miRSM McGladrey-sponsored study identifies challenges and policy issues facing more than 99 percent of U.S. manufacturers

(WASHINGTON, D.C., February 23, 2006) — The future of U.S. manufacturing depends primarily on the continued success of small and midsized manufacturers according to a report released today by the National Association of Manufacturers (NAM) and The Manufacturing Institute (TMI). The report, “The Future Success of Small and Medium Manufacturers: Challenges and Policy Issues,” highlights the critical role small and midsized businesses play in the future of America’s manufacturing sector. It is the first significant post-9/11 report on the state and future of small and midsized manufacturers.
RSM McGladrey, a leading business services provider, sponsored the report. RSM McGladrey has continually dedicated its services to midsized companies and now represents nearly 6,000 manufacturing clients in the United States.
“Small and midsized businesses comprise more than 99 percent of our nation’s manufacturers. They are America’s premier innovators and risk-takers,” says Tom Murphy, executive vice president of RSM McGladrey. “This report documents their critical role in driving the U.S. economic engine, particularly in the face of economic downturns and terrorist disruptions.”
Small and midsized manufacturers account for more than 40 percent of the value of U.S. production and 60 percent of total U.S. manufacturing employment. The report cites important competitive strengths that help attract outstanding employees to small and midsized businesses, including a close relationship with their customers and a flexible, innovative approach to doing business.
However, the report also finds these same companies face fierce future challenges that require action and attention from legislators and regulators in Washington. “Small and midsized manufacturers are doing many things well and it shows,” says NAM President John Engler. “However, there are some growth-related challenges they must address to achieve long-term, competitive success in a dynamic global business environment.”
The report describes how changing customer demands, worker shortages, evolving technologies and high costs are constant challenges that may impede the ability of small and midsized manufacturers to compete against foreign competitors. Businesses also face myriad internal management challenges due to limited financial and human resources.
“Policymakers need to understand how dependent the U.S. economy is on innovative risk-takers that make up the small to medium manufacturing sector,” Murphy says. “The U.S. Congress and the Administration must promote public policies that allow and encourage small and midsize manufacturers to thrive in that role. The innovation we see in abundance in small and midsize businesses comes with great risk. This report identifies specific tools and resources that can help manufacturers manage risk without compromising their commitment to innovation in today’s highly competitive global marketplace.”
The NAM/TMI report outlines the 15 best practices that are inherent in successful companies in this size-range. NAM defines small manufacturers as companies with 500 or fewer employees and midsized manufacturers as those with 2,500 or fewer. The highlighted practices are:

• Stay in touch with customers, talk to them about their needs and look to them for new product ideas.
• Differentiate products and services to better define and develop a competitive advantage.
• Devote the necessary time and energy to marketing; develop a distinctive product and marketing strategy; and expand and diversify your customer base.
• Go global: Develop export markets.
• Ensure that your activity-based cost system is helping your company contain cost increases, focus on which activities are consuming the most resources and highlight non-value added activities.
• Look for a long-term relationship with a banker who is willing to take the time and effort to understand your company.
• Invest at least 3 percent of your payroll in employee training; get involved with Workforce Investment Boards (WIBs), government-sponsored training programs and local educational institutions such as community colleges that offer training in manufacturing skills.
• Explore how experts from a Manufacturing Extension Partnership (MEP) center can help you with your business.
• Appoint a majority of outsiders with relevant and diversified business experience to your board of advisors, look to those outside directors or advisors for opinions and advice, and welcome their challenge.
• Develop a plan for management succession. Start estate planning early and continually keep abreast of estate tax laws and regulations.
• Monitor your company’s viability and competitiveness on a daily, weekly and monthly basis with a set of key performance indicators (KPIs) tailored to your company’s particular business challenges.