STATS BEHIND THE SCENES

Prior to the latest drop in the stock markets earlier this week to below 7000, a January survey of 570 contract manufacturers conducted by MFG.com discovered that a surprising 45 percent of respondents still project growth this year. Overall, 28 percent of these job shops forecast their business to remain at last year's level as they make tough choices to steady the bottom line and boost operational efficiencies.

37 percent of these job shops are optimistic the global industry will rebound this year. 28 percent are neutral on the possibility and 34 percent think a 2009 rebound is unlikely. In reference to expanding their business, 75 percent of these suppliers seek to spread their services into other industries. They see promise for additional contract manufacturing business in a variety of industries, including wind power, solar power and generation, alternative energy, medical, marine, biotechnology and pharmaceuticals, mechanical assembly, subassembly and test, automotive accessories, agriculture, aerospace, apparel and textiles and more.

To do this, these job shops are looking at a variety of strategies to acquire new customers this year. In fact, 24 percent of them plan to increase their web presence, 19 percent intend to enter new markets, 16 percent will attend more trade shows, 12 percent are retaining a sales representative or broker, 8 percent are expanding their outside sales staff and another 5 percent are expanding their inside sales team. Only 17 percent are not employing any of the tactics above.

53 percent of these manufacturers have reduced their profit margins to increase customer demand and acquire new customers, while 39 percent have not decreased their profit margins. Seven percent are not sure. These job shops have implemented various changes during the current economic downturn, including:

? 28 percent shortened shifts or work hours
? 26 percent have done nothing – it is business as usual
? 23 percent had layoffs at their company
? 9 percent canceled shifts
? 6 percent implemented automation to reduce payroll
? 3 percent added overtime
? 2 percent added shifts
? 2 percent opened new facilities
? 1 percent closed facilities

In the past six months, 61 percent of these job shops experienced a decrease in order volume (both value and quantity) from their customers. 22 percent had no change in business, while 15 percent experienced an increase in orders from their clients. Two percent were not sure. In a follow-up question, these manufacturers were asked: If your customers decreased the volume, did they increase the frequency of their orders? 89 percent responded no; 7 percent had an increase in frequency of order, and 3 percent were not sure.

Questioned about the potential of their company to grow this year, the majority of the job shops surveyed continue to hold steady:

? 36 percent say they will grow between 1-24 percent
? 9 percent plan to grow between 25-50 percent
? 28 percent project no growth
? 17 percent plan to downsize between 1-24 percent
? 3 percent say they will downsize between 25-50 percent
? 1 percent don't plan to be in business by the end of the year

The survey was almost split down the middle regarding overall business conditions, with 51 percent of companies experiencing declining conditions while the other 49 percent see improving or excellent business conditions. 50 per cent of these job shops noticed a decrease in new demand over the past six months. 28 percent of them reported no change in customer demand and 18 percent experienced increased business from their current customers. Three percent were not sure.

These suppliers were asked whether they had noticed an influx of work coming back to the United States from overseas:

? 54 percent have not seen work coming back to the U.S.
? 16 percent have noticed an influx of work coming back to the U.S.
? 30 percent were unsure

They were also asked if they had postponed or canceled any major purchases due to the current state of the economy:

? 18 percent stopped hiring new employees
? 15 percent postponed or cancelled capital equipment purchases
? 12 percent have not stopped any purchases to date
? 11 percent stopped hiring replacement employees
? 11 percent curtailed business travel to customers and trade shows
? 8 percent cancelled their memberships in professional or industry associations
? 7 percent halted facility expansion
? 7 percent will not purchase software
? 4 percent will not pursue business expansion

Somewhat surprisingly, 25 percent of shops have no plans for cross-industry growth. Think about that for a moment. What does it say when one out of four shops makes no attempt to think "outside the box" of their existing scope as manufacturing dwells at a 26-year low in the United States? Stay tuned.

MFGWatch is a service provided by MFG.com, Inc., 2700 Cumberland Parkway, Suite 500, Atlanta, GA 30339, www.MFG.com.