A partner at accounting and consulting firm Plante Moran, Joel Mitchell has a front-line look into how manufacturers are faring. Mitchell, who heads the manufacturing and distribution industry service team in Grand Rapids, said companies are bracing for disruptions and closely watching how passage of the federal tax reform bill could affect their businesses.
How are West Michigan manufacturers performing financially?
Most of what I see is they are performing well and are very healthy. The trend I guess I see is that this has been a year of investments, whether it’s facility expansion, capital investment, I.T. systems, ERP systems. There’s been a lot of money and resources in building infrastructure up. Growth has been decent, not spectacular, and maybe the expenses have been a little bit higher because of the investments. But, most of the folks that I see are expecting those investments to start paying off next year from a top-line perspective.
How prepared are businesses for the next downturn? How are they addressing that issue?
It’s got to come at some point, right? Whether you call it the recovery or the expansion, it hasn’t necessarily added the same number of jobs that have been out there. So, the workforce might not be the easiest pickings in terms of having a lot of fat, but I think people managed that relatively well. Like the productivity, in using other tools, they don’t have as much of a cost structure built into those things. Where they are at is maybe more scalable to changes in how things are going.
How are manufacturers bracing for interruptions from technology?
It becomes a really broad area. Cybersecurity is an area (of concern) for people. I just had a meeting and we were walking through some of the history of (cybersecurity) issues. There was the Yahoo issue a couple years ago, the Target one, and most recently, Equifax, where hackers were getting consumer information. There are stories everywhere, and companies are dealing with it. At our firm, we do things to help prepare and educate people, and we actually have mock phishing or penetration-type exercises to teach people how to deal with it and how to identify it.
That’s a scary issue for manufacturers, right?
Yeah, it’s one thing to say, ‘Hey, our I.T. people are educated about this and they are the ones (doing it),’ but it could be anybody. A lot of folks have technology they use on their manufacturing floors. You have blue-collar workers dealing with all of these devices and things hooked up to your network, and all offer access points. The same with your office folks — the whole spectrum of the workforce could potentially be in play.
How is this just another evolution of the manufacturing industry?
It’s not like 50 years ago when if I wanted to keep my money safe, I put it in a safe and all you worried about is someone physically breaking into your safe. Now, it’s anybody, anywhere in the world, writing this stuff up and trying to gain access remotely through your system.
How else is technology affecting manufacturers?
The other disruption in the I.T. front is data analytics. With more and more electronics and systems going online, there’s the capturing of so much data. That’s an area where a bunch of people are making investments, building those tools and developing those methodologies to help manufacturing.
Are manufacturers spending more on technology?
In R&D, for sure. I have a client that has developed an app that goes with their product that measures performance and highlights when services are needed, (when) a replacement is needed. For the customer, all that information is going back to them as well so they can assess their problem, assess how customers use their product.
Looking ahead to 2018, what’s one key issue you’re watching?
I am a tax guy — that’s my background. These (federal) tax changes I think are good. I think they have a much greater chance of happening, and they are very friendly from a business perspective.
There’s a significant drop in tax rates. More often than not, it’s going to result in businesses paying less tax. Potentially, there’s going to be more after-tax income sitting there in cash for companies to use and to grow. I think the likelihood of it going through is significantly greater after it getting through the Senate.
How would you sum up your clients’ view of 2018?
I think with people there is a feeling they are sitting in a really good spot. Business has been good. We are kind of in a long extended run of growth, but everyone is a realist and understands that at some point there will be a little bump.