Successful manufacturers don’t just make the most of what they do best. They protect themselves against unnecessary risks. Leading manufacturers also understand that over-reliance on a single sector or customer can be dangerous.
Just ask manufacturers in industries like energy exploration or with buyers such as the U.S. Department of Defense. Changes in the global economy and shifting commodity prices also show why New York State manufacturers need multiple markets to minimize risks and maximize rewards.
A Sector-Driven Economy
“We’ve evolved into a sector-driven economy,” explains Steve Menaker from RSM US, the tax and consulting firm formerly known as McGladrey. “No longer can you assume that when the economy is moving along, everyone is participating.” As Menaker told Industry Week, a manufacturer of mining equipment was planning to double its sales, but is now scrambling to enter industries such as automotive and aerospace. For small-to-medium enterprises (SMEs), retooling a business model or a factory isn’t a light lift.
Fluctuating Material Prices
Falling commodity prices can also weigh heavily on SMEs. For example, when a manufacturer of hose clamps wanted to protect against price increases, the SME signed a hedging contract for nickel. Demand for the industrial metal plunged, however, and the small manufacturer is now losing big money on the contract.
SMEs who buy large quantities of other commodities, such as cotton, are also concerned about falling prices. As a result, they’re manufacturing fewer products today because material prices may be lower tomorrow.
For U.S. manufacturers, the uncertainty surrounding global markets could also mean new opportunities. To reach stable, growing markets, foreign automakers like BMW and Hyundai are building plants in the United States.
NYS manufactures who enter these supply chains stand to benefit, but an over-reliance on any single market carries its own risks. Which new markets does your NYS business plan to enter in 2016?
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