By Rachael Pfenninger, director of strategic execution, AMBA
In the American Mold Builders Association (AMBA) 2021 Business Forecast Report, nearly all surveyed mold builders (99%) reported that current business conditions are positive or fair, a 9% uptick from last year’s gathered data. Other economic indicators also point to rising optimism, improved levels of profitability and stable employment. However, despite positive economic indicators, gathered data also highlights rising concerns amidst the continuing COVID-19 pandemic, and points to significant repositioning in the industry as mold manufacturers poise to face growing challenges, such as foreign competition, cost pressure and profitability.
Now in its eleventh year, AMBA’s annual 2021 Business Forecast Report analyzes data collected from mold manufacturers all over the United States. This year’s report represented 110 US mold manufacturers across 21 states, over three-quarters of which were concentrated in the Midwest region. With the aggregated data supplied in this report, industry executives are able to better benchmark how their companies stack up to industry norms and better align their anticipated outlook for the year.
Profits and Historical Data
As the industry heads into 2021, the current state of business remains stable for mold manufacturers. Current profitability and employment maintain historical trends, and, in fact, show marginal improvement. Fourth-quarter trends improved dramatically this year, with 43% of respondents reporting that fourth-quarter quoting was up (a rise of 18% from the previous year) while 40% of respondents (compared to 75% last year) indicated that backlog was down.
This year, AMBA again benchmarked the condition of respondents’ pipeline in the first quarter. Where more than half of mold builders reported in 2020 that either their pipeline was not full enough or they were desperately looking for work, this year that number has fallen significantly to 32%. Just under one-third of respondents also have indicated that their pipeline is full or oversold heading into 2021, a great improvement over the 21% who reported a full pipeline or oversold pipeline in
2020 (See Chart 1).
From a historical perspective, trending data on current business conditions reflects that information (See Chart 2). Overall, 47% of respondents (7% higher than last year) reported good conditions, while 19% reported this year that conditions are excellent. Those reporting fair or poor conditions also shifted dramatically; this year, only 1% indicated that their current state of business was poor, a significantly optimistic economic indicator when compared to the 11% who reported that business was poor or bad the previous year.
Current and Expected Capacity Utilization
In addition to surveying respondents on the current state of their pipeline, AMBA also surveyed companies on their current and anticipated capacity utilization.
Overall, the industry reported an average current capacity utilization percentage of 73% (6% higher than last year). When asked about their expected capacity utilization, respondents reported an average expected capacity of 74%, only 1% higher than the current capacity utilization and 2% higher than the expectation reported in 2020.
Challenges and Shifting Priorities for Mold Manufacturers
While workforce development continues to be the top challenge identified by mold manufacturers, this year the percentage of respondents identifying it as their number one challenge fell significantly from 93% to 53% (See Chart 3). Naturally, this led to a higher focus placed on other challenges, including the rise of foreign competition (27% in 2020 to 35% in 2021) and cost pressure and maintaining profitability, which rose to 30% and 24% respectively. Also notable is a growing focus on continuous improvement and political environment and regulations – both of these were identified by 22% of respondents as a top challenge in the coming year.
Workforce development was not the only challenge that dimmed in comparison to others; other previous top challenges, like new business development, were identified only by 21% of respondents this year in comparison to 46% of respondents
Unsurprisingly, it’s likely that the recent past and current environment primarily has driven this shift in perspective and focus. As mold manufacturers cope with the loss – permanent or temporary – of an already limited domestic workforce – forcing them to reconsider their operations and improve the efficiency with which they produce work – they also are continuing to battle the growing threat of international competition from foreign, low-cost mold manufacturing sources in the midst of what has been a volatile political environment.
Mold Manufacturers Stay Competitive during Pandemic
Despite a dramatic shift in identified top challenges in the mold manufacturing industry, the COVID-19 pandemic has encouraged mold builders to take advantage of the opportunity to make significant changes to their business, processes and workforce. When asked what improvements have been made due to the COVID-19 environment, 40% of mold manufacturers indicated that they have focused more significantly on internal training and/or skills development, while another 37% have made capital improvements and engaged in continuous improvement initiatives. Other activities identified included a focus on improved internal communication, data management and analytics tools, external communication technologies and cyber security.
Despite a mix of economic indicators, mold builders are reporting improvement of key metrics as they head into 2021 and deserve to feel some optimism. With continued maintenance of the tariffs placed on Chinese-built plastic injection molds by the United States Trade Representative (USTR), 38% of mold builders already have reported that advocacy efforts have had a positive effect on their business, while another 23% anticipated future positive impact that will help combat the pressure of foreign competition.
Despite the ever-shifting landscape, the political environment and the continuing threat of foreign competition, key indicators point to slowly improving conditions for US mold builders. Through its efforts to continually improve the efficiency of their operations, train and develop their workforce, and invest in new technologies and capital, US mold manufacturing is poised to improve its competitive advantage by embracing new opportunities for growth in 2021.
The full AMBA 2021 Business Forecast Report now is available for purchase. Visit AMBA.org/publications to learn more about the state of the mold building industry and to access additional benchmarking information.