Kreischer Miller Manufacturing Survey Shows Hiring's a Challenge

Kreischer Miller Audit & Accounting Director and Manufacturing Industry Group Leader Michael A. Coakley

Horsham, PA...A majority of Philadelphia-area manufacturing leaders hired new employees last year, and even more – nearly 65 percent – plan to do so this year, according to the results of the Kreischer Miller 2018 Greater Philadelphia Manufacturing Survey.

The survey also reflected positive growth in employees’ paychecks: More manufacturers reported that their employees received a raise in 2017 (92 percent) than did in 2016 (87 percent).

“These results are a strong indication of the continued success and growth of manufacturing in Greater Philadelphia,” said Kreischer Miller Audit & Accounting Director and Manufacturing Industry Group Leader Michael A. Coakley.

Growth-related decisions have been fueled by manufacturers’ growing confidence in both the U.S. economy and their individual company’s performance.

Consider:

• More than 86 percent of the manufacturers said they were very or somewhat optimistic about the likely performance of the U.S. economy in the next 12 months – up about 20 percentage points from last year’s survey.

• Almost half of those surveyed predict their company’s revenues will grow by more than 5 percent in 2018, a marked increase from the 34 percent who anticipated that level of growth in the 2017 survey.

• 59 percent of those surveyed said federal tax reform would have either a somewhat or very positive impact on both the economy and their bottom line. In a brief, follow-up pulse survey administered after the tax reform package had been widely analyzed, the percentage predicting a positive impact on the overall economy increased to nearly 70 percent.

Not all of Kreischer Miller’s 2018 findings reflect such optimism, however.

Most manufacturers expect to take a hit from new tariffs

Local manufacturers are much less optimistic about the trade tariffs imposed this spring. The tariffs will have a negative or very negative impact on both their companies and the U.S. economy as a whole, said nearly 58 percent of local manufacturers who responded to the follow-up pulse survey, the administration of which came after the federal government announced new tariffs on steel and aluminum.

Less than 8 percent expect their business will benefit. A higher number – nearly 27 percent – believe the tariffs will be good for the nation’s economy as a whole.

While manufacturers plan to hire, they say it won’t be easy.

Almost 59 percent of the manufacturers responding to the main survey said they hired new employees in 2017 (up from the 48 percent who increased company headcount in 2016). Even more – 65 percent – said they plan to hire in 2018. They do not expect hiring to be easy.

In fact, the lack of qualified workers/skilled labor was by far the most commonly cited barrier to company growth on the 2018 survey, and the concern has grown: More than half of the respondents identified a dearth of qualified job candidates as among the biggest barriers to company growth this year, up from 41 percent in the 2017 survey and
28 percent in 2016.

“The growth reflected in this year’s survey results reinforces the tremendous opportunities that careers in manufacturing offer current and future members of our regional workforce,” Coakley said. “The hiring challenges faced by our local manufacturers show that there is a disconnect between jobs available and the skill sets of applicants. It’s a nationwide problem, and one our region must continue to address.”

The Gap Between IT Investment and IT Security has Narrowed, but Risk Persists

Kreischer Miller’s 2017 survey unearthed a gap between the use of cutting-edge, internet connected machinery and utilizing equally cutting-edge security measures. The 2018 survey shows that gap is closing, yet more than half of the companies responding did not utilize vulnerability assessments, and more than a quarter used no IT security measures.

Among the findings:

• About 26 percent of companies who responded said they experienced a cyber or information security breach in the past year. The most common issues reported were malware, malicious email or ransomware, followed by a system hack. This was a new question in 2018.

• The percentage of respondents who said they didn’t utilize any IT security measures dropped to 26 percent in 2018 - down from 33 percent of respondents last year.

• 44 percent of companies surveyed utilized vulnerability assessments, up from 33 percent last year.

• 31 percent did disaster recovery testing, up from 20 percent last year.

“While it is promising that more of our local manufacturers are addressing cyber security threats than before, the number that still haven’t is somewhat alarming,” said Sassan S. Hejazi, Ph.D., director of Kreischer Miller’s Technology Solutions Group. “The risk for data breaches of all kinds continues to rise. And the costs of a data
breach - in terms of time and reputation as well as actual dollars – can be substantial.”

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Based in Horsham, PA, Kreischer Miller is one of the leading accounting firms serving manufacturers in the Greater Philadelphia and Lehigh Valley areas. Our expertise with a diverse range of organizations – from smaller, local manufacturers to large, Fortune 500 companies with national and international operations – gives us the background and depth to understand the challenges and opportunities that face the industry. Kreischer Miller is also a member of the Manufacturing CPAs, a nationwide network of independent accounting firms specializing in serving the manufacturing industry. Learn more at www.kmco.com.