In Q1 2023, CompanyWeek profiled 73 manufacturers across Arizona, California, Colorado, Texas, and Utah in our Manufacturing Report publications. These businesses included OEMs, contract manufacturers, tech and automation companies, and material manufacturers. The challenges, needs, and opportunities they shared with our reporters provide a snapshot of the current U.S. manufacturing economy. When we compare this data to that of Q4 2022, it yields a handy roadmap showing where these trends may be headed through the remainder of the year.
Below is our summary, along with a closer look at the opportunities these manufacturers are identifying despite lingering supply chain snarls and the continuation of rising interest rates.
In Q1 2023, managing growth tied with supply chain as the most often mentioned challenge among the manufacturers we interviewed. While the impact of supply chain difficulties has moderated a bit -- falling 22 percent since Q4 2022 -- the challenge of managing growth increased 12 percent. It's a trend that indicates an increase in demand that should be good news for both U.S. manufacturers and the economy, especially if supply chain snarls continue to ease.
Workforce as a challenge fell 13 percent since Q4 2022, while the challenge of raising market awareness fell 10 percent. Expanding distribution/sales and finance/funding replaced pricing in Q1's top five.
Workforce was once again the most often mentioned need among the manufacturers our reporters interviewed in Q1 2023 -- a position it has held in nearly ever quarter since we began tabulating this data in in Q1 of 2017. That said, the percentage of manufacturers citing workforce as a need fell by 17 percent since Q4 2022 and is down 19 percent since the end of 2021 -- a trend that indicates at least some manufacturers are finding it easier to fill available positions.
The need for funding -- whether for equipment purchases, expansion, or general business expenses -- is on an upward trajectory, however. The number of manufacturers citing finance/funding as a need increased 19 percent since Q4 2022. While real estate/space as a need decreased 7 percent since Q4 2022, equipment needs slid into the top five at 15 percent, replacing Q4's marketing. The need for new customers remained steady since last quarter.
Back in December, we predicted that manufacturers would soon begin to feel the pinch of tighter financial conditions fueled by rising interest rates. It's a trend we expect to continue, with economists predicting yet another interest rate hike by the Fed this week.
Growing market was once again the most mentioned opportunity among the manufacturers featured in our publications in Q1 2023, despite a decline of 11 percent when compared to Q4 2022. The percentage of manufacturers mentioning new market opportunities retained its position as the second most often mentioned, despite a decline of 12 percent.
New products and market or product leadership as opportunities held fairly steady in Q1, while managing growth and new channels replaced technology/innovation in Q1’s top five.
Overall, we believe these trends indicate that despite the challenges and needs they are facing, many manufacturers remain undaunted, identifying continued opportunities for growth ahead.
Here are just a few of their reasons:
Mark Cruze of Custom Components & Assemblies in Houston, Texas, said in January that he believes the outlook for American manufacturers remains positive. "I see a lot of people bringing their products back from overseas because they're having trouble getting things," he explained. "I see a lot of opportunity there. I see companies bringing their work back from China and other places that are unstable."
Spencer Loveless of Merit3D in Price, Utah, also identified opportunities in reshoring, citing clients who "had molds in China, and they were tired of China. They ditched their molds, and now they're 3D printing their part here."
New product opportunities were on the mind of Jeff Marz of Marz Precision Manufacturing in Lehi, Utah. Though his company offers CNC machining services, Marz wants to create proprietary products he can sell on Amazon. "We're a recreational family -- we own boats, motorcycles and off-road vehicles," he said. "We'll create products that can be used in those areas -- I'm a Harley rider, and I haven't found a good cup holder for my Harley. We're looking to have a product we can call our own, but until then we're happy to work for the companies we do."
Though he declined to give specifics, Shaman Wynn of Amazing Magnets in Round Rock, Texas, was also anticipating opportunities due to the development of new products. He told us in February that the company was "currently in the market research phase" and "very excited about some new product lines and verticals" that "could completely revolutionize our business and add a massive increase to our sales revenue."
The growing interest in sustainability among consumers was cited by several manufacturers as an opportunity, including J. Kirby Best of Bespoke Manufacturing Company in Phoenix, Arizona. "[Our model] is stopping this incredible waste that the garment industry creates," he said.
Rajat Sharma of San Francisco, California-based Ingreendients echoed the sentiment, telling us he sees an opportunity for his company to not just satisfy the demands of conscious consumers but to also shape conversations within the industry as a whole. "Should plant-based mean 100 percent from plants?" he asked. "Or are we okay with 93 percent or 95 percent plant derived? Also, what's going down our drains? Millions of people, every single day, whatever they put on their bodies is eventually going down the drain. Are they safe? Are they toxic for our waterways? Right now, I think those are the conversations that Ingreendients can introduce at a larger scale through what we're trying to do."