“There are two drivers of industry-level productivity growth: Individual plants become more productive and more productive plants get larger by absorbing the resources of less productive plants that are getting smaller”. (United States Census Bureau) The number of businesses declined in 80% of the industries in the NAICS manufacturing sectors 31, 32, and 33 between 1997 and 2012.
We need to understand how large the difference in productivity is within each industry. For example, (Figure 1) in Motor Vehicle Parts Manufacturing, NAICS 3363, the 90th percentile produces $483 Sales$ / Workhour, outperforming the 10th percentile by nearly 6 times, which produces only $83 Sales$/ Workhour (in 2015). The number of businesses in the Motor Vehicle Parts Manufacturing industry fell 11.5% from 5827 businesses in 1997 to 5155 businesses in 2012.
Figure 1
Even if your business is growing, is it enough to survive?
Every business must strive to be in the top performance percentile, to keep pace with its competitors’ increase in productivity. Figure 2 shows the annual change by industry percentile for NAICS 3363 in Sales$ / Workhour. Can a business in the 10th percentile catch up to the businesses that are changing at a faster rate?
Figure 2
What should your business do to increase productivity, remain competitive, and increase earnings?
Increasing your production per hour should be the primary objective. A.Stout & Associates look first to achieve greater production per hour while incurring no additional cost. The second objective should be to implement it quickly, in months - not years. Maximizing production speed is the real key to maximizing earnings by reducing costs and increasing capacity in the shortest time.
Do you know how your business compares to your competitors within your industry? Dispersion charts of industry performance levels are available for each industry in NAICS sectors 31, 32, and 33. The remaining sectors have only the average performance with no dispersion data available. Contact me.
What do you need to calculate to compare your business performance?
Find your 4-digit NAICS code
Calculate your Annual Sales$ / Workhour
Sum your annual revenue (Annual Sales$)
Sum the total hours worked by all employees, CEO, sales, accounting, maintenance, direct & indirect (Annual Workhours)
Divide Annual Sales$ revenue / Total Workhours = Sales$ / Workhour
Provide this information to A. Stout & Associates. Schedule an appointment with A.Stout & Associates to review your business performance
Compare your business performance to the Dispersion graph for your industry
Review the historical revenue growth for your industry
The trend of the number of businesses in your industry
Discuss what you need to do to grow your Sales$ / Workhour
A. Stout and Associates charge a fee for this service.
For more information visit www.AStout.net and schedule a consultation today.