2016 BDO Manufacturing Risk Factor Report

Manufacturing Industry Serves Up New Risks
The manufacturing industry is getting mixed reviews.

The Institute for Supply Management (ISM) Index reported that activity was up in April after five straight months of declines.

Then, in late May, the Purchasing Manager’s Index reported the first reduction in output since September 2009. In the trenches, manufacturers say domestic demand has been solid, while global business has been more challenging.

And the end customer matters: in a recent earnings call, Caterpillar’s CEO noted, “Just about any market that’s away from oil is doing pretty good.”

“Pretty good” is a modest but realistic goal for manufacturers this year, and their top concerns echo this cautious optimism.

Our annual analysis of the most frequently cited risk factors found the supply chain remains at the top of the list - cited by 100 percent of manufacturers we analyzed - while emerging and growing risks in cybersecurity, competition, labor, pricing, regulations and international operations are also keeping manufacturers up at night.

While emerging technology, competitive and regulatory risks are impacting every sector, gauging the mood of the manufacturing industry might depend on who you ask.

Economic uncertainty may have executives planning cautiously for growth, but in the context of the global economy, U.S. end customers have more money to spend than their international counterparts.

At the same time, many manufacturers are incentivized to move jobs back home - only to compete for skilled labor in short supply.

In 2016, we expect manufacturers to continue to adapt to new technology opportunities like IoT and automation.

By aligning with innovation, they will be better positioned to attract new engineers and skilled workers.