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Press release from Business Wire

U.S. Manufacturers Optimistic About Growth, but Concerned by Impact of Uncertain Demand, Rising Commodity Prices, New Accenture Study Finds

<p class='bwnowrap bwalignc'> <i><b>Manufacturers commit to greater operations investments to boost competitiveness</b></i> </p>

Monday, May 21, 2012

U.S. Manufacturers Optimistic About Growth, but Concerned by Impact of Uncertain Demand, Rising Commodity Prices, New Accenture Study Finds08:00 EDT Monday, May 21, 2012 NEW YORK (Business Wire) -- Eighty-nine percent of senior executives at North American manufacturers expect their company's revenue to grow in 2012, and 50 percent predict growth of at least 6 percent, according to a new Accenture (NYSE:ACN) survey that also found that almost two thirds of manufacturers are optimistic about global economic growth. Even so, when asked what would most impact their growth targets, 67 percent of the 81 manufacturing executives surveyed cited uncertain consumer demand and 60 percent pointed to rising commodity prices as possible obstacles. The manufacturers are also concerned about weaker pricing power for finished goods and services (43 percent) and pressure to reduce operating costs (41 percent). The survey also reveals that 85 percent of the manufacturers expect that the improvement of their company's operating model will be a significant priority through the end of 2013, and they plan to invest in or strengthen it. More than half of the manufacturers (52 percent) also are considering increasing their use of contract manufacturing as a way to vary their cost structure and increase their flexibility. To improve profitability, 85 percent of manufacturers said they will reduce their cost of goods sold, and 82 percent said they intend to improve their operational efficiency. “In today's era of permanent volatility, manufacturers need agile operating models to surpass the competition and our survey indicates that North American companies have bold plans to improve their flexibility,” said Richard Bergmann, managing director for Manufacturing. “An adaptable, cost efficient global manufacturing network not only improves financial performance, but can help respond to fast changing market demands and maintain the high levels of customer satisfaction that underpin long term growth.” Relocations to continue Operations relocations will continue to be an important aspect of manufacturers' strategies, according to the survey. Forty-three percent of the manufacturing respondents said they expect to move operations through 2012 and 2013 as they continue to manage costs and look for opportunities to increase customer responsiveness. These moves would follow a flurry of activity that occurred in the last two years, during which 65 percent of the manufacturers said they had moved some operations. Executives most frequently said they moved operations to the United States (40 percent), China (28 percent) and Mexico (21 percent). Although reducing operating costs was the prime motivation for moving operations, respondents also pointed to the need to enter new markets and improve customer service. “As companies consider where to maintain or move operations, they need a clear view of all the costs associated with their global footprint,” said Bergmann. “Managing those costs in the face of rising oil costs, changing government regulations and disruptions to demand, supply and pricing requires investment in new skills and capabilities to ensure their supply chains are robust and adaptable. We see a strong indication that North American manufacturers are relocating not just to drive down costs, but to seize growth opportunities and maintain customer satisfaction.” Balanced approach to capital investment While 60 percent of North American manufacturers surveyed continued to invest capital in their business in 2011, 35 percent of the manufacturers deferred their capital investments during the year. Forty-three percent of those who deferred investments said that doing so hurt their competitive position. When looking to capital investments for 2012 and 2013, 86 percent of the manufacturers said their companies planned to invest in manufacturing equipment, 64 percent in existing manufacturing infrastructure and 63 percent in hardware and software to support business performance. “Manufacturers who put off capital investments in recent years appear to recognize the drawbacks once growth returns,” said Bergmann. “Given the record amount of cash that North American companies have accumulated, they now have an opportunity to invest to improve operating models and execution capabilities. That can come as much from enhancing existing capital and operations as well as investing in new technologies.” According to the survey, nearly two-thirds of manufacturers said they had either met or surpassed their 2007 production (62 percent) or profitability (62 percent) levels. About three in 10 expect to reach 2007 levels of production (31 percent) and profitability (27 percent) within one to two years. Methodology Between April and December 2011, 81 senior manufacturing executives in North America at large global companies with revenues of $3.1 billion on average completed a survey, providing their perspectives on the state of manufacturing. The respondents represented the automotive, consumer and industrial products, electronics and high technology, and aerospace and defense sectors. Respondents were allowed to complete the survey via the telephone or the Internet. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world's most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. Though its Skills to Succeed corporate citizenship focus, Accenture is committed to equipping 250,000 people around the world by 2015 with the skills to get a job or build a business. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com. Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50284224&lang=en AccentureBarb Lyon, (703) 947-1838barbara.d.lyon@accenture.comorBurson MarstellerJosh Purdy, (612) 752-5602josh.purdy@bm.com