2012 Georgia Manufacturing Survey

2012 Georgia Manufacturing Survey

Enabling Manufacturers to Compete in the Global Economy

The Georgia Manufacturing

Survey, begun in 1994 and conducted

every two to three years, benchmarks the use of modern

manufacturing technology, practices

and techniques by industry statewide.

Information gleaned from the survey is used to improve manufacturing

assistance programs and regional

innovation initiatives that, in turn, help

Georgia companies compete, improve

their pro�tability and create jobs for

Georgians.

Summary of FindingsStrategies

Profitability

Outsourcing

Exporting

Research and Development

Marketing and Sales

Sustainability

17% of Georgia manufacturers choose low price to compete in the marketplace compared to less than ten percent that compete through innovation or new technology.

Profits of Georgia manufacturers generally declined between 2010 and 2012, but the profitability difference between companies competing mainly through innovation and low price was maintained.In 2012, 14% of manufacturers were affected by outsourcing, that is, work transferred from a Georgia facility, and 16% gained from in-sourcing, or work transferred to a Georgia facility.

Half of Georgia manufacturers had export sales, with 23% of manufacturers increasing their export sales in 2011 over 2009 levels.

When Georgia manufacturers conduct R&D, they compare well with manufacturers across the country. However, only one-third of Georgia manufacturers conducted R&D in-house. Only four percent used public loans or grants to pay for R&D and fewer than 20% used R&D tax

36% of the respondents identified marketing and sales as their top concern. This figure is slightly below previous years, but still the most common concern.

Only eight percent of Georgia manufacturers have produced an emissions inventory or carbon footprint of their facility, including nearly half of large manufacturers.

Investing in the Future

Training

More than half of manufacturers reported using enterprise resource planning, computer aided design, and preventive/predictive maintenance. Plans for investing in new technologies are most common for bar code readers (21%) and radio frequency identification (RFID) (18%).

Respondents (24%) noted technical skills as another top concern, but 27% reported not spending any funds on employee training, whether it involved routine tasks or new capabilities.

The current survey looks at how manufacturers have and plan to use information, quality management, and production technologies. It also highlights the benefits of competing on innovation rather than on low price and indicates the extent of engagement of manufacturers in innovation. Emissions measurement for sustainable manufacturing is examined. And, as with previous studies, the 2012 Georgia Manufacturing Survey also presents the top concerns of Georgia manufacturers.

The theme of the 2012 Georgia Manufacturing Survey is how manufacturers are investing in the future. Innovation, advanced technology, and sustainability play crucial roles in helping manufacturers achieve competitiveness and maintain it for the future. Increasingly, manufacturers must operate using efficient and productive technologies with finite resources and a greater awareness of environmental impact.

Investing in the futureThe 2012 Georgia Manufacturing Survey

Enabling Manufacturers to Compete in the Global Economy

1

Across all six strategies, results revealed that innovation strategies were associated with the highest mean return on sales—over ten percent. Low-price and quick delivery strategies were linked to the lowest mean return on sales of five percent. High quality strategies brought margins in the nine percent range while adapting to customer needs was associated with seven percent margins.

About the Survey528 Georgia manufacturers with 10 or more employees participated in the surveyThe survey was undertaken between February and May 2012

Results were weighted by industry and employment size to represent the population of manufacturersIndustry groups were as follows:

Food/Textiles ranges from food, animal feed and beverages to leather and apparel

Material encompasses industries in wood, pulp and paper, plastics and non-metallic minerals

Machinery also includes fabricated metals

Electronics/Transportation covers electrical appliances

Science comprises industries from petroleum to chemicals to medical supplies

Strategy Preferences of Georgia Manufacturers :

16%

Quality of service

Low price

Adapting to customer needs

Quick delivery

Sustainable manufacturing

Innovation/New technology

more than 50%

17%

9%

3%

less than 10%

Manufacturers Prioritize Strategies As part of the Georgia Manufacturing Survey, manufacturers were asked to rank six strategies based on their importance in competing for sales. The strategies were low price, high quality, innovation/new technology, quick delivery, adapting to customer needs and sustainable manufacturing strategies.

STRATEGIES

0%

3%

6%

9%

12%

15%

InnovationLow Price20122010

Pro�ts Increase for Firms Competing on InnovationAverage Return on Sales for Manufacturers Competing Primarily

through Price vs. InnovationPro�tability – 3-Year Average Annual Return on Sales (%) – by Primary Business Strategy 2010-2012

Source: Georgia Manufacturing Survey 2012, weighted responses of 528 surveys; Georgia Manufacturing Survey 2010, weighted responses of 494 surveys.

More than half of the survey respondents introduced a new or

significantly improved product or service

during the 2009-to-2011 period.

2

Manufacturers that compete primarily using innovation strategies have relatively high returns on sales and higher employee wages. Most Georgia manufacturers, however, use strategies associated with low wages. Average wages for manufacturers that prioritize innovation/technology strategies are $10,000 or more higher than those for manufacturers that prioritize other strategies.

Higher Returns to the Community Linked to InnovationManufacturing Wages by Percentages of Respondents Ranking Strategies

Highest in 2010

$0 $10,000 $20,000 $30,000 $40,000 $50,000

Low price

Quick delivery

Adapting product to customer needs

High quality

Innovation, new technology

Source: Georgia Manufacturing Survey 2012, weighted responses of 528 manufacturers.

Science-based industries had a higher percentage of manufacturers primarily competing on innovation. All industries favored high quality as a primary sales strategy, especially those in the food and textiles group. Electronics and transportation manufacturers were least likely to compete using low price as their primary strategy.

Most Manufacturers Focus on Quality and PriceMost Important Manufacturing Strategies by Industry Group

(Percentage of �rms indicating strategy is of highest importance)

Strategy Food-Text Materials Mach Elec-Trans Science

High quality

Adapting product to customer needs

Low price

Quick delivery

Innovation/ New technology

64.9%

13.8%

14.8%

12.9%

5.0%

55.9%

19.0%

14.6%

14.2%

8.5%

54.7%

12.4%

23.7%

12.8%

9.2%

46.7%

33.3%

8.9%

8.9%

8.9%

52.9%

7.8%

19.6%

9.8%

13.7%

Source: Georgia Manufacturing Survey 2012 weighted responses of 528 manufacturers.

3

82% of Georgia manufacturers

experienced positive pro�tability (average

annual return on sales) from 2009 to 2011. The median

manufacturer’s pro�tability was six percent, while the top ten percent of manufacturers had

pro�tability levels of 25% and the bottom

ten percent had negative three percent. These

returns were similar to the 2010

survey, except that there were more

manufacturers with three to 15%

pro�tability and fewer with negative

pro�tability.

When manufacturers were asked to indicate the extent to which their facilities undertook any of 13 innovation-related activities during the 2007 to 2009 period, the most common innovations were: (1) working with customers to create or design a product, process or other innovation; (2) signing a confidentiality agreement; (3) working with suppliers to create or design a product, process or other innovation; and (4) purchasing machinery, equipment, computers or software to implement innovations.

The least common innovation activities undertaken were: (1) purchasing external research and development; (2) purchasing or licensing patents, inventions, know-how or other types of knowledge; (3) publishing papers or technical articles; (4) registering a trademark or (5) applying for a patent.

InnovationCreation and Dissemination of New Knowledge

Firms Find Diverse Ways to InnovateAdoption of Specialized Innovation Activities

(Percentage of establishments that engaged in the activity)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Work with customers for innovationSign a confidentiality agreement

Purchase equipmentWork with suppliers for innovation

In-house R&DTraining

Planning and developmentMarket research

Register a trademarkApply for a patent

Purchase patentPublish papers

Purchase external R&D


Four Types of Innovation

Product InnovationTechnologically new products or

signi�cantly improved existing products.

Process InnovationTechnologically new or signi�cantly

improved practices, technologies or delivery.

Organizational InnovationNew or signi�cant changes in

manufacturer’s structure, management methods or information exchange systems.

Marketing InnovationNew or signi�cant changes to packaging,

design, sales methods or distribution channels.

4

R&D Intensity: Georgia versus U.S.(R&D intensity measured by R&D expenditures as a percentage of sales)

*Domestic means R&D is conducted at any US location in the enterprise group.Sources: Georgia Manufacturing Survey 2012, weighted responses of 296 manufacturers; U.S. National Science Foundation/Division of Science Resources Statistics, Business R&D and Innovation Survey: 2009.

Total

Food-text

Material

Mach

Elec-Trans

Science

R&D Intensity2011 Georgia

R&D Intensity2009 US (domestic*)

1.25% 4.54%

1.65% 0.86%

2.43% 1.46%

0.86% 4.03%

1.98% 7.77%

2.24% 6.56%

The average respondent that introduced new-to-the market goods or services reported that these goods and services accounted for nearly 16% of the facility’s sales. More than 60% of respondents with new-to-the market goods or services received at least five percent of their sales from these new goods or services.

The percentage of sales from new-to-the-market goods and services in 2012 is above the value for 2010.

0%

10%

20%

30%

40%

50%

2012

2010

Sales Re�ect Modest GainsPercentage of Sales from New-to-Market Goods/Services, 2010 vs. 2012

Source: Georgia Manufacturing Survey 2012, weighted responses of 215 manufacturers; Georgia Manufacturing Survey 2010, weighted responses of 199 manufacturers.0-5% 5.1-10% 10.1-15% 15.1-20% > 20%

% Sales from New Products

Financial concerns are a major limitation on innovation. However, only four percent of Georgia manufacturers use public loans or grants, only three percent received private equity support such as venture capital, and only one percent of the respondents used the Small Business Innovation Research (SBIR) program. These low usage rates exist despite more than half of manufacturers having introduced a new product and one-third of manufacturers conducting in-house R&D, and therefore could have made use of these resources. Less than 30% of respondents financed innovations with private conventional loans.

Large manufacturers with 250 or more employees were somewhat more likely than small manufacturers to have received public support. The use of private loans was more prevalent among

smaller facilities.

Some Speci�csNearly half of survey respondents introduced a new or signi�cantly improved product during the 2009 to 2011 period

14% introduced a new or signi�cantly improved service

Larger manufacturers were more likely to introduce new goods

28% percent of respondents introduced a new-to-the-market product or service in the 2009 to 2011 period

Only 18% of manufacturers said they use R&D tax credits even though more

than 30% conduct R&D in-house.

How do Georgia manufacturers’ R&D expenditures compare with that of manufacturers throughout the United States? Comparing R&D intensity – which is calculated by dividing R&D expenditures by sales and shown as a percentage – from respondents to the Georgia Manufacturing Survey and from the National Science Foundation’s Business R&D and Innovation Survey, we see that Georgia manufacturers, as a whole, are slightly below, but relatively close to, the U.S. benchmark. Georgia’s food/beverage/textiles/apparel/leather and materials groups have higher R&D intensity levels than the U.S. benchmark, the machinery group isabout on par, while the electronics/electrical/transportation and science-based industries have R&D intensity levels far below the U.S. benchmark.

5

OutsourcingOutsourcing and In-sourcing

(Percentage of Establishments Reporting Work Transferred from Facility (Outsourcing) or to Facility (In-sourcing))

Between 2009 and 2011, about 14% of Georgia manufacturers were affected by outsourcing, somewhat less than was reported in the 2010 survey. For those affected, the most common outsourcing locations were elsewhere in the United States, followed by Asia and Mexico and Central and South America. In-sourcing also occurred. The rate of transfer of work to Georgia manufacturers was 16%, higher than the percentage of firms affected by outsourcing. There was a marked increase in work transferred from Asia to Georgia manufacturers (from 2.6% in 2010 to 4.3% in 2012). In-sourcing and outsourcing are not mutually exclusive; nearly all of the manufacturers affected by in-sourcing and outsourcing were involved in both.

In-sourcing Exceeds Outsourcing Rates

10%

15%

20%

Outsourcing

In-sourcing

2005 2008 2010 2012

Source: Georgia Manufacturing Survey 504 weighted responses (2012); Georgia Manufacturing Survey 494 weighted responses (2010); 676 weighted responses (2008); 617 weighted responses (2005)

In contrast to prior surveys, manufacturers competing on innovation were as likely as manufacturers competing on low price to be affected by outsourcing. However, manufacturers that prioritize innovation as one of their top two strategies for competing were more likely to benefit from in-sourcing than manufacturers competing based on low price.

Innovation Means More In-sourcingPercentage of Establishments Reporting Their Facility was A�ected by Outsourcing/In-sourcing


The rate of outsourcing was somewhat higher for large companies

than for smaller companies. But the rate of in-sourcing was signi�cantly

higher for large companies.

0%

5%

10%

15%

20%

25%

% Impacted by Outsourcing

% Impacted by In-sourcing

Innovative Strategies

Low Price Strategies

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

10-49

50-249

250+

Food-text

Material

Mach

Elec-Trans

Science

Northwest

Northeast

Atlanta

West

Central

Augusta

South

Coastal

Tota

lEm

ploy

men

tIn

dust

ry G

roup

Regi

on

Outsourcing

In-sourcing


Half of Georgia manufacturers had export sales, with 23% of manufacturers increasing their export sales in 2011 over 2009 levels. Manufacturers in science-based industries were more likely to have export sales, followed by those in the electronics/electrical/transportation industry group. Manufacturers in the materials group were least likely to have export sales.

Percentage of Establishments Reporting Their Facility Was Impacted by Outsourcing/In-sourcing

Large Firms Outsource More

Some Speci�csEight percent of manufacturers had work moved from Georgia to another establishment within the United States

Five percent had work moved from Georgia to Asia (including China and India)

Four percent had work moved from Georgia to Mexico or other Central or South American country

Less than one percent had work moved from Georgia to Europe or elsewhere in the world

6

Some Speci�cs

24% of respondents reported problems �nding technically skilled workers and 16% reported problems �nding workers with basic skills; this percentages are much greater than in 2010

Manufacturers with 250 or more employees were more likely to have greater concern about �nding employees with technical skills, while medium-sized manufacturers with 50-249 employees were slightly more likely to have greater concerns about �nding employees with basic skills

Small manufacturers were more concerned about marketing and sales and business strategy and �nancial analysis

TrainingWorkforce Skills Remain an Issue


Among manufacturers that spent money on training in 2011, the median respondent reported that ten percent of training dollars were spent on non-routine training. 25% of respondents spent more than 50% of their training dollars on new activities and tasks. Small manufacturers not only spent less, but most of their spending (90%) was for routine training.

Median Expenditures Per Employee on All

Training Activities in 2011 and Median

Percentages of Training Dollars Related to New

Activities and Tasks

ConcernsMarketing and Sales Concerns Weaken in 2012

Compared with 2010, marketing and sales have become slightly less important to Georgia manufacturers in 2012. At the same time, marketing and sales are still the most common problem or need among Georgia manufacturers in 2012. Lean manufacturing priorities are the second most common need or problem. Technical skills are also important, having become more so since 2010.

Energy management, which declined in importance in the 2010 survey (compared to previous survey results), rose again in the 2012 survey. Quality assurance rebounded in importance in the 2012 survey after having declined in the 2010 survey relative to previous survey responses. Fewer manufacturers expressed needs for product development in the 2012 survey than in the 2010 survey. In addition, needs for business and finance and management and leadership were less prevalent in 2012 than in the 2010 survey.

Source: Georgia Manufacturing Survey 2012, weighted responses of 528 manufacturers; Georgia Manufacturing Survey 2010, weighted responses of 494 manufacturers.

Manufacturing Problems and

Needs, 2010 – 2012

Marketing and salesManufacturing process/leanTechnical skillsEnergy costs managementBasic skillsExpansion planning, facility layoutQuality AssuranceEnvironmental, safety compliance, health, workplaceManagement and leadershipInformation systems & hardwareProduct development, designBusiness, Finance

Problems/Needs COMPARISON DIFFERENCE2012 2010 2012 - 2010

36.0%31.6%23.5%21.4%16.4%13.8%13.6%

13.5%

12.2%12.2%11.4%11.4%

39.1%31.6%18.8%18.9%13.9%13.5%11.5%

12.3%

12.8%11.1%15.4%13.5%

-3.1%0.0%4.7%2.5%2.5%0.3%2.1%

1.2%

-0.6%1.1%-4.0%-2.1%

0

50

100

150

200

250

300

350 Median percent training for new tasks

0%

5%

10%

15%

20%

25%Median training $ per employee

Total

10-4920-249

250+Food-te

xtMaterial

MachElec-T

ransScie

nceNorth

westNorth

eastAtlantaWest

Central

Augusta SouthCoasta

l

7

Some Speci�cs Respondents in the Northwest region spent the most on training on a per-employee basis, and those in west, Augusta and coastal regions spent the least

The median manufacturing establishment had only 12% of employees with two or more years of technical or vocational college. Seven percent had bachelor’s degrees in at least half of their workforce. Nearly 30% of manufacturers have at least one employee with a master’s or doctorate in science, engineering, or information technology; this is an indicator of innovation capability

25,000 or more

10,000-24,999

< 10,000

Metric Tons

Percentage of Respondents That Have Conducted a Carbon Footprint Estimate or Emissions Inventory by Annual Emission Level

SustainabilitySustainable manufacturing involves minimizing use of natural resources, toxic materials, waste emissions and production materials over the life cycle of the product or part to achieve cost savings, environmental, and social benefits.Georgia manufacturers are widely engaged in sustainability practices, with more than 75% having set goals to improve the sustainability of their processes. Sustainability goals to eliminate waste sent to landfills are most prevalent. Less common are goals to reduce energy use and emissions in shipping in employee commuting or business travel. The most common planned goal is to reduce energy use in shipping.

Manufacturing Goals for Sustainability

Source: Georgia Manufacturing Survey 2012, weighted responses of 30 manufacturers

16%

18%66%

Large manufacturers are more likely to have set sustainable manufacturing goals, especially for the operation of facilities with renewable energy sources. Materials manufacturers were most likely to have eliminated waste and reused products and materials. Science-based manufacturers had the highest share of manufacturers practicing pollution reduction. Reduced shipping was highest for the food/textiles/apparel/leather, materials, and electronics/electrical/transportation groups. Reduced employee travel is highest among manufacturers in the electronics/electrical/transportation group. The food/textiles/apparel/leather and materials groups had the highest rates of operation with renewables.

Eight percent of Georgia manufacturers have conducted emissions inventories of their carbon footprint, down from 11% in the 2010 survey. However, nearly half of large manufacturers have conducted these inventories. In comparison, more than ten percent of medium-sized manufacturing respondents and fewer than five percent of small manufacturing respondents had produced a carbon footprint or emissions inventory. Science-based industries were most likely to have produced a carbon footprint or emissions inventory. Metals and machinery industries were least likely to have produced a carbon footprint or emissions inventory.

0

20

40

60

80

100Do not plan

Plan to Practice

Practice now

Source: Georgia Manufacturing Survey 2012 weighted responses of 528 manufacturers.

Eliminate waste

materials

Reduce air, water

pollutants

Recovery and reuse

Reduce energy use in shipping

Reduce energy use, employee

travel

Use renewable

energy

8

HOW MANUFACTURERS ARE INVESTING IN THE FUTURE

Manufacturers are investing in the future through using a range of information technologies, quality management and continuous improvement techniques, and manufacturing production technologies. Software for scheduling, inventory control of purchasing such as enterprise resource planning (ERP) is the most commonly used (71%), followed by computer aided design (65%), preventive and predictive maintenance (60%), and lean manufacturing (50%). Plans for acquiring new technologies are most common for bar code readers (21%) and radio frequency identification (RFID) for inventory and warehouse tracking (18%).

Use of technologies and techniques increases with facility employment size. This is particularly true for use of supply chain management, quality systems, lean manufacturing, robots, and bar code readers. Rapid prototyping and advanced materials use are not related to employment size, however. By industry, the electronics/electrical/transportation and science-based groups tend to have the highest use of these technologies and techniques. However, RFID is most prevalent in the food/textile/apparel/leather group (used by 25% of these respondents) and CAD in the machinery group (used by 80% of these respondents).

If basic and advanced technologies are distinguished, 92% of respondents used at least one basic technology (such as machine maintenance, computer aided design, or ISO 9000), while 84% used at least one advanced technology (such as RFID, additive manufacturing, or new materials).

Technologies and Techniques Manufacturers Use and Plan to Use

0% 20% 40% 60% 80% 100%

Plan To

Practice Now

ISO 500001,Energy Management System

Additive Manufacturing,Printed Manufacturing

Advanced Materials

ISO 14000 Environmental Management Systems

Mass Customization SystemsRapid Prototyping

Robots

RFID for Inventory andWarehouse Tracking

Life Cycle Analysis

Computer-integrated Manufacturing (CIM)

ISO 9000, TS16949 Certi�cation

Quality Systems (e.g. Six Sigma)Supply Chain Management Systems

Bar Code Readers forData Collection

Lean Manufacturing

Preventative/ Predictive MachineMaintenance Program

Computer Aided Design

Software for Scheduling, Inventory Control, or Purchasing

Source: Georgia Manufacturing Survey 2012, weighted responses

of 471 manufacturers.

About HA&W

Dr. Jan Youtie is the director of the 2012 Georgia Manufacturing Survey. Youtie is a director of policy research services in Georgia Tech’s Enterprise Innovation Institute and an adjunct associate professor in Tech’s School of Public Policy. She specializes in applied research in economic development and industrial modernization.

Professor Philip Shapira is the co-director of the 2012 Georgia Manufacturing Survey. Shapira is a professor at Georgia Tech’s School of Public Policy and also a professor of innovation management and policy with the Manchester Institute for Innovation Research at the United Kingdom’s Manchester Business School.

Dimitri Dodonova at Kennesaw State University (KSU) led survey research and analysis at KSU. Dodonova is assistant director of the Econometrics Center at KSU. Professor Donald Sabbarese, Director of the Econometrics Center, is a co-leader at KSU, conducting analyses for the Georgia Manufacturing Survey.

Additional Research assistance was provided by Luciano Kay at Georgia Tech and Carmen Morales at Kennesaw State University.

A special thanks to this year's sponsors: Georgia Tech Enterprise Innovation Institute; School of Public Policy, Ivan Allen College, Georgia Tech; Georgia Department of Labor; Kennesaw State University; and Habif, Arogeti & Wynne, LLP.

Adam Beckerman is the partner in charge of Habif, Arogeti & Wynne, LLP’s manufacturing and distribution group, which is one of the largest practices in the Firm. Beckerman has been enabling the success of manufacturers that are starting-up, growing or getting ready for an equity event for more than 18 years. He is also recognized as a thought leader on manufacturing trends and business issues.

About the Sta�

Habif, Arogeti & Wynne, LLP is one of the top 50 U.S. accounting and consulting firms and an underwriter of this year’s survey. In addition to delivering traditional audit and tax services, the Firm‘s manufacturing and distribution group is committed to helping clients gain greater control over production and operations, reduce waste and lower inventories, and develop a synchronized supply chain, which all improve profitability and competitive edge.

Visit www.cherry.gatech.edu/survey to download a PDF of the full report.

For more survey information, contact Jan Youtie at 404.894.6111 or [email protected].

“Manufacturers have been investing in the future, and this investment has paid off in many ways. Georgia manufacturers are attracting work from outside the state to a greater extent than the rate of outsourcing.”

“Innovation remains as important as ever. Those Georgia companies that innovate receive rewards for doing so. But a significant number of companies still have not adopted innovation as a leading strategy.”

- Jan Youtie

- Philip Shapira

For more information contact Adam Beckerman at [email protected]

10

Education

2012 Georgia Manufacturing Survey