The Manufacturing outlook is Optimistic despite concerns a Looming Recession

The manufacturing outlook for medieval market makers is optimistic, despite concerns about an expected recession.

This is one of the findings of the BDO 2020 Manufacturing CFO Outlook Survey, which surveyed CFOs from global midmarket construction companies about their market expectations, investment strategies and technology initiatives. CFOs represent companies in a variety of industries with revenues of $ 250 million to $ 3 billion.

The survey was conducted by BDO, a global tax and financial services advisory company with practices for multiple industries including manufacturing and distribution in Chicago, prior to the coronavirus outbreak, which has disrupted a broad number of businesses and Economic uncertainty has increased for the year ahead.

According to the survey, more than two-thirds of respondents (77%) expect revenue to increase for 2020, and more than half (54%) of them expect revenue to increase by more than 10%. In addition, two-thirds (75%) of respondents anticipate an increase in profits, with just under half (48%) expecting profitability to grow 10% or more.

Optimism comes at a time of economic uncertainty and anticipation of an upcoming recession – even before the new coronavirus hits. According to the survey, 20% of manufacturing CFOs forecast a recession to begin by the end of 2020, while 38% of the time by 2021 and 47% believe it will be after 2021. The current coronavirus epidemic likely throws a wrench in some of the survey’s findings, but to what extent is still an unknown.

Recession is coming

The survey shows that the variability in manufacturing market trends, said Escander Yavar, is the national leader in manufacturing practice BDO USA.

Market research from a year earlier would have predicted a recession starting in 2019, but it has been pushed for at least a year, Yavar said. Trade wars and tariff policies are issues that affect manufacturers’ cost lines, but their major concern is an imminent recession.

“The industry is concerned about trade and tariff policies that are more protectionist and secessionist because it’s not just good for manufacturers. They will have a free-flowing economy,” he said. “But if you have a very strong protectionist trade tariff policy and a recession at the same time, this is a big red flag for the industry, so they are trying to avoid it altogether.”

The survey was conducted prior to the coronavirus outbreak, so the results do not reflect if CFO respondents fear that epidemic fears have increased.

Yonar said coronavirus is affecting all industries and the impact on manufacturing will be significant, but it is very difficult to calculate the decline right now. Companies are in a reactive mode and measures such as developing business continuity plans or changing suppliers will not happen overnight.

“A lot of companies are thinking more and more in terms of trade tariffs on the supply chain and the impact in China of coronaviruses, but it takes time and I haven’t seen many examples of best practices to deal with the situation,” she said. . “We just don’t know how big those numbers are going to be in terms of impact, and months or weeks in the process of finding [alternative] Education may take. Companies are still evaluating whether to move that step. Resources or developing new supplier relationships. ”

The usa And trade tensions, characterized by mutual tensions between China, were already causing manufacturers problems before the coronavirus outbreak. The survey indicated that 21% of manufacturers experienced supply disruptions in chains due to government restrictions in 2019.
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Manufacturers investing in Industry 4.0

However, 1 reason for a positive production prognosis in the face of economic downturn concerns could be the rising investment in advanced Industry 4.0 technology.

“Following a comparatively slow phase of growth in productivity during the past couple of decades, the convergence of numerous technologies, from cloud computing into the Web of Things into artificial intelligence and elongated fact, is ushering in a new age of expansion and reinvention — that the fourth largest Industrial revolution, or even Business 4.0,” the report said. “This nascent paradigm change is unfolding in real time and will continue to take origin irrespective of where we’re in the economic cycle”

The report found that investing in technology or infrastructure was the top business priority for 2020. More than half of CFOs listed digital transformation or applied digital technologies to modernize manufacturing and business processes and introduce new business models as the most important manufacturing strategy for 2020. (57%). This was followed by product or service expansion (52%), geographic expansion (47%) and restructuring or reorganization (34%).

“Ten years ago, CFOs just wanted to know more, and they are just educating themselves in this industry 4.0 market – IoT, all cloud technologies and advanced analytics,” said Yavar. “What we are seeing in this report is that more and more are actually taking the initiative and driving some sort of use case to see the return on investment value.”

This is unlikely to be large-scale reinvention, but more manageable projects which have concrete value, ” he explained.

“They have started to handle certain KPIs [key performance indicators], while it’s attempting to improve their client experience, while it’s enhancing their surgeries,” Yavar explained. “They have started to make this a board-level conversation and they’re becoming some executive initiative, so the wonderful thing about this is it is inevitable.”