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ISM Semiannual Forecast Points to Lots of Optimism Among U.S. Manufacturers

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This week, the Institute of Supply Management (ISM) released its December 2013 Semiannual Economic Forecast, which serves as an outlook for U.S. manufacturing and supply chain activity in the first-half of 2014. This is ISM’s supplemental reporting to its monthly PMI reporting, which is very closely watched by Wall Street and business media. The report provided some noteworthy indications of what manufacturers are planning for in the New Year.

Expectations for 2014 are positive as 69 percent of survey respondents expect revenues to be greater in 2014 than in 2013. Respondents are planning for manufacturing revenues to increase 4.4 percent in 2014, almost a percentage point higher than consensus economic forecasts of global growth of 3.5 percent.

ISM reports that manufacturing employment is expected to increase by 2.4 percent which is a sign of continued confidence. Respondents report operating at 80.3 percent of their normal capacity, up slightly from 80.2 percent reported in April 2013. Capital expenditures are expected to increase by 8 percent in 2014 over 2013.

Of most interest were responses to a special question focused on expected supply chain improvements planned for 2014.  Supply chain and B2B technology and services providers, please take note.

The report indicates that 69 percent of respondents are planning improvements to supply chain processes, which is a rather strong indication of aggressive investment and renewal plans.  Areas of investments were described as strategic sourcing, supply base rationalization and supplier relationship management on the procurement side of supply chain.  Other areas of cited investment were inventory management and control, which we presume is supply-chain and multi-tiered in scope, along with improved cross-functional planning and scheduling.  It would appear that manufacturers have internalized the need for supply chain to have a more outside-in focus, with emphasis on proactively identifying risk, while deepening relationships with key suppliers.  Enhancing cross-functional planning is a sign of more closely aligning both planning and fulfillment execution processes into a singular management control process.

Thus, from the lens of U.S. manufacturers, optimism is running high for a banner year and renewed investment in 2014.

 

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