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Ho, Ho, Ho… An Early Holiday Present

Ho, Ho, Ho…An Early Holiday Present

Every year, I take some time to look at what manufacturing clients across the MEP National NetworkTM  are saying about the future and the challenges they face. It’s usually part of my New Year’s resolution to take the time to step back and consider what is happening with our manufacturing clients and their businesses. This exercise provides a peek into the hearts and minds of the CEOs who run the over two hundred thousand small manufacturers across the U.S. whom MEP supports. It always provides me with some insight into important market intelligence to guide future activity.   

As part of the NIST MEP client survey, we ask MEP Center clients to identify the top three challenges their companies face over the next three years from a pre-determined list.  We’ve been asking this question for nine years and thousands of clients take the time to give us their thoughts. The specific challenges have changed as the economy and economic environment has changed, but some of the challenges have been enduring (continuous improvement, growth, etc.) and others have become more (or less) important over time.

Small Manufacturers’ Challenges

Just under seven in ten clients cited cost reduction as a challenge in FY 2017—a statistic that has remained remarkably stable over the past years. The share of clients reporting this as a challenge fell by only about 3 percentage points over the last nine years. However, there are some important shifts among the challenges cited by clients since FY 2009.

  • Employee recruitment and retention is now the second most frequent challenge cited by clients in FY 2017.  The share of MEP clients who feel this way has more than doubled over the last nine years. 
  • Growth and product development/innovation challenges are now the third and fourth most frequent challenges reported.  Just over five in 10 clients report growth as a challenge and a little less than 44 percent of the clients cite innovation/product development as a challenge over the next three years.
  • In addition, a few other challenges are more important in FY 2017 compared with FY 2009. The share of clients citing technology needs as a challenge rose by nearly six percentage points—from roughly 10 percent in 2009 to over 16 percent in 2017. Managing partners—think supply chains—had a minimal increase over the last nine years.  

MEP Center client challenges chart

Some Improvements

  • On the other hand, smaller shares of clients report that growth, sustainability, and financing are important challenges compared with nine years ago.  For instance, the share of clients identifying financing as a challenge fell by nearly half—from 18 percent in 2009 to under 10 percent in 2017. This reflects changes in the financial marketplace and the fact that many firms have cleaned up their balance sheets.
  • The declining share of clients saying that growth is an important challenge (but more than half the clients still cite it as important, even now) may likely reflect the uptick in manufacturing activity that has occurred over the last nine years and that the core business is doing fine. However, that should not suggest complacency.
  • The share of clients reporting sustainability as a challenge fell by just over six percentage points in the past nine years and the share of clients reporting exporting as a challenge fell slightly.

The consistency in the story is interesting. I suspect some of this reflects underlying changes in the economic environment as well as changes across MEP client companies as MEP Centers respond to new opportunities and challenges in the markets they serve.

Looking Ahead

Looking back is useful, but it’s interesting to ponder what they may suggest for future work with manufacturing clients.  And it also raises a set of challenges for Centers to develop services to respond to new and emerging needs.  As they help clients change, the Centers must change themselves in order to remain responsive to the needs of manufacturers. This data, while drawing on only MEP clients, represents an important piece of information and insight into what are the top of mind challenges facing a broad cross section of manufacturers in the United States. Challenges remain in helping companies improve their performance and we should keep in mind, this is a marathon and not a sprint.

I am reminded of this quote attributed to Mark Twain, which speaks to what both manufacturers and Centers can do: “The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one.” 

Please let us know of any thoughts that you have or topics you would like to see addressed in this blog.

 

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The MEP National Network™ is a unique public-private partnership that delivers comprehensive, proven solutions to U.S. manufacturers, fueling growth and advancing U.S. manufacturing.

About the author

Ken Voytek

Mr. Voytek is the Manager of the Program Evaluation and Economic Research Group and the Chief Economist with the Manufacturing Extension Partnership (MEP) Program at the National Institute of...

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