of sustained growth, according to the results of ThomasNet's newest Industry Market Barometer (IMB).
Nearly half (45 percent) of the companies responding report growth over the last six months of 2010, and 88 percent of those are confident in their future expansion. The survey reveals a set of specific strategies that fueled this growth, from customer retention efforts to movement into new markets and product development. Bolstered by the results of these strategies, respondents are investing more in their companies and recruiting talent in anticipation of increased customer demand.
Nearly 3,400 professionals participated in the latest IMB, a survey of buyers and sellers of industrial products and services, most of whom represent small and midsize businesses (SMBs). The research looks at their performance, outlook, and strategies for success. Respondents include business owners and managers, sales and marketing executives, engineers, and purchasing agents from manufacturers, distributors and service companies in North America.
"Industrial buyers and sellers are busy collaborating in a way that is feeding and sustaining the sector's growth, which bodes well for the overall economy," says Eileen Markowitz, president of Thomas Industrial Network. "Successful companies are executing strategies that cultivate existing customer relationships and develop new business opportunities. Our data also shows that they're relying heavily on the Internet to improve the effectiveness of these strategies."
Core strategies drive growth and confidence
Despite the healthy growth being reported, survey respondents acknowledge the hurdles ahead of them. Interestingly, their initiatives and investments speak directly to their obstacles. Their top challenge (cited by 68 percent) is customers cutting back or going out of business, and they are addressing it by focusing on customer retention and service. Domestic competition is another challenge which respondents are tackling by competing more aggressively in core markets, and pursuing business in new industries and U.S. geographies.
One example of a company that has used these strategies to succeed is Perfection Spring & Stamping Corp., a custom manufacturer of springs and wire forms, which recently received several project orders from the innovative automaker, Tesla. This win, in Perfection's core automotive marketplace, comes as the company works to rebuild after the recession, when it experienced many customer losses. Perfection Spring has placed increased emphasis on customer service and bringing in new clients, leading to steady month-on-month growth.
Confidence leads to further investment
Respondents' priority initiatives through June 2011 demonstrate an expectation of increased demand. Two subsets of respondents emerge in this fourth IMB. The first are "Outperformers," defined as those companies that not only grew in the last half of 2010 but also expect further growth by June 2011. A second group, "Optimists," also expect growth by June 2011, despite business staying the same or declining in the last half of 2010. Companies from both segments are setting priorities and making investments-positioning themselves for more growth ahead.
Their top priorities include increasing production capacity, adding new lines of products and services, upgrading facilities and managing their costs. Their investments map to these strategies. For example, most are spending on technology, such as software, for areas such as cost management. To ratchet up production capacity or develop more products/services, they are investing in capital equipment.
The companies surveyed are also hiring in anticipation of growth; 37 percent of respondents plan to hire through the first half of 2011. The most common job openings align with their priorities and include skilled trade workers (43 percent), line workers (36 percent) and engineering professionals (35 percent), in addition to customer service and sales/marketing staff.
"With our company's double-digit growth continuing, we're investing in new capital equipment and facilities, and hiring for positions across the enterprise, from engineers to warehouse personnel. We're also adding 45,000 square feet to our facility, more than doubling the size of our 35,000-square-foot building," says Brandon Plock, sourcing team leader, Field Fastener, a global distributor of fasteners.
Internet fuels the fire
Industrial businesses are recognizing that investing in a more strategic use of the Internet, in particular, their websites, is enabling their strategies to succeed. This is especially evident among the "Outperformers." Nine out of 10 say their Web strategies have been important to their expansion, delivering increased revenue, new sources of business, an ability to compete more aggressively and improved service.
"Our new Internet strategy has enabled us to better compete in our core markets while building a pipeline of new prospects," says Joshua Kahn, evp, Perfection Spring & Stamping Corp. The custom manufacturer is bringing in the highest-quality leads it's ever had, even when the organization had 18 sales agencies around the country.
"We're excited to see continued growth and investments in the industrial sector," says Markowitz. "The information we've gathered from thousands of businesses demonstrates that their strategies are paying off. These companies provide affirmation of a winning formula for industry's future success."
To view and download the full results of the latest IMB, click here.