So you’re thinking about dipping into the cash reserves to add more space to the shop floor or taking out a loan to buy that expensive, state-of-the-art, new CNC machine. Only problem is, you’re not sure if now is the right time.

Yesterday’s article in the paper made you think orders will pick up soon, but the economist on television today paints a picture of gloom and doom.

So What’s a Decision Maker to Do?

Don’t fret. Keep it simple to cut through the muck and use the numbers to your advantage.

Of all the statistics bouncing around, manufacturing executives and business owners should stick to tracking five key indicators for planning their company’s growth strategy, says Dr. Chris Kuehl, an economic analyst for the Fabricators & Manufacturers Association International. Those include actions of the Federal Reserve, employment trends, manufacturing orders for durable good, consumer’s expectations and actions, and inflation.

Rising inflation rates, for example, tend to signal a coming interest rate hike by the Fed. That means it’s a good time for those who were thinking about borrowing for new equipment and expansions to make a move now, before higher rates kick in. “Your local bank at some point is going to react to what the Fed does,” Kuehl says.

And if manufacturing orders for durable goods – many of which are products used to make something else - are trending upward, that indicates optimism on the part of those making the machines. It could be the signal that you, as a supplier, need to take those expansion plans off the shelf.

Employment trends are another key piece of the growth planning puzzle. In recent years, a shortage of higher skilled workers and lack of people entering the field has created a big problem for manufacturing companies looking to expand.

Keeping an eye on the unemployment rate, for example, should help shape your long-term recruiting strategy. The higher the rate, the more likely workers are to move geographically. When you start getting up to the 5.7 to 6 percent range, Kuehl said, it’s easier to find skilled workers outside the region willing to relocate. “That’s when they’re starting to get caught up in layoffs.” On the other hand, expanding your search area will probably be a waste of time and money when unemployment dips. “When rates are low, people don’t move. They have a tendency to look in just their own area.”

While different segments of manufacturing will continue to track pointed statistics – such as steel companies following steel prices – Kuehl came up with the guidelines for general statistics when he noticed a lot of members getting overwhelmed with the different indexes and sets of data.

His advice for tracking the only key indicators isn’t just for execs at large corporations. “Even the very smallest company can look at these. They get inundated with this information every day if they look at their daily paper; watch CNBC or whatever (source). They know this stuff gets thrown around so it’s a matter of ‘what do I do with this, how do I react to this.”

In addition to tracking the five general indicators to plan growth strategy, gather localized market info about your own client base, says David Velie, managing partner of Cincinnati-based Amend Consulting.

That means surveying clients - as well as knocking on their door for a face-to-face – and pulling industry specific data on your clients. For example, if you have aerospace and defense clients find out what’s happing in that industry. “You’ve got to find out what sectors are growing and what sectors are not growing,” Velie said. “Will market penetration drive demand for that new piece of equipment?”

And before making an investment, examine your operation to see if you can squeeze more out of what you already have. Velie said too often business owners get excited about adding onto a facility or buying a new piece of equipment, but don’t have the same enthusiasm for getting their operation to run at peak efficiency. “The answer to accommodating more work could be as simple as running three shifts instead of two.”


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