We run into all types of processors in our day-to-day news-gathering efforts at Plastics News. But we seem to spend more time talking to the most sophisticated companies in the industry. So some of the results of a recent Plante & Moran PLLC survey came as a bit of a surprise.
The message: there are still quite a few processors out there that are operating by the seat of their pants.
For example, only 32 percent of the molders prepare a multiyear financial forecast. And only 57 percent make an annual operating plan or budget.
How many of you would be surprised if the 68 percent of molders that don't prepare a multiyear forecast aren't around five years from today?
Of course you can go overboard with planning. Back in the 1970s, critics of American business pointed out that U.S. firms were too focused on quarterly profit and were missing the big picture. Look at the Japanese firms, like Sony Corp., with their 100-year business plans, they said.
Well, planning that far into the future is an exercise in overgeneralization. If you're ever asked to come up with a 100-year plan for your company, feel free to use this one, and take the rest of the afternoon off to work on your golf swing: ``We will dominate our global business segments, delight our customers, maximize long-term profitability and respond quickly to market changes.''
The point is that planning can be overrated. Even if you can predict changes in the market, knowing when they will happen and how your customers and competitors will react is critical. Being prepared for change, along with having the ability to react, is essential.
But if you're not planning at least a year or two into the future, perhaps it's because you don't expect to have much of a future.
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We've written about this Plante & Moran survey a few times, most recently in last week's issue. The Southfield, Mich., accounting and consulting firm surveyed 162 molding firms in North America, collecting the data in 2003 and 2004. The report also used government data from the same period.
The data gives a very interesting look at the state of today's typical North American processor. Here are some highlights, from our earlier report:
* North America had more than 7,000 injection molding firms, with average annual sales of between $10 million and $12 million.
* The region's operating rate for injection molding machinery was less than 40 percent, even though an estimated 15,000 machines have been retired in the past five years.
* Median two-year sales growth for companies in the study was 4.2 percent.
* The median two-year pretax profit margin was 4.7 percent.
* Median number of annual quotes issued to customers was 204, while the median annual number of successful quotes was 30.
All companies are unique, of course. But having this sort of data on hand can be very helpful for processors who are benchmarking their efforts against their peers.