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Live Chat 10/10: Good News for SMB Manufacturing

121 comments on “Live Chat 10/10: Good News for SMB Manufacturing

  1. Ashu001
    October 10, 2013

    This one will be quite interesting to watch! I am most fascinated by how they plan to Manage Critical issues with relation to Supply Chain-One shouldnt forget that majority of the Electronics Supply Chain is now in Asia.

  2. Ashu001
    October 10, 2013

    Informationweek has a New Slideshow on-8 Phablets to watch!

    http://www.informationweek.com/hardware/handheld/8-phablets-to-watch/240162235

  3. Hailey Lynne McKeefry
    October 10, 2013

    I'll front load our usual welcoming patter:

     

  4. Hailey Lynne McKeefry
    October 10, 2013

    We will be starting at 10:30 a.m. PST/1:30 p.m. EST sharp. First, though, there are two housekeeping notes:

    First, please make a copy of your post before hitting the “post” button – just in case.  If the system “eats” one of your carefully crafted thoughts, please hit “Ctrl-Z” to recover it.

  5. Hailey Lynne McKeefry
    October 10, 2013

    Second, if you have problems posting, we suggest trying a different browser.  IE9 is a popular choice, but sometimes find Firefox, Chrome, or Safari work better.

  6. Hailey Lynne McKeefry
    October 10, 2013

    This will be a fun, fast, and friendly conversation, so please do not hold back with your comments or questions.  There are no dumb questions and we value everyone's point of view.

  7. Hailey Lynne McKeefry
    October 10, 2013

    Questions, theories, ideas, real world experiences and even friendly rants are welcome here.

  8. Hailey Lynne McKeefry
    October 10, 2013

    And always, please announce your arrival so we can give you a warm EBN welcome and offer you some virtual  guacamole. 🙂

  9. mmcdonald
    October 10, 2013

    Hi Hailey,  Looking forward to the chat…

    Mike McDonald

  10. bobsyeruncle
    October 10, 2013

    Greetings.

  11. Hailey Lynne McKeefry
    October 10, 2013

    Hi Mike, gald you are here! I imagine folks will arrive soon.

     

  12. Hailey Lynne McKeefry
    October 10, 2013

    Hi Bobsyeruncle. Glad to have you with us. Could i offer you some virtual guacamole or some other virtual refreshment?

  13. PWMG
    October 10, 2013

    Hey everyone.

  14. Hailey Lynne McKeefry
    October 10, 2013

    In the meantime, let me introduce our guest:

    Mike McDonald joined Prime Advantage in 2000 as a Regional Account Manager responsible for the southeastern region of the United States. As VP of New Business Relationships, Mike has played a large role in the quality and growth of new Members in the buying group. Today, Mike's responsibilities include overseeing the recruiting process, recruiting Members in the Midwest and portions of the east coast, and creating and implementing specific marketing strategies. In the past four years, Prime Advantage's membership has nearly doubled, from 400 to more than 750. Prior to joining Prime Advantage, Mike was a Regional Sales Manager for Welded Tube Company of America based in Chicago. He also spent four years in various sales and management positions with the financial services division of Bank One.

    Mike received his BBA in Marketing and Business from Grand Valley State University and his MBA from the Mendoza College of Business at the University of Notre Dame.

  15. bobsyeruncle
    October 10, 2013

    Very nice. Thx.

  16. Hailey Lynne McKeefry
    October 10, 2013

    Welcome PWMG. glad you could make it!

     

  17. Hailey Lynne McKeefry
    October 10, 2013

    and just a bit about prime:

    Founded in 1997, Prime Advantage is a private buying group dedicated to bringing its clients the best possible savings on raw materials, components, supplies and services. By combining the purchasing power of industrial manufacturers, Prime Advantage negotiates volume rebates and discounts with an exclusive group of world-class global Suppliers.

    Prime Advantage represents more than 750 U.S.-based manufacturers in more than 25 different industries, including commercial foodservice, construction, food processing, material handling, packaging, truck and trailer and vending.

  18. Hailey Lynne McKeefry
    October 10, 2013

    Mike, Prime recently released a survey of small and midsized manufacturers. What stood out to you in teh results and what are the messages to the manufacturing industry in general?

  19. mmcdonald
    October 10, 2013

    What stood out most Hailey was the consistency in the positive expectations.  Specifically, revenue growth, hiring and CAPEX.  The numbers have been trending in a steady positive direction for several years now.  It's encouraging, because these are mid market companies (average is $100mm in revenue)….the life blood of mfg in the states..

     

  20. Ashu001
    October 10, 2013

    Sometimes I wonder-Why does time fly so fast?

  21. Hailey Lynne McKeefry
    October 10, 2013

    Would you call SMB manufacturers the canary in the coal mine?  Are they early or late in teh cycle in terms of seeing increase or decline would you say?

     

  22. PWMG
    October 10, 2013

    I see this is the 12th survey you have done. 

    What stands out, compared to past surveys, in terms of capital spending for your member companies?

  23. mmcdonald
    October 10, 2013

    It's got big wings, tech4people

     

  24. Ashu001
    October 10, 2013

    @mmcdonald-Do you feel these SMB Manufacturers can form the Ecosystem neccessary to move Large-Scale Manufacturing back onshore from China?

  25. Hailey Lynne McKeefry
    October 10, 2013

    THanks for coming Tech4People. Pull up a chair!

  26. mmcdonald
    October 10, 2013

    I would definitely say SMB are a strong indication of what's happening in the economy.  Most of our Members, while they do sell internationally, sell most of their products domestically.  The fact that they're hiring is probably the best news of all, because that's always the lagging indicator.  

  27. Michael Steinhart
    October 10, 2013

    I could use a virtual margarita – hi everyone

  28. Ashu001
    October 10, 2013

    @mmcdonald-What is the Biggest factor for SMBs to re-start Manufacturing America?

  29. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, we've had a lot of debate around here lately on employment. Some say tehre's a a lack of qualified candidates. Others say a lack of jobs.

  30. mmcdonald
    October 10, 2013

    Good question PWMG.  Capital spending has been pretty consistent over the last 3 years or so.  Our Members are investing back in their businesses, which  is encouraging.  To answer your question, what stood out is the same as revenues….a consistent positive trend.

  31. Hailey Lynne McKeefry
    October 10, 2013

    Hey Michael S, glad you could come. The pitcher is on the table to your left. Please help yourself. Salt is there too… and the chips and guac.

  32. Michael Steinhart
    October 10, 2013

    What's the cost differential between Asian manufacturing and on-shore US manufacturing? 

  33. Michael Steinhart
    October 10, 2013

    It's encouraging to hear that things are on the upswing since 2008-9

  34. mmcdonald
    October 10, 2013

    tech4people, I think the “restarting” of mfg in the states has already taken place.  Rising wage rates in China and other LCC are making the US on the brink of being the best and most affordable place to mfg…

     

  35. Michael Steinhart
    October 10, 2013

    that goes to what I was asking, mmcdonald — but are companies looking for the 'next cheap thing' now that China's becoming more expensive?

  36. mmcdonald
    October 10, 2013

    Hailey, you make a good point on employment.  I think both are true.  Our members state they have problems filling skilled positions (welding, etc.).  But also, this recovery just like others usually makes firms realize they can do more with less, and some of those jobs won't return.

  37. Hailey Lynne McKeefry
    October 10, 2013

    We are definitely seeing more organizations talk about reshoring or onshoring. Lots of tech giants are making forays into that area: Motorola has announced that its latest smartphone will be manufactured in Fort Worth, Texas. It says the Moto X will be the first such device to be assembled in the US. Apple has confirmed that it will move some of its Mac production to Texas. And there are reports that Google Glass will be produced in America.

  38. PWMG
    October 10, 2013

    Hailey you are making me hungry

  39. Ashu001
    October 10, 2013

    @mmcdonald-I read that sometime in 2014-15,Manufacturing Costs in China and the US will be the same;especially as Wages in China keep on rising at Double Digit Rates every year.

    In addition America has access to dirt-cheap Domestically Produced energy;while China is importing everything from outside.

    I just read that the EIA claims that China is now the World's Largest Importer of Crude Oil-6.3 million barrels/day ;surprassing America's 6.1 million barrels/day

  40. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, so at least in part its that workers need a different skillset. to that point, there are a bunch of universities, at least a dozen that have cranked up a supply chain managment degree in the last couple of years.

  41. mmcdonald
    October 10, 2013

    Michael, I don't have specific figures to offer regarding cost of mfg between the US and Asian countries.  But, depressed wage rates are what made those countries attractive, and now those rates are increasing…

  42. Hailey Lynne McKeefry
    October 10, 2013

    @PWMG, virtually or actually hungry. 🙂

  43. Ashu001
    October 10, 2013

    @Hailey-This is very Good news (on the Manufacturing front!!!)

  44. PWMG
    October 10, 2013

    Feeding my mind now!

  45. Michael Steinhart
    October 10, 2013

    I just wonder whether there's a corresponding push to move to India or some other region where you can still get away with paying 20 cents an hour

  46. Hailey Lynne McKeefry
    October 10, 2013

    From your survey, MIke: Forty-seven percent of companies expect to hire in the next six months and fewer than 3 percent are planning layoffs. That's good.

  47. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, i'd also be interested in hearing about capital expenditures. that one out of three figure–what does it say to us do you think?

  48. mmcdonald
    October 10, 2013

    It's official, we're all hungry.  Hailey, you're right about retraining.  Many of our Members have partnered with local junior colleges to create training programs.  It takes time, but it's a great start..

  49. bobsyeruncle
    October 10, 2013

    Any thoughts on why your group's employment expectations are better than most?

  50. Ashu001
    October 10, 2013

    @Michael-I read that GoodYear is planning to TRIPLE Tyre Production in India because the Indian Rupee has fallen by 15%(vs US Dollar) or so this Year.

  51. Michael Steinhart
    October 10, 2013

    Are there state or federal incentives for creating jobs / manufacturing facilities onshore?

  52. JimOReilly
    October 10, 2013

    There are large hidden costs in dealing with Asian suppliers. Typically the inventory pipeline is long, around 3 to 4 months, and this is a major exposure if the market changes or the product mix needs rebalancing.

    Also quality issues stack up for the 4 months, which is a huge exposure.

  53. mmcdonald
    October 10, 2013

    Regarding capital expenditures, the 30% is compared to the first half of the year.   There are some unknowns, such seasonality, but all the same, it's a strong number.  50% stated they'd keep their capital expenditures the same as the 1st 6 months, and 30% stated they'd increase..

     

  54. Hailey Lynne McKeefry
    October 10, 2013

    Welcome, Jim! Nice to have you with us… Can i offer you refreshment?

  55. JimOReilly
    October 10, 2013

    I saw a study that palces the US way down on education rankings. We do not have a good continuing education system, while many competitors are good at this.

  56. Hailey Lynne McKeefry
    October 10, 2013

    For those who have recently joined, Prime has done a survey about SMB manufacturing. You can read more here: http://www.ebnonline.com/author.asp?section_id=3219&doc_id=268559&

     

  57. JimOReilly
    October 10, 2013

    Tequila sunrise with a twist and umbrella please!

  58. Tom Murphy
    October 10, 2013

    Sorry I'm late, but I did bring some fresh guacamole and will make some margaritas if anyone cares to join me.

     

  59. Michael Steinhart
    October 10, 2013

    Jim – are you talking about all manufacturing, or just electronics?

  60. Michael Steinhart
    October 10, 2013

    I'll have what @Jim's having!

  61. Hailey Lynne McKeefry
    October 10, 2013

    Always glad to have you, Tom… late or early! 🙂

  62. mmcdonald
    October 10, 2013

    @bobsyeruncle, good question.  It's one we were scratching our heads on trying to get a more clear picture.  Our group employement numbers are more encouraging that what you're hearing in the general news.  I think part of that is a delay in hiring.  These firms came out of the recession with lean staffs, and became more efficient.  I think business has picked up to a point where they have to increase headcount…which is good.  Long story short, it's the lagging indicator, and probably just timing..

  63. JimOReilly
    October 10, 2013

    Electronics is more prone to the problem, because life cycels are short, but automotive has the issue, and even sheetrock has the quality issue

  64. PWMG
    October 10, 2013

    It looks like Prime Advantage's member companies are involved in a variety of markets. 

    What types of things are your members buying a lot of?

  65. Hailey Lynne McKeefry
    October 10, 2013

    @and I can always trust you to bring the Guacamole…. Tom's is the best.

  66. Tom Murphy
    October 10, 2013

    I was reading in and liked what I saw about US manufacturers bringing some jobs back home.  I'm dubious about how extensive that will be. It seems to me that transportation costs linked to energy are the key here — it's cheaper to make stuff locally than to ship parts to the factory and then send goods halfway around the world for consumers.

  67. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, could it also be an SMB thing? I suspect that employees might e more loyal at a small company. It's hard to leave anonymously. Possible?

  68. PWMG
    October 10, 2013

    Good point Tom. Transportation costs are a big factor.

  69. Tom Murphy
    October 10, 2013

    Shortened product cycles (now just 12-18 months for consumer electronics) are a huge factor.  The supply chain now extends from the designer to the retailer in near real-time.  A big retailer like Best Buy reserves shelf space for the next generation of mobile phone a year in advance, so they have to know what it will be and how it is likely to sell.

  70. mmcdonald
    October 10, 2013

    Great question PWMG.  Our Members are mid-sized manufacturing firms (typically OEMs), that build equipment in such industries as commercial food equipment, packaging and conveying equipment, truck body, and many other metal consuming sectors.  We've also expanded into the food sector…confectionary companies, etc. Average size member is roughly $100mm in sales.

  71. JimOReilly
    October 10, 2013

    Foxconn is having major problems getting workers at the low rates they pay. That's one reason they are looking to robot assembly.

  72. mmcdonald
    October 10, 2013

    @Hailey, absolutely.  I think that's a big part of it as well.

     

  73. JimOReilly
    October 10, 2013

    Are US environmental laws too strict or just too bureacratic. This is a hold-back on the metal bending industry

  74. Tom Murphy
    October 10, 2013

    I really doubt that China will have a shortage of lowly paid workers for a very long time. We're not talking about highly skilled workers here. There are still hundreds of millions of Chinese living in utter poverty who would be happy to snap iPhone components together for a yuan a day.

  75. mmcdonald
    October 10, 2013

    @Tom, you're dead on.  Trasportation costs, along with time on ocean are huge factores.  A supply chain professional would much prefer to get on a plane and visit a supplier in Mexico, or the souther US states, than head to China….assuming the costs are close to one another…which they are..

  76. JimOReilly
    October 10, 2013

    Tom, the issue with labor force is location, location! The majority of the poor are in rural communities and would have to relocate. That pool may be thinned out alreqady. Also, a large part of the urban workforce has seen the richer side of the economy, and rsent the low wages they are paid.

  77. PWMG
    October 10, 2013

    So, what does your survey say are some of the biggest purchasing concerns of $100M industrial manufacturing companies today? 

  78. Hailey Lynne McKeefry
    October 10, 2013

    I also want to bring up the topic of Conflict minerals. Your report said: As the Conflict Minerals Rule, an SEC regulation that requires companies to disclose whether conflict minerals are used in their products, is about to come in effect in May 2014, 15 percent of respondents are already feeling the impact of this rule on their organization. Another 40 percent of respondents are not yet sure if their company will be affected.

  79. Tom Murphy
    October 10, 2013

    On the other hand, I think US workers will forego the $40/hour factory wage of the 1970s and settle for $20 if they can get a stable job with benefits. 

    I've heard that the labor costs attached to an iPhone are about $11.  And the darn things cost $500. I don't think Americans especially would hesitate in paying $520 if the phone was made on the mainland US.

  80. Hailey Lynne McKeefry
    October 10, 2013

    I know that it's going to take some time tfor enforcement as well. At the same time that number feels low to me. What do you think is going on there?

  81. mmcdonald
    October 10, 2013

    @PWMG, the biggest purchasing concerns are the cost of raw materials (always a top concern but dropping dramatically), and healthcare costs.  Healthcare is trending up and has been for a few years, which is understandable.  Raw materials trending down, because there's such low risk of inflation right now..

  82. Tom Murphy
    October 10, 2013

    The thing about conflict minerals as I understand it is that it doesn't affect privately held companies. And it will be very hard to enforce the rules because the government would have to trace the conflict minerals through the entire chain to make sure everyone is complying.  Does even the US government have the ability to do that?

  83. Hailey Lynne McKeefry
    October 10, 2013

    @Tom, the key here is that it affects public companies but they have to trace it through teh entire supply chain–so by virtue of a relationship with a public companies, private companies are also going to get hit with this.

  84. mmcdonald
    October 10, 2013

    @Hailey, regarding conflict minerals, I think the low number stating it's impacting them is mainly a matter of size of our Member.  Conflict mineral regulation definitely impacts public companies, and larger private firms, but it just hasn't hit the smaller firms yet in big waves.  I think in time some of that will change.

  85. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, based on current political news, i don't think that healthcare concern is going to wane anytime soon. 🙂

  86. Tom Murphy
    October 10, 2013

    Jim: China's railroads already carry millions of workers to the city — parents essentially move there to work, leaving children with grandparents, then rush home on holidays on crowded trains. Sometimes they wait at the station for days to get on a train.  China is building new high-speed raillines like crazy — with the same vigor they showed in building mobile phone infrastructure in the 90s.  They're also building a LOT of nuclear power facilities, which could greatly reduce reliance on foreign oil while simultaneously cleaning up the horridly polluted urban air.

  87. Hailey Lynne McKeefry
    October 10, 2013

    I agree, Mike, on ConMin..i heard that it generally takes four to five years for enforcement on this type of hting to kick in. a few big news items on that front and everyone will be scrambling again.

  88. mmcdonald
    October 10, 2013

    @Tom and Hailey, you're spot on.  Smaller private firms that hold a place in the supply chain of larger and/or public firms will be impacted.  Those that don't, just haven't yet…and not sure to what extent they will.

  89. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, that might be something to add to the next survey, eh?

  90. mmcdonald
    October 10, 2013

    @Hailey, has healthcare been in the news??:)

  91. PWMG
    October 10, 2013

    It seems that everyone is waiting to see how the ACA will impact healthcare costs…

    How long can we hold our collective breath? The insurance providers sure are nervous about it, w/ many saying premiums will definitely go up for some people.

  92. Hailey Lynne McKeefry
    October 10, 2013

    i've seen it once or twice i think.

     

  93. mmcdonald
    October 10, 2013

    @Hailey.  Looks like we have our first question of the next survey:)

  94. Hailey Lynne McKeefry
    October 10, 2013

    We are coming up on the 45 minute mark… so please get your last questions and comments for Mike out there.

     

  95. Ashu001
    October 10, 2013

    @Jim-Its fascinating that you mention Quality Issues as a Serious problem in Asia.Most interesting.

  96. JimOReilly
    October 10, 2013

    Tom, China is aiming to bring thorium nuclear power on stream in 2024. That is much asafer and cheaper, and they have a lot of thorium.

  97. Tom Murphy
    October 10, 2013

    I don't think there's any doubt that insurance premiums are rising — they have been for years, and insurers will use any excuse to raise them more.  The ACA will help millions get insurance that they couldn't buy before, and will provide aid to those in poverty. But the middle class will pay more.  That will continue until we nail down the problem causing the increases — the double-digit increases in the cost of medical care.  The AMA won't like it, but at some point, we need price caps on medical care.

  98. mmcdonald
    October 10, 2013

    All. Interested in your feedback.  With positive reveune, hiring and capital spending trends for our group (small and mid-sized OEMs), are you experiencing the same at your firms?

  99. JimOReilly
    October 10, 2013

    @tech4people. Quality is generally Ok, but when it goes wrong, with a 4 month pipeline, it can cuase havoc at the US end. Apple just went though that.

  100. Hailey Lynne McKeefry
    October 10, 2013

    @Mike, if you want to share your email, too, some of our readers/visitors may want to think about it and get back to you.

  101. PWMG
    October 10, 2013

    Price caps on medical costs in the U.S.? Isn't that against the law?

    We can dream…

  102. Hailey Lynne McKeefry
    October 10, 2013

    One last question, i know your survey is a broad range of manufacturing–do you have specific thoughts for manufacturers in the electronics industry based on the trends you've seen?

  103. mmcdonald
    October 10, 2013

    Sure thing.  Mike McDonald  mmcdonald@primeadvantage.com

     

  104. Ashu001
    October 10, 2013

    @mmc-We are seeing revenue is largely flat this year.I guess it has a lot to do with the Shutdown issues plaguing Government contracts today

  105. Hailey Lynne McKeefry
    October 10, 2013

    @Tech4People, do you think that's going to get better, worse or stay the same?

     

  106. Ashu001
    October 10, 2013

    @PVMG-IN the name of Price Caps we actually get much Higher costs every single day!

  107. Tom Murphy
    October 10, 2013

    Oh, sorry we're running out of time. We have so much to talk about, and I got here so late!

    Mike: Thanks for sharing your insights!! 

    My two cents: I think there is very little reason to be optimistic about the economy.  If there are big increases in capex this year, my take is that it reflects pent-up demand more than a true resurgence in the global economy.  Europe is in real trouble, and Germany's new coalition may not continue to bail it out. The US outlook has improved, but political anarchists seem intent on ruining the recovery. And China — as noted below — has some challenges with energy, labor costs and perhaps even trade balances.   If I had to bet on one country doing well in this environment right now, it would be India.

  108. Ashu001
    October 10, 2013

    @Jim-Yes I heard about the Apple issue.

  109. mmcdonald
    October 10, 2013

    @Hailey, my hope and expectation is that the growing business of our Member companies does equate to growth in the electronics sector.  Electrical components are a key input for many of our member companies.  In a word….encouraging.

  110. Ashu001
    October 10, 2013

    @Hailey-Honestly,we see the Economy Plodding through.Except if you have Oil &Gas Exposure.Then its BOOMING!

  111. Hailey Lynne McKeefry
    October 10, 2013

    in semiconductors, for example, 2013 is clealry hard…but there seems to be some optimism about 2014 and  2015

  112. Tom Murphy
    October 10, 2013

    Mike: I certainly hope you're right! I think we all do! Thanks again….

    …and thanks to Hailey for your usual gracious job as host!

  113. Hailey Lynne McKeefry
    October 10, 2013

    Thank you Mike, for being a great guest and fielding all our questoins. We look forward to staying in touch with you and your member companies.

  114. mmcdonald
    October 10, 2013

    Great feedback everybody.  Thanks for having me, I truly enjoyed it.  Good insights Tom…

     

  115. Ashu001
    October 10, 2013

    @Tom-Why are u betting on India?Is it because their Currency has fallen so much in last one year(making them much more competitive)???

  116. PWMG
    October 10, 2013

    @Tom – Keep in mind that Merkel's re-election was a mandate. She steers a steady ship there, and Germany still leads Europe, economically.

  117. Hailey Lynne McKeefry
    October 10, 2013

    We hope you[ll come again!

  118. Hailey Lynne McKeefry
    October 10, 2013

    And thank you all for bringing such great thoughts and questions.

  119. Ashu001
    October 10, 2013

    @Tom-India also has woeful Infrastructure,An Intransigient Bueracracy and an Activist Citizens who protest even the Slightest Bit of Pollution.

    What are its Pros???

  120. Ashu001
    October 10, 2013

    @PVMG-Absolutely,Merkel is the Iron Lady of Europe!She is sure to Adandon Greece this Year now.

  121. bobsyeruncle
    October 10, 2013

    Thanks everyone, for your thoughts, and the guac.

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