Deloitte/NAM study reveals domestic and international intentions of U.S. manufacturing companies
By Staff -- Manufacturing Business Technology, 6/1/2005 12:00:00 AM
The biggest surprise to come out of the Manufacturing Location Survey conducted jointly by the National Association of Manufacturers (NAM) and New York-based Deloitte Consulting, released in March, is the high percentage of respondents that are planning expansion. More than 60 percent intend to expand in the next three years, and nearly three-fourths of those respondents say they will expand domestically.
"To paraphrase Mark Twain, the death of American manufacturing has been greatly exaggerated," says Phil Schneider, principal and practice lead for Deloitte Consulting Global Expansion Optimization and Location Strategy Practice. "The attitude is very bullish compared to what it was a couple of years ago, and that is very encouraging."
Senior executives from 220 NAM member companies were queried about key site selection criteria in what is hoped will become an annual survey by NAM and Deloitte. [Going into it], "the expectation was if companies were planning expansion, it would be offshore," says Melissa Morse, NAM director of member programs. "We've found that's not necessarily the case."
Among large manufacturers (more than 500 employees), intentions to expand jump to 95 percent, with an even split between domestic and non-U.S. expansion plans. Small to midsize manufacturers plan to expand primarily in the U.S., although 20 percent plan international expansion.
Cost reduction was consistently identified as the key driver. Accessing markets, improving productivity, and increasing top-line revenue rounded out the top four.
Regarding key site selection criteria, availability and reliability of utilities ranks No. 1.
"This tells me a couple of things," says Schneider. "When they've gone global, they've encountered trouble with reliable power, so it's top-of-mind. But it's also a domestic issue. Manufacturers are attempting to run their plants very efficiently, 24/7, and any hiccup in power or fuel can have devastating effects. If you lower labor costs but have rolling brownouts, that's a problem."
After availability and reliability of utilities, the second most prevalent site selection criterion was ease of doing business.
"Companies want to go where they're wanted," Schneider says. "It's a matter of getting up and running quickly. Any help from the local area with regard to permitting, zoning, regulatory assistance—areas that make the effort more seamless—these are the areas companies want to go."
Not of prime concern were access to ports and air service, local amenities, and grants and incentives. Though manufacturers value these factors, they are not prime site location drivers.
