Mar 4, 2017 Off Comments in Manufacturing by

In 2016, Skoda Minotti’s Manufacturing and Distribution Group implemented its inaugural manufacturing and distribution survey to take the pulse of Northeast Ohio manufacturers. Respondents weighed in on topics ranging from the availability of skilled labor and challenges associated with workforce development, to prospects for pursuing expansion in the region and beyond, and more.

What did we find? Overall, results indicate cautious optimism, but they also point to worrying signs. Most respondents continue to face the same challenges they have faced for years. Yet they seem unsure whether new strategies or methods to address these challenges will ever surface.

Here’s a synopsis of our findings.

The good news

Sixty-two percent of respondents ranked developing new products and services as their company’s top priority. We find this pleasantly surprising. Northeast Ohio, Ohio and the Midwest aren’t generally known as hotbeds of innovation, so this could signal a small but significant paradigm shift among middle market companies toward growth through innovation.

The not-so-good news

Longtime industry challenges, such as finding skilled labor and cutting costs, remain high priorities for most respondents. Also cited among key challenges was dealing with rising costs and compliance issues related to the Affordable Care Act. Additionally, 76.6% of respondents expect their business’ labor costs to increase over the next 12 months. Several trigger points could cause this to occur, but this finding points to at least some trepidation by our respondent pool. It also helps to explain the number-one cited priority of cost-cutting among respondents.

Adding credence to this sense of unease is concern over lack of orders and sales margins cited by 37.5% of respondents — in fact, it was the number-one response to the question of what poses the biggest threat to respondents’ businesses over the next 12 months. These issues have many possible origins — from operational issues and sales force challenges to underpricing of products — yet they are among several recession indicators, and in no way do they demonstrate a position of strength on the part of many respondents.

The surprising news

The world as a global marketplace? Not so much, according to most respondents. Only 3.1% ranked new operation in foreign markets as their main opportunity to grow over the next 12 months. That ranked seventh out of eight possible responses. None ranked organic growth in existing foreign markets as a top priority.

Chief among the reasons for this may be the dollar. Today, it is strong relative to many global currencies. Exports, therefore, are a challenge for many U.S. businesses, since the dollar holds higher value than other currencies.

U.S. companies also face far greater barriers to entry for foreign investments then they do for expansion here in the United States. President Donald Trump has talked tough about trade relations, so industry insiders will carefully monitor U.S./global relations, specifically the status of current trade pacts and negotiations with the new administration now in place.

In terms of growth closer to home, respondents envision more expansion opportunities outside of Northeast Ohio than within the region. Our analysis suggests that while respondents may not expect deterioration of sales within Northeast Ohio, they don’t necessarily see it as an area of growth.

Read more: Cleveland Ohio Manufacturing: looks good, but there are worries