The majority of respondents to a recent survey of manufacturers in southeastern Wisconsin said they were feeling direct impacts from offshore competition.
The survey was conducted for Small Business Times by the Paranet Group, a Brookfield-based networking group devoted to lean manufacturing education.
More than 65% of the survey’s respondents said they noticed a direct effect on their businesses due to an increase in offshore competition. The impact was felt in several ways:
– 46% said they had experienced a reduction in revenue because of the competition.
– 41% said their growth had slowed as a result of low-price imports.
– 36% of the manufacturers had lost specific projects to their foreign counterparts.
– 26% have had to undergo layoffs or otherwise reduce their workforces.
Contract manufacturers and manufacturers of branded products and equipment responded almost equally to questions about the impact of offshore competition, but larger manufacturers were more likely to be able to adjust to the market by locating or sourcing manufacturing abroad.
While none of the contract manufacturers operated manufacturing facilities out of the country, 50% of the original equipment manufacturers (OEMs) said they did. More OEMs outsourced manufacturing work overseas than did contract manufacturers, according to the survey results.
That dynamic illustrates why small contract manufacturers that rely on OEMs and other larger manufacturers for project work are hurting this year, according to Linda Kiedrowski, Paranet Group president.
"China is exerting an influence on manufacturing, and those in manufacturing need to learn how to work with that influence," Kiedrowski said. "If you look at the results, there were a lot of companies that did outsource their tooling. A lot of them said overseas competition had a major impact, but many of them are already dealing with that impact by outsourcing or manufacturing overseas."
One OEM respondent commented that the company’s products are now produced at a factory in China, while its domestic workforce was reduced from 260 to 76.
More than 40 of Paranet’s 150 members responded to the survey, which yields a 95% confidence level and a 13% margin of error.
Kiedrowski said the results were generally reflective of the region’s manufacturing sector as well.
"I would say they are fairly accurate," Kiedrowski said. "Of course, the people who answer the survey typically have an interest in the topic. In the results, 65% were directly impacted. I would say overall in manufacturing it is probably a little bit less. But what about those companies that are in blissful ignorance? Certainly the effect not just of China but your Asian Rim and South American nations – all of those will have a major impact on the manufacturing environment in the Midwest. How do manufacturing companies change the way they do business to remain competitive?"
Wisconsin firms feel the pressure from offshore competition
A survey of southeastern Wisconsin manufacturers reveals that the impact of offshore competition on the manufacturing sector is being felt in real terms. Original equipment manufacturers and other primary manufacturers are better able to send manufacturing overseas than the smaller contract manufacturers that rely on supplier contracts.
IssuePercentage reporting impact
Lost Revenue46%
Slowed Growth41%
Lost Projects36%
Reduced employment26%
Source: The Paranet Group, Brookfield
Nov. 22, 2002 Small Business Times, Milwaukee
