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What Manufacturers and Distributors Are Thinking About Right Now

Despite the prolonged challenges that the supply chain has posed brands and consumers over the past two years, manufacturers remain optimistic about their current situation and future prospects.

In the Sikich Industry Pulse: Manufacturing and Distribution survey, nearly 70 percent of manufacturers rated their optimism for business prospects over the next six months at a seven or higher on a scale of one to 10. This marks only a slight decrease from the previous Industry Pulse survey from September 2021, which is significant given that the supply chain disruptions themselves have barely eased up. In that survey, 71 percent of manufacturers rated their optimism at a seven or higher.

Sikich, an accounting, tax and audit company that also provides professional services and consulting for technology implementations, warned that this optimism may change as geopolitical conflicts such as the war in Ukraine continue to unfold.

At the same time, manufacturers agree that they have a lot to overcome in relation to both the supply chain constraints as well as labor shortages that have plagued their industry and many others.

Only 10 percent of manufacturers said they were “very” confident in their ability to obtain the talent required to support their business strategies over the next 12 months. And in the face of global supply chain upheaval, manufacturers have been forced to revisit their supply-chain strategies.

One-third (33 percent) of the 100 executives surveyed across manufacturing and distribution are sourcing alternative supplies (both internationally and domestic) and 21 percent are sourcing alternative products to address supply chain challenges. Another 17 percent said they are reevaluating logistics providers, while 14 percent say they are changing their purchase position. Eight percent increased warehouse space, while 5 percent invested in technology for further supply chain visibility.

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The survey said that seven out of 10 respondents are taking two or more of these steps to mitigate the ongoing disruptions.

Sikich surveyed executives in February and March this year on topics such as supply chain disruptions, workforce needs and facility plans. The firm conducts three of these surveys per year to generate and compare benchmark data.

“I’m pleased to see manufacturers’ optimism remain strong, even amid the plethora of challenges they are facing,” said Jerry Murphy, partner-in-charge of manufacturing and distribution services at Sikich. “With the pandemic, supply chain disruptions and geopolitical turmoil continuing to cast a shadow over the industry, manufacturers should focus on strengthening key parts of their operations to reduce their vulnerability to these external challenges.”

Murphy suggested that manufacturers consider adopting advanced technology that improves supply chain visibility and responsiveness, as well as work to improve recruitment and retention by focusing on creating a superior employee experience.

For manufacturers and distributors that have upcoming warehouse changes in place, 69 percent are planning to upgrade their existing facilities, while another 22 percent aim to expand these centers. Only 6 percent say they are moving to a new facility, while 4 say they will build a new warehouse in the U.S.

The majority of manufacturers and distributors (54 percent) say they are building out more generous labor policies to include benefits such as two weeks of paid time off, improved working conditions and enhanced healthcare options. And 44 percent are implementing eco-friendly practices such as automation, going paperless and using sustainable materials.

While manufacturing and distribution might not come to mind as sectors with a high level of expertise in cybersecurity, concerns about fraudulent behavior cannot be ignored. The Industry Pulse report found more than half of respondents experienced an information security event in the past year, and 36 percent experienced two or more different kinds of security events.

Seventy-four percent of firms had experienced some form of email phishing scam.

“While manufacturers are well aware of the cybersecurity challenges they face, attackers are becoming more sophisticated in how they target employees with phishing scams,” said Brad Lutgen, partner and head of Sikich’s security and compliance team. “A security awareness program that includes continuous training and education as well as testing through mock phishing attempts is the best way to help employees avoid falling victim to these scams. A good security program takes a layered approach so it’s also important that manufacturers utilize tools—such as robust email filtering, designed to help detect and quarantine email threats within the business—and not solely rely on training alone.”

The report found that nearly 34 percent of companies experienced unemployment fraud in the past 12 months, and 8 percent experienced a ransomware incident.

While cybersecurity remains a challenge, the Industry Pulse findings mark an improvement from the same time last year. In March 2021, a Sikich report found that 81 percent of manufacturers experienced an email phishing scam, 42 percent experienced unemployment fraud and 9 percent experienced a ransomware incident.