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What Is the Economic Climate in the next Few Years for Manufacturing-industry System Integrators?

Rivergate Marketing CSIA Alan Beaulieu ITR Economics

An undeniable fan favorite and highlight for attendees of the Control System Integrators Association’s (CSIA) Executive Conference is the annual presentation given by economist Alan Beaulieu from ITR Economics. Alan gives attendees an overview of the current market conditions and has an uncanny track record of accurately predicting what to expect in the short-, medium-, and long-term economic forecasts.

“Alan’s perspective keeps me grounded,” said Doug Fagaly, chief strategy officer at E-Technologies Group.  “When things are rosy, you think it’s going to be rosy forever.  Alan’s forecasts give us advance warning of downturns, and the specific industries that will be most affected.  As a visionary for our company, there are not many places to go for that data.”

With his usual wit and candor, this year Alan told attendees there are signs of the economy cooling off and growth of industrial production slowing, but not to expect a recession.  Forecasts show that in 2019 the US GDP will show a 0.5% growth, which will increase to 0.7% in 2020, and further rise to 2% in 2021.  The manufacturing sector is a growing part of the US economy, and is currently at nearly a record high level.  The country’s strong manufacturing base is hampered by a tight labor market, as evidenced by a record high number of job openings.  System integrators can profit by offering customers ways to increase efficiencies.

What does this economic climate mean for system integrators and others in the industrial B2B space?  Alan suggests companies use this short hiatus in 2018’s breakneck pace of sales and focus on making internal improvements.  “Fix your problems, think long term, and get ready for the next decade,” he said.  More specifically, companies should refine processes that may have been bottlenecks in the past, strategically invest in key tools to speed internal efficiency (such as by adding an ERP or CRM system), and get aggressive with marketing.  “This is a good time to take care of things like updating your website.  If you think your website is good, that’s usually a sign that it’s not,” Alan quipped.

Understand that during this phase of the economic cycle, B2B sales are slowing, and the sales cycle is longer.  Exceptions to this rule will exist where there is a niche industry or sales and pricing are aggressively pursued.  Most companies will see their rates of growth slowing for 2019, but should expect to remain profitable for the year.  In 2020, companies will see a rise in sales.

“Prior to hearing Alan’s speech, I was planning to maintain an even keel,” said Chuck Dillard, vice president for systems at Electronic Drives and Controls.  “Understanding through Alan’s in-depth analysis that the short-term slowdown will be launching us to an increased business climate, I’m going to focus on expanding our employee base to maximize our growth over the next several years.  There was no way I would have known that the next ten years would be a growth period without Alan’s insight, and EDC will leverage off the forecast downturn.”

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