The explosion of knowledge and technologies can put a strain on smaller companies, in particular. While they can be more agile and adapt more creatively, in order to do that, they need access to capital, either through investors or lenders.
“So, it’s a critical question for smaller manufacturers: Do they have access to capital and can they maintain that through down economies?” he says.
OEMs often have the technical know-how and capital, but it’s much more difficult for manufacturers in the supply chains to adapt to new technologies, Burkland says.
The risk of the unknown
OTP Industrial Solutions’ entire customer base of about 13,000 are manufacturers — the company distributes industrial equipment, pumps, bearings, fluid power, finishing, power transmission and electrical products — so President and CEO Philip Derrow keeps a close eye on the sector.
“Every single year there are companies that struggle for a variety of reasons, having to do with their performance, the overall market, changes in the market, regulatory environment, and so on,” he says. “But the number of companies that are struggling is smaller than the number of companies that aren’t — at least from my observation.”
While Derrow still hears about tighter labor markets, he believes most manufacturers have found or are finding solutions to that problem. Often, that means training people internally.
In his mind, a more emerging risk is the uncertainty and availability of cheap energy for energy-intensive manufacturers under a new presidential administration. That can include those that use primary metals like steel and chemical manufacturers.
“The regulatory risk factor is also always present, and again there will be change and nobody knows what that’s going to be either, like with energy costs and availability,” Derrow says.
But overall the mood in the sector is positive, he says.
“Our customers are generally positive about 2017, and most expect to have a better 2017 than 2016.”