Survey of CFOs for midsized manufacturers reveals their top concerns and business goals for 2016

Prime Advantage, a leading group purchasing organization for midsized manufacturers has conducted a survey revealing the financial projections and top concerns of industrial manufacturing companies.

In its eighth edition, the survey’s results show that optimism in manufacturing among the group’s Members is far outpacing enthusiasm for the U.S. economy as a whole. CFOs remain confident in their organizations, with an average optimism ranking of 6.9 out of 10, an increase over the previous year. In contrast, optimism in the U.S. economy is lagging as it fell to an average ranking of 5.4.

Prime Advantage Members’ confidence is in contrast to participants in the Duke University/CFO Global Business Outlook which have seen a continued decline in organizational optimism since December 2014.

Eighty-one percent of Member companies are relishing in the positive impacts of decreased oil prices. The good news is mainly taking the form of increased margins, due to lower component costs and savings on freight expenses.

Medical insurance expenses take over the top spot of internal concerns for manufacturers, with 68% of respondents listing healthcare costs in their top three concerns. Attracting and retaining qualified employees comes in as a close second, at 64%. Preserving morale and productivity continues to be an initiative of note, with 36% of financial professionals listing this concern. On the bright side, there was a 24 point decrease in respondents worrying about their ability to maintain margins in comparison to last year. This result is possibly attributable to dwindling concern over the price of raw materials and components, which saw an 11 point decrease.

Items topping the priority list for 2016 for financial executives have shifted from 2015, with 68% of respondents mentioning the importance of growth in existing markets, which is up 8 points from 2015. Success is likely to come from new products and services, according to 63% of those responding. Cutting operational costs rounds out the top three at 54%, which is down 5 points from 2015. The focus on cost cutting has been in steady decline since 2013 when it peaked at 68%.

“The results of our 2016 CFO Survey indicate a continuing state of manufacturing optimism, coupled with strong expectations for increased revenue for our Members and Endorsed Suppliers,” said Louise O’Sullivan, founder, president and CEO of Prime Advantage. “This is quite encouraging as it follows four previous years of growth and innovation for our manufacturing Members.”

Survey highlights:
● Sixty-nine percent of CFOs are confident about their companies’ business prospects in 2016
● And 68% believe that growth in existing markets will be a priority in 2016 (an increase of eight percent from 2015)
● But optimism in the US economy has fallen, with just 54% of CFOs expressing optimism for 2016 in the overall US economy’s health
● Eighty-one percent expect to see business benefits from decreased oil prices, including improved margins and lower freight costs
● Rising health care costs have become the top cost concern for 2016 (68%) followed by attracting and retaining qualified employees (64%)

Methodology:
In January 2016, Prime Advantage surveyed financial executives and leaders from Member companies, with annual revenues ranging between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million. The survey respondents are top professionals representing U.S.-based manufacturers in more than 25 different industries, including commercial foodservice equipment, packaging, truck and trailer, material handling, food processing and construction equipment. Prime Advantage has polled its Members for their impressions of current economic conditions since February 2008.