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Welcome to the
2016www.enterpriseminnesota.org
1
Platinum Statewide Sponsors
2
Gold Sponsors
3
• Blandin Foundation
• Great River Energy
• Southern Minnesota Initiative Foundation
Silver Sponsors
4
• Alexandria Area Economic Development Commission• Alexandria Lakes Area Chamber of Commerce• Alexandria Technical & Community College• Anoka-Ramsey Community College• Anoka Technical College• Clow Stamping Company• Minnesota Precision Manufacturing Association (MPMA)• Pine Technical & Community College• Ridgewater College• Saint Paul Port Authority• W.P. & R.S. Mars Co.
Bronze Sponsors
5
• Absolute Quality Manufacturing• Central Package & Display• Crystal Distribution Inc.• Delmar Company• FAST Global Solutions• G&A Partners• GVL Poly• HEADWATERS Search• Mactech, Inc.
• Minnesota Agri-Growth Council• Northwest Minnesota Foundation• Pequot Tool & Manufacturing, Inc.• Productivity Inc.• Tolerance Masters• Ultra Machining Company (UMC)• USDA Rural Development• Von Ruden Manufacturing, Inc.
Student Focus Groups
6
• Alexandria Technical & Community CollegeAlexandria Area Economic Development CommissionAlexandria Lakes Area Chamber of Commerce
• Anoka Technical CollegeAnoka-Ramsey Community College
• Dunwoody College of Technology
Beer Sponsor
7
Webcast Sponsor
8
Enterprise Minnesota Board of Directors
9
CHAIR MEMBERSJoel Wittenbraker Greg Buck
President – Mactech Inc. President – Productivity Inc.Jeanne Crain
VICE-CHAIR President and CEO – Bremer BankTom Schabel Mike Jensen
President and CEO – President and CEO – Gauthier IndustriesAlexandria Industries Bob Kill
President and CEO – Enterprise MinnesotaKent Mogler
Manufacturing ConsultantJoe Mulford
President – Pine Technical & Community CollegeSteve Thul
President – Whirltronics, Inc.
Northwest Minnesota Foundation
Northland Foundation
Initiative Foundation
West Central
Initiative
Southwest Initiative
Foundation
Southern Minnesota Initiative Foundation
10
Minnesota Initiative Foundations
11
Special Guests
U.S. Senator Amy Klobuchar
U.S. Representative Tom Emmer
12
On behalf of Enterprise Minnesota, Meeting Street Research is pleased to present the key findings from the eighth annual survey of manufacturing executives in Minnesota.
The survey was conducted February 14 – March 3, 2016, among 400 manufacturing executives; it has a margin of error of +4.9%. Respondent titles included owners, CEOs, CFOs, COOs, presidents, vice presidents, and managing officers.
Rob Autry is the president of Meeting Street Research, a public opinion research firm based in Charleston, SC.
79% 78% 83% 82% 82% 84% 89% 90%
21% 21% 16% 17% 17% 15% 11% 9%
December2008
January2010
January2011
January2012
March2013
March2014
March2015
March2016
Confident Not Confident
“From a financial perspective, how do you feel right now about the future for your company?”
For the third consecutive year, financial confidence has climbed and currently stands at its highest level yet.
8%
26%
40%32% 34% 37%
42%
32%34%
53%49%
55%
46%54%
42%
48%56%
19% 9% 10%15%
7%13% 15%
December2008
January2010
January2011
January2012
March2013
March2014
March2015
March2016
Economic Expansion Flat Economy Recession
“Thinking about the upcoming year, in 2016, do you anticipate economic expansion, a flat economy, or a recession?”
Manufacturing executives are less economically hopeful than they were this time last year.
Confidence is high in most of the Minnesota Initiative Foundation regions.
South (N=51)
% Confident 91%
% Economic Expansion 25%
% Flat Economy 56%
% Recession 14%
Southwest (N=50)
% Confident 92%
% Economic Expansion 28%
% Flat Economy 57%
% Recession 12%
Initiative Foundation (N=54)
% Confident 90%
% Economic Expansion 41%
% Flat Economy 45%
% Recession 7%
Northland (N=50)
% Confident 74%
% Economic Expansion 23%
% Flat Economy 51%
% Recession 21%
Northwest (N=50)
% Confident 94%
% Economic Expansion 21%
% Flat Economy 58%
% Recession 17%
West Central (N=50)
% Confident 87%
% Economic Expansion 38%
% Flat Economy 46%
% Recession 13%
“How well do you feel your firm is prepared to handle [an economic expansion/a flat economy/a recession]? Would you say you are very well, somewhat well, or not well prepared to handle it?”
Manufacturing executives feel they are very prepared for an economic expansion, less confident about being prepared for a recession.
Economic Expansion
Flat Economy Recession
Very Well Prepared 53% 45% 21%
Somewhat Well Prepared 43% 52% 57%
Not Well Prepared 4% 2% 19%
Total Prepared 96% 97% 78%
23%
44%
51%47%
41%45% 45% 44%
17%
36%39%
31% 32%35%
30%
37%
19% 24%
32%27% 28% 27% 27% 25%
2008 2010 2011 2012 2013 2014 2015 2016
Gross Revenue Profitability Capital Expenditures
Percent Expecting Increases Per Year
While gross revenue increases are flat, we do see a rise in profitability expectations. Capital expenditure increases are the lowest they’ve been since 2010.
We asked manufacturing executives to rate how concerned they were about a series of factors affecting companies like theirs. In total, we had them rate 9 different factors.
“Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your firm
is about that particular factor using a scale from 1 to 10, where one means that your firm is NOT
AT ALL CONCERNED about it and where ten means your firm is VERY CONCERNED about it.”
12
34
5 8090
100110
678
910
51%
41%
32%
29%
19%
17%
12%
12%
10%
Concerns Ranked By % Concern (8-10)
The costs of health care coverage
Government policies and regulations
Attracting and retaining qualified workers
Economic and global uncertainty
Costs of employee salaries and benefits, not including health insurance
Competition from foreign sources
The shipping and logistics of getting your products to market
Future leadership within firm
Managing supply chain relationships
Health care costs and government policies and regulations continue to top the list of concerns.
2010 2011 2012 2013 2014 2015 2016
The costs of health care coverage 68% 71% 68% 67% 59% 56% 51%
Government policies and regulations 57% 61% 56% 58% 55% 46% 41%
Attracting and retaining qualified workers 19% 14% 31% 30% 34% 33% 32%
Economic and global uncertainty n/a n/a n/a n/a 31% 29% 29%
Costs of employee salaries and benefits, not including health insurance
16% 15% 13% 19% 18% 18% 19%
Competition from foreign sources 27% 20% 21% 17% 16% 15% 17%Shipping and logistics of getting your products to market
n/a n/a n/a n/a n/a 14% 12%
Future leadership within firm n/a n/a n/a n/a n/a 13% 12%
Managing supply chain relationships n/a n/a 15% 10% 11% 9% 10%
Concerns Among Manufacturing Executives (% Concern 8-10)
Still, concerns about health care costs and government regulations are down to their lowest level yet.
There are some interesting differences by region.
Initiative Foundation (N=54)
Healthcare 46%
Policies/Regulations 38%
Qualified Workforce 30%
Economic Uncertainty, Employee Costs,
Shipping/Logistics22%
Northland (N=50)
Healthcare 48%
Policies/Regulations 40%
Qualified Workforce 26%
Economic Uncertainty 26%
Northwest (N=50)
Healthcare 55%
Policies/Regulations 49%
Economic Uncertainty 36%
Qualified Workforce 32%
South (N=51)
Healthcare 58%
Policies/Regulations 48%
Qualified Workforce 39%
Economic Uncertainty 36%
Southwest (N=50)
Healthcare 57%
Policies/Regulations 38%
Qualified Workforce 34%
Economic Uncertainty 22%
West Central (N=50)
Healthcare 56%
Policies/Regulations 46%
Economic Uncertainty 34%
Qualified Workforce 28%
Top Concerns (% 8-10) By Region
55%
40%45%
58% 60%67% 71%
66%
43%
55%50%
39% 36% 32%27% 29%
December2008
January2010
January2011
January2012
March2013
March2014
March2015
March2016
Difficult Not Difficult
“How difficult is it to attract qualified candidates for your firm’s vacancies?”
The difficulty to attract new workers remains a significant concern, down slightly from a year ago.
54%61%
70%63%
55%
75% 72% 71%
43%37%
27% 30%
43%
25% 27% 27%
December2008
March2014
March2015
March2016
December2008
March2014
March2015
March2016
Difficult Not Difficult
“How difficult is it to attract qualified candidates for your firm’s vacancies?”
This year, metro firms have seen an improvement in their ability to attract qualified employees.
Metro Firms Greater Minnesota Firms
Initiative Foundation (N=54)
Northland (N=50)Northwest (N=50)
South (N=51)
Southwest (N=50)
West Central (N=50)
Concern is noticeably higher in four of the MN Initiative Foundation regions.
81%
88%
79%
58%
56%
70%
Percent Difficulty In Attracting Qualified Workers
OverallTwin Cities Metro Area
Greater Minnesota
Applicants do not have the needed skills or education
52% 53% 52%
Lack of applicants or interest 42% 34% 52%Firm too small to competitively recruit 35% 39% 31%
Inability to offer competitive wages 22% 22% 22%
Firm location or geography 17% 7% 29%
Something else 4% 4% 4%
Firms in Greater Minnesota report having a larger challenge with a lack of applicants and interest and with their location.
AMONG THOSE THAT HAVE DIFFICULTY: “What would you say is the biggest challenge your firm faces in attracting qualified candidates?”
Biggest Challenges Facing Firm in Attracting Qualified Candidates by Minnesota Initiative Foundation
Greater Minnesota areas report having a larger challenge with a lack of applicants and interest.
Initiative Foundation (N=54)
Lack of Interest 30%
Education 29%
Too Small to Compete 18%
Firm Location 17%
Northland (N=50)
Too Small to Compete 19%
Education 19%
Firm Location 16%
Lack of Interest 12%
Northwest (N=50)
Lack of Interest 36%
Education 24%
Wages 19%
Too Small to Compete, Firm location 15%
South (N=51)
Education 40%
Lack of Interest 39%
Wages 20%
Too Small to Compete 19%
Southwest (N=50)
Education 36%
Lack of Interest 30%
Firm Location 19%
Too Small to Compete 12%
West Central (N=50)
Lack of Interest 37%
Education 34%
Too Small to Compete 25%
Firm Location 16%
“When looking to hire new employees, where is your need greatest?”
Manufacturers continue to need employees with technical training and experience.
2013 2014 2015 2016
Entry-level employees 20% 22% 25% 30%
Employees withtechnical training 19% 21% 23% 21%
Employees with technicaltraining and experience 49% 47% 39% 38%
Employees with four-yearcollege degrees 6% 6% 6% 4%
Demand for machine operators and assemblers is higher this year compared to 2015.
2015 2016
Machine Operator 29% 32%
Assembler 23% 25%
Engineer 10% 7%
Welder 9% 9%
Supervisor 4% 4%
Other 22% 17%
“What types of manufacturing jobs or positions are in most demand at your company?”
29%25%
30% 28% 29%
2% 5% 2% 4% 4%
68% 69% 67% 68% 66%
January 2012 March 2013 March 2014 March 2015 March 2016Grow Shrink About The Same
“In the next 12 months, does your company expect to grow or shrink the size of its workforce, or will it stay about the same?”
Two-thirds of manufacturers say they expect their workforces to stay about the same for the next year.
2013 2014 2015 2016
Metro Firms 25% 30% 28% 31%
Greater Minnesota Firms 26% 30% 28% 27%
Less than $1 million in revenue 20% 21% 16% 22%
$1-5 million in revenue 31% 33% 35% 31%
Over $5 million in revenue 33% 41% 43% 44%
50 or fewer employees 23% 27% 25% 27%
Over 50 employees 39% 42% 40% 50%
Been in operation 1-15 years 25% 27% 37% 43%Been in operation over 15 years 25% 31% 25% 23%
Percent Expect Their Firm to Grow in Next 12 Months
Again there are some differences on workforce growth expectations by firm type.
Expect To Grow
IF Initiative Foundation 27%
Northland Foundation 21%
Northwest Minnesota Foundation 24%
Southern Minnesota Initiative Foundation 28%
Southwest Initiative Foundation 29%
West Central Initiative Foundation 26%
Metro Region 31%
Percent Expect Their Firm to Grow in Next 12 Months by Minnesota Initiative Foundation and Metro Region
Firms in outside the metro region are less optimistic about employee growth.
2016
Your firm has become more efficient and automated 29%
You are not expecting additional business in the coming year 24%You are concerned about economic conditions and how they might impact your firm 19%
Profit margins are down and you are trying to do more without hiring additional workers 15%
Your firm is having trouble recruiting and attracting workers 4%
Other 6%
AMONG EXPECT TO STAY THE SAME: “Which one of the following reasons comes closest to describing why you believe your firm’s workforce size will stay about the same in the next 12 months?”
The top reason firms say their workforce will stay the same is because they have more efficiency and automation.
Firms feel prepared to handle the departure of managers and skilled workers, less so for the departure of a CEO or owner.
“I am going to read you a few different roles within manufacturing and I would like to know how well you feel your firm is prepared to handle the departure of someone in that role. Would you say you are very well, somewhat well, or not well prepared to handle that person’s departure?”
53%
73% 75%
42%
20% 20%
The CEO or Owner A Manager or Supervisor A Skilled WorkerTotal Well Total Not Well
“Does your firm collaborate with local educational institutions for workforce training or other programs?”
The number of firms that say they collaborate with local educational institutions is similar to last year.
36% 34%
63% 66%
March 2015 March 2016
Yes No
Firms in the Southwest and West Central regions are most likely to collaborate with local educational institutions.
% Yes/% No Firm Collaborates with Local Educational Institutions by Metro and Minnesota Initiative Foundation Region
31% 32%27% 29%
45%52%
60%69% 68%
73%66%
55%48%
40%
Metro IFInitiative
Northland Northwest South Southwest WestCentral
Yes No
66%
48%41% 43% 43%
54%58% 58%
6%13% 14%
9% 10%5% 5% 5%
27%
38%44% 46% 44%
39%35% 36%
December2008
January2010
January2011
January2012
March2013
March2014
March2015
March2016
Increased Decreased Stayed About the Same
“On average, over the last two years, have your firm’s wages, including benefits, increased, decreased, or stayed about the same?”
Similar to last year, a majority of executives report increasing wages.
41% 45%
53% 54%48%
62% 61% 60%
7% 4% 2% 2% 4% 2% 2% 4%
51% 49%
44% 43% 46%35% 36% 36%
December2008
January2010
January2011
January2012
March2013
March2014
March2015
March2016
Increase Decrease Stay About the Same
“Do you expect the average wages, including benefits, to increase or decrease over the next two years, or will they stay about the same?”
The percentage of firms that expect wages to rise over the next two years remains high.
16% 19% 18% 17% 18%25% 22% 22%
13% 10% 8% 8% 12% 7% 6%
5%
69% 67% 71% 72% 68% 67% 71% 72%
December2008
January2010
January2011
January2012
March2013
March2014
March2015
March2016
Will Invest More Will Invest Less Will Stay the Same
“Generally speaking, would you say that as a percentage of payroll your company will invest MORE in employee development or LESS next year compared to 2014, or will it stay about the same?”
Investment in employee development figures are consistent with last year.
Yes No
Less than $1 million in revenue 18% 81%
$1-5 million in revenue 33% 65%
Over $5 million in revenue 62% 38%
50 or fewer employees 26% 74%
Over 50 employees 75% 25%
“Are you currently investing in employee development or leadership training in order to attract and retain qualified employees and managers?”
Two-thirds say they are not currently investing in employee development or leadership training.
The number of companies that say they have a formal structured leadership development program has remained unchanged since last year.
“Does your company have a formal structured leadership development program for supervisors and managers?”
20% 20%
80% 79%
2015 2016Yes No
“How much of your product did you ship internationally in [the last year]?”
2008 2010 2011 2012 2013 2014 2015 2016
None 58% 58% 56% 52% 56% 51% 56% 58%
10% or Less 31% 29% 28% 29% 29% 23% 24% 27%
11% - 25% 5% 7% 8% 9% 8% 14% 9% 7%
26% - 50% 4% 4% 6% 7% 4% 4% 5% 4%
51% or More 1% 1% 2% 2% 2% 5% 4% 4%
The percentage of firms shipping more than 10% of their product abroad is down for the second year in a row.
11% or More 10% 12% 16% 18% 14% 23% 18% 15%
“Have you gained new OEM customers from them wanting to have suppliers closer to their location?”
One in three firms say they have gained new business due to “home sourcing,” an overall increase of 12 points since last year.
26%32%
71%64%
2015 2016Yes No
AMONG THOSE THAT GAINED NEW BUSINESS: “What would you say is the main reason why your supply chain relationships changed?”
31%26%
18%12%
30%
23% 25%
12%
31% 30%
21%
11%
Shorterlead times
Total costs versusonly product costs
Closer relationships/regional suppliers
Better inventorymangement
2014 2015 2016
Shorter lead times and total costs are the two main reasons why manufacturers say their supply chain relationships have changed.
Only four out of ten firms have a formal strategic growth process in place.
“Does your company have a formal strategic growth plan?”
39% 38%
59% 60%
2015 2016Yes No
Firms with a formal strategic growth process are more likely to expect increases in gross revenues and profitability for the coming year.
Key Firm Data Among Those With/Without Strategic Growth Plan
Have Formal Strategic Growth
Plan
Do NOT Have Formal Strategic
Growth Plan
Confident in Firm’s Financial Future 95% 87%
Expect Increase in Gross Revenues 53% 38%
Expect Increase in Profitability 43% 32%
Three-fourths of manufacturers say they are NOT aware of the significant changes in ISO standards.
“Are you aware of the significant changes and upgrades made from the ISO 9001:2008 Standard to the ISO 9001:2015 Standard?”
Yes No
Metro Area Firms 26% 74%
Greater Minnesota Firms 18% 82%
Less than $1 million revenue 9% 91%
$1-5 million in revenue 30% 70%
Over $5 million revenue 44% 56%
50 or fewer employees 20% 80%
Over 50 employees 50% 50%
Been in operation 1-15 years 17% 83%
Been in operation over 15 yrs 26% 74%
Larger firms are more likely to say they feel prepared to meet the changes to the new standard.
AMONG THOSE THAT ARE AWARE: “How well do you feel your firm is prepared to meet the changes to the new standard? Would you say you are very well, somewhat well, or not well prepared to do business under those new changes?”
75% 71%
83%
53%
66%
92%
66%
94%
Overall MetroArea Firms
GreaterMinnesota
Firms
Less than$1 MillionRevenue
$1-5 MillionRevenue
Over $5Million
Revenue
50 or FewerEmployees
Over 50Employees
Prepared
Confidence in the future of their firms at its highest level yet
Confidence in the economy is not
Heath care costs and government policies are the top concerns, but…
Difficulty in attracting qualified workers remains
Wages continue to grow and executives see the trend continuing
Awareness of changes to ISO standards is not
The 2016 State of Manufacturing survey was sponsored by:
Full results can be viewed at www.enterpriseminnesota.org
57