2014 Results of the Biennial Georgia Manufacturing Survey Conducted by GaMEP

Lucy Adams

Wednesday, September 24th, 2014

The 2014 results of the biennial Georgia Manufacturing Survey conducted by GaMEP was released today. Data was gathered from February through June from 504 Georgia manufacturers with 10 or more employees. Participants were categorized into industry groups: Food and textiles (food and beverage, animal feed, apparel and leather); Material (wood, pulp and paper, plastics and non-metallic minerals); Machinery and fabricated metals; Electronics and transportation; Science (petro-chemicals, pharmaceuticals and medical). To reflect an accurate representation of Georgia’s manufacturing sector, results were weighted by industry and employment size. Data summarize manufacturer activities for the 2011-2013 period.

Manufacturers ranked their market competition strategies. Though only 6 percent report competing based on innovation, those who do enjoy the highest mean return (10 percent higher) on sales than those using any other strategy to compete in the marketplace. Most Georgia manufacturers (57 percent) focus on differentiating their product from the competitor’s based on quality of service. Quick delivery, a strategy prioritized by 14 percent of respondents, resulted in the lowest returns. Manufacturers focusing on low price (14 percent) nearly doubled their sales.

Data argue for profitability and employee retention via innovation. Larger plants (250 employees or more) tend to set low price as their primary strategy, while smaller firms (less than 50 employees) tend to compete on innovation. New-to-the-market sales, an indicator of future competitiveness, for companies competing on low price declined from 2012 to 2014. For companies competing on innovation, new-to-market-sales at the 2014 survey date were higher than for those competing on price. Innovating companies also report paying higher wages, $5,000 higher than wages paid by companies competing on low price or fast delivery of product. Of companies with new-to-market-sales, 55 percent report that at least 5 percent of their total sales are attributed to these goods or services.

Though most manufacturers, regardless of industry category, ground competition efforts in quality and price points, science-based manufacturers indicated they are least likely to compete on low price. The transportation and electronics sector has the highest percentage of manufacturers competing on innovation. Still, 48 percent of those surveyed reported bringing at least one new or improved product to market during 2011-2013.

In the area of research and development (R&D), Georgia manufacturer expenditures fall below the national average overall. The industry categories of food and textiles, material, machinery and fabricated metal, and science had higher R&D intensity levels than the U.S. benchmark. Transportation and electronics had R&D intensity levels below the U.S. benchmark.

Only 16 percent of the manufacturers surveyed report taking advantage of R&D tax credits, though 27 percent implemented in-house R&D. Significant underutilization of R&D resources is pervasive among Georgia manufacturers. Two percent use public loans or grants Two percent received private equity support such as venture capital. Less than 1 percent used the Small Business Innovation Research (SBIR) program.

Collaboration efforts toward innovation are minimal (only 24 percent report collaborating with another entity), but, when engaged in, manufacturers combine efforts with suppliers most often, with groups in the same enterprise and customers ranking a close second. Sixty-seven percent of large manufacturers report collaboration activities; eighteen percent of small manufacturers report collaboration activities. The majority of collaborative projects are conducted with domestic partners as opposed to international ones. Nonetheless, companies that report collaboration in innovation also report higher export sales.

Insourcing rates exceed outsourcing rates in the latest survey. Manufacturers competing on innovation experienced more insourcing, while those competing on price experienced more outsourcing. Larger companies were more likely than smaller companies to outsource.

Sourcing a skilled workforce poses one of the greatest challenges for Georgia’s manufacturers and the need has increased since the 2012 survey. Twenty-eight percent have problems identifying and recruiting employees with technical skills and 22 percent have difficulty identifying and recruiting employees with basic job skills. Seventy-one percent of manufacturers invested in training employees, and 20 percent spent more than 50 percent of training dollars on educating employees in skills related to new workplace activities. Small manufacturers spent less than large manufacturers and primarily invested in training for routine job activities rather than for new skills.

Use of technology in the manufacturing arena has dipped since the last survey. Still, 90 percent of the manufacturers surveyed used at least one basic technology and 70 percent used at least one advanced technology. Despite a slip in incorporation of techniques and technologies and the challenges of hiring skilled employees, 84 percent of Georgia’s manufacturers report positive profitability. Greater investment in training and education, innovation and research and development, as indicated by the survey, should increase profitability. Shoring up innovation in product production and processes and new-to-market products and services will advance Georgia manufacturer’s competitiveness in the global marketplace.

For more information, visit http://gamep.org