In age of increasing machine internet connectivity, survey also unearthes potential cyber vulnerabilities

HORSHAM, PA, April 10, 2017 — Kreischer Miller, a leading independent accounting, tax, and business advisory firm serving the Greater Philadelphia and Lehigh Valley areas, today announced that its Manufacturing Industry Group has released the results from its fifth annual Greater Philadelphia Manufacturing Survey.

Despite current uncertainty about how the political battles raging in Washington will ultimately shape sectors including healthcare and education, Greater Philadelphia’s manufacturing leaders remain optimistic about the economy. This optimism stems in part from a belief that the new presidential administration will lessen regulations and that recent positive market trends will continue, the survey finds.

While the majority of manufacturers surveyed predict growth in 2017, they also report hurdles in the way of achieving it. These industry leaders, from middle market companies across many sectors, are on the frontlines of a manufacturing renaissance fueled by innovations in automation and technology. This new type of manufacturing requires a new type of labor force, and there is increasing concern about the lack of qualified workers - 41 percent versus 28 percent in last year’s survey.

The 2017 survey spotted a modern manufacturing challenge to which survey respondents may want to pay more attention: Cyber security. The machines on the plant floor are more and more often connected to the internet. But while nearly half of respondents’ companies provided information security training for employees last year, the majority did not conduct any type of vulnerability assessments of their information security capabilities. And 80 percent did not conduct any disaster recovery or business continuity reviews or testing.

“We are in a period of great change in manufacturing, and that comes with previously inconceivable possibilities and opportunities, but also significant unanticipated challenges,” said Kreischer Miller Audit & Accounting Director and Manufacturing Industry Group Leader Michael A. Coakley.

The Greater Philadelphia Manufacturing Survey examines local manufacturing leaders’ views and plans in a multitude of relevant topics. The results summary includes a comparison to previous years’ results where applicable.

More on the key findings:

Manufacturers’ optimism is largely due to external factors, including the 2016 election

The 101 local manufacturing leaders who responded to the annual survey are largely optimistic about the economic future. Sixty-six percent felt some level of optimism, up from 60 percent last year, while pessimism dipped from 16 percent to 5 percent. The source of this optimism mostly comes from outside the plant walls: Nearly two-thirds indicated the Trump administration will have a positive impact on the overall economy and on their business. The mood locally lines up with national and regional trends.

Mike Borinski, senior vice president of finance and chief financial officer of Bradford White Water Heaters in Ambler, Montgomery County, said representatives of both his company and industry organizations have found a new openness among employees of regulatory agencies, including the Department of Energy. “They are more willing to at least have the conversation about how regulations impact industry,” he said.

Admiral Valve Chief Financial Officer Kelly Tomlin and M&S Centerless Grinding President John Shegda are looking forward to a good year based on the plans of the clients they serve.

“Our customers are now indicating that they are ready to release funding for capital projects in factories, in ship-building, and in the industrial gas segments,” Tomlin said of her Kennett Square, Chester County, company. This is based partially on Trump’s promised support of the military and domestic manufacturing and fossil fuel industries, she said.

Shegda, whose company is based in Hatboro, Montgomery County, attributes some of the current economic momentum to the conclusion of presidential campaigning. “There was so much uncertainty about what was going on that many of the big manufacturers were sitting on the sidelines, so there was hesitation in the market.”

Internet-connected machines are a necessary risk, and cyber security a significant expense

Modern manufacturers would be wise to make cyber security plan review a routine part of doing business, said Kreischer Miller Technology Solutions Director Sassan S. Hejazi, Ph.D.  “Joining a shop floor to the Internet of Things can yield tremendous gains in efficiency without human guidance,” he said. “Unfortunately, there are human beings who are ready to exploit that internet connection to steal data.”

Tomlin attributes the lag between using cutting-edge internet-connected machinery and utilizing equally cutting-edge security measures to a bottom-line reality: “If you don’t install the latest and greatest technology on your shop floor, at some point you’re not going to be competitive. When it comes to cyber security, in the back of your mind you know you have to do that, but there is no direct correlation with that and your ability to compete as a company for sales dollars,” she said.

Tomlin said her company has taken appropriate security measures, yet knows there is more to do. “Our IT company is telling us most of the major corporations are buttoned up – they have spent a lot of money in this arena. Now, a lot more small to medium-sized businesses are being attacked.”

Shegda said the survey results have prompted him to review security. M&S Centerless Grinding uses a cloud-based system he’s confident in, but “I’m thinking about making that more robust with another layer of software on top of that to break up data and hide it around the country.”

Borinski notes that realistically, without shunning technology and accepting the hit to competitiveness that would bring, there’s no way to completely avoid cyber risk. “All you can do is try to stay current with the available tools, and that’s what we’re doing.”

Reasons for the qualified worker problem, and possible solutions

The lack of qualified workers is an ongoing problem that the region’s manufacturers have consistently identified in the Kreischer Miller survey. “False but persistent negative imagery about manufacturing keeps some young people away from choosing to pursue a career in the industry,” Coakley said. “Add to that technological advances in equipment and processes, as well as an aging workforce, and the result is more skilled labor positions available than there are workers to fill them.”

“We feel the pain every time we have an open position, especially in a mid-level skilled manufacturing position,” Tomlin said. “We are putting ads out using social media, going to trade schools, and to associate degree programs at junior colleges. But mostly, we have to steal them from other companies.”

In an effort to reverse this trend, local companies are increasing their efforts to educate students in the region about manufacturing careers. One such initiative is the student video contests sponsored by the region’s manufacturing alliances through the “Dream It. Do It. PA” partnership, pairing manufacturers with middle schools and high schools to answer the question “What’s So Cool About Manufacturing?”

Shegda, who is president of the local National Tooling and Machining Association chapter and a board member of the Manufacturing Alliance of Bucks and Montgomery Counties, was very interested to see “the amount of effort and time that CEOs are spending on workforce development issues.” He noted that in addition to working with education institutions to increase the number of future employees, they are also working with current employees to bring their skills up to the current level.

Other growth obstacles

What else is standing in the way of growth in manufacturing? Competition from domestic markets was the largest barrier cited, at 42 percent, up slightly from 37 percent last year. Healthcare costs (35 percent) and decline in demand from domestic markets (35 percent) remain major concerns of this year’s respondents. There is also pressure for increased wages – 28 percent versus 11 percent last year.

Growth strategies

When asked about the main opportunity to grow their businesses over the next 12 to 18 months, 66 percent of respondents cited a focus on existing markets, either by increasing market share (33 percent) or through organic growth (33 percent). Fifteen percent of those surveyed hope to grow by offering new products, and 12 percent cited mergers, acquisitions, and strategic alliances as their strategy. Notably, the number of local manufacturers planning on growing via merger, acquisition, or alliance dropped by 11 points from the 23 percent who cited this strategy in last year’s survey. However, “Strategic alliances among local manufacturers allow them to focus individually on what they do best while collectively growing the industry in the region,” Kreischer Miller’s Coakley notes.

Doing business around the globe

About 75 percent of survey respondents have some level of export sales, but for nearly two-thirds of them, international sales account for 10 percent or less of total sales. Wherever local companies’ goods are sold, they are largely manufactured domestically, with 75 percent indicating they do no manufacturing outside of the United States.


Manufacturing Survey questionnaires consisting of 33 questions were distributed electronically to middle market manufacturers in Greater Philadelphia, including southeastern Pennsylvania, southern New Jersey, and northern Delaware. The survey was conducted from mid-November 2016 through early-January 2017. The 101 respondents included both privately-held (90 percent) and public companies (10 percent) and represent a diverse cross section of the manufacturing sector.

Download a copy of the full survey results.


Melanie L. Vivian
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(215) 441-4600

About Kreischer Miller

Kreischer Miller is a leading independent accounting, tax, and advisory firm serving the Greater Philadelphia and Lehigh Valley areas. The firm is built to respond to the unique needs of growth-oriented private companies, helping them smoothly transition through growth phases, business cycles, and ownership changes. Kreischer Miller offers a wide range of services, including Audit & Accounting, Tax Strategies, Business Advisory, Human Capital Resources, and Technology Solutions across an array of industries, including manufacturing, distribution, construction, real estate, not-for-profits, media, government contracting, professional services, family-owned businesses, and investment firms. The firm provides insight and creative services to organizations that need to be able to quickly adapt and respond to changing market opportunities and challenges. To learn more, call us at 215.441.4600 or contact us.