Manufacturers poised to increase spending on automation, survey says

Indiana manufacturers appear to be ready to spend more on automation, technology and facility growth, according to a new survey.

More than half of the respondents to the annual Indiana Manufacturing Survey ranked investment in facilities, machinery and information technologies as the top priority for manufacturers to move into the future.

The survey, released Wednesday, was authored by faculty from Indiana University’s Kelley School of Business, commissioned by Indianapolis-based accounting firm Katz, Sapper & Miller and promoted by the Indiana Manufacturers Association and Conexus Indiana.

The survey included responses from more than 200 manufacturers across the state in a wide variety of industries, including aerospace, food, industrial, automotive and furniture. The average respondent had 391 full-time workers, with largest employing 8,000.

This year’s survey indicates a sizable shift in investment priorities for manufacturers. In the past several years, investment in human resource development has ranked as the No. 1 priority.

Easier access to capital and more affordable technologies are creating a greater willingness among manufacturers to invest in automation. Those investments are expected to fuel growth and address a growing workforce shortage.

“Manufacturers are seeing opportunities for growth, and they can’t wait for workers to show up to make things happen,” writes survey co-author Steve Jones, professor of finance at the Kelley School at IUPUI. “By investing in automation, they can reduce their reliance on the available labor pool and maintain Indiana’s place in the competitive global marketplace.”

Most manufacturers, however, don’t think automation will reduce manufacturing employment, at least not in the long run.

About 35 percent of respondents said they thought automation will increase the number of skilled positions in manufacturing, but reduce the number of unskilled positions. Another quarter said they believe automation will increase the number of skilled positions in manufacturing and help preserve unskilled positions by keeping American firms competitive.

Only 22 percent of respondents said they though automation would reduce employment numbers overall.

In other survey findings:
— 87 percent of respondents said they’ve experienced problems recruiting young people into manufacturing;
— 68 percent said illegal drug use was a major or limited problem in hiring and employment;
— 25 percent said jobs were increasing at their business and 35 percent said employment was staying constant;
— Only 6 percent said they expect to offshore production outside the country;
— 12 percent said they expect to open another facility in Indiana in the next two years.
— 43 percent said cybersecurity is a potential problem;
— Only 16 percent said the North America Free Trade Agreement should be terminated, but 62 percent said the pact should be renegotiated;
— 61 percent said reducing the corporate tax rate would improve competitiveness;
— 81 percent said Indiana government does a good job of supporting manufacturing, but only 38 percent said the federal government does a good job;
— Health care law changes were rated the top regulatory concern among respondents, followed by corporate taxes.

“Manufacturers feel health care costs, corporate taxes and the general regulatory environment are a drag on growth,” wrote survey co-author Mark Frohlich, an associate professor of operations management at the Kelley School.