In this episode of The Sound of Automation podcast, Wipfli director Cara Walton discusses business planning in times of uncertainty and the importance of agility in business strategies. We'll discuss current market uncertainties such as tariffs and the shift from electric vehicles (EV) to internal combustion engines (ICE), emphasizing the need for adaptable strategies. Cara looks at the role of data in building agility, reviewing data sources, and both short-term and long-term strategies. Additionally, we'll discuss our manufacturing benchmarking study and share key takeaways from the latest Wipfli manufacturing pulse survey.
Transcript:
Cara Walton 00:00
I see a tariff update almost every hour on the hour right now. And that's hard, right?
Because you're trying to manage your business and manage and plan appropriately. The other aspect is just this ongoing uncertainty and how that's driving changes in the marketplace. While at the end of the day, manufacturers still just need to focus on improving their processes, right? And getting more sales in the door and running good, stable and successful businesses. But it's becoming harder and harder with all of these other things coming into play.
Intro/Outro Narrator 00:30
Welcome to The Sound of Automation, brought to you by Wipfli, a top 20 advisory and accounting firm.
Bryan Powrozek 00:49
Hello and welcome to The Sound of Automation.
I'm your host, Bryan Perozek, and joining me today is my colleague, Cara Walton. Cara, how are you doing today?
Cara Walton 00:58
I'm good, Bryan. How are you?
Bryan Powrozek 00:59
I'm doing well, doing well. Good to have you back on.
I wish we had maybe a better topic to be talking about. I mean, not that it's a bad topic, but I feel like a lot of the uncertainty in the marketplace that our clients and people on our network are seeing, it can make doing business very challenging. So hopefully today we can shed a little light on how you're never gonna take all that uncertainty out of the market, but give people some strategies of potentially how to deal with it.
Cara Walton 01:32
Yeah, absolutely. I think to your point, it's a, maybe it's good for some, but I, meaning the specific impacts that you can talk about today, but as a whole, right? That the volatility is just, it's tough.
You got things coming at you from eight directions. Anyway, as a business owner, a leader, and now you got eight more directions. The thing is coming at you with tariffs, with the economy, with the political environment, the whole nine. So we just, we just doubled the volatility, right? Whether it's positive or negative.
Bryan Powrozek 01:56
Exactly. I'm starting to feel like a broken record here to date myself with that reference, but, uh, you know, cause it seems like since we started the podcast years ago, you know, this, this topic of uncertainty and volatility and all that keeps coming up and it's, you know, I'm, I think the only, you're kind of like death in taxes, right?
I think the only constant we can plan for going forward here is, is uncertainty and the fact that things are going to change and they will be different and as a business owner, you have to be able to, uh, uh, to, to react to those and adjust to those, uh, as you're going. So you, you touched on a couple of things there, but just, just curious, uh, you know, what your, um, what you're hearing out in the market, what are some of the big things that, uh, that business owners are trying to react to right now? You, you hit tariffs, which I think is a big one. I, I've seen a lot more on tariffs in the last two months than, uh, than I think I've ever seen in my career.
Cara Walton 02:53
Yeah, I would agree with you. It's definitely ever-changing, right? But to your point on the volatility piece of it, I feel the same way, right? It feels like you're a broken record, you just keep saying, hey, you just got to be, you know, there's more change, we got to keep managing it better. And it's really challenging to keep having a similar message.
But I think part of what's happening there, and we can go into more of the specifics in terms of kind of like what I'm seeing in the market, but part of it is the speed of those changes, right? Like, this is probably a very silly reference to make on a podcast. I'm going to talk about a chart, but for anyone who's listened to me on a podcast before, I love to talk about charts. But there's a big thing, right, you can see like the speed of adoption of every single form of innovation that's ever happened in the world. So like, for example, when the color TV was adopted, the speed of that adoption was really high. When the iPhone first came out, the speed of adoption of an iPhone was even higher, right? So you have these consistent curves that almost are like exponentially up to down now in terms of adoption rates. The same thing is starting to happen with changes, right? So I think to your original question, the biggest thing that we're seeing business owners and leaders see every day right now is the speed at which they have to pivot and change something within their own business, right? Whether that be with tariffs, that's a good first example. I don't know about business owners and leaders, I won't speak for them, but I see a tariff update almost every hour on the hour right now. And that's hard, right? Because you're trying to manage your business and manage and plan appropriately, but there's no way you can respond to every single update that you see, even if every single update does impact your business, that's an impossible way to run your business, right? Because then how do you focus on continuous improvement? How do you focus on all these other opportunities for change and advancement when you're just firefighting? And at this point, I think that's the big challenge is that there's a lot of firefighting. I have the pleasure and the joy and also sometimes the challenge of getting on a meeting once a month with a lot of colleagues that are mid and upper level management and manufacturers. And the biggest thing that they're struggling right now is that they spend eight hours their day firefighting and then the time that they're not in the plant firefighting is when they actually get caught up on all the other aspects of their job because of all these challenges that are happening at the market, right? So yes, tariffs are a big piece of it. I think the other piece of it is a lot of products being put on hold or launches that are challenging. So especially if you're in the automotive space, but in any industry right now, there's uncertainty, right? There's uncertainty in our own businesses as manufacturers and suppliers to the manufacturing industry, but there's uncertainty at the OEM level. So whether you're supplying into a massive packaging company or an automotive OEM or tier one or an appliance manufacturer, whatever industry you're in, those OEMs also have some concern, right?
For the first time since President Trump was in office, he's already said, hey, you know, we might have to be aware of a recession, it might happen. That's the first time he's ever said that publicly. So if you put yourself in the shoes of your customer, how do they feel about that, right? And that's driving uncertainty into our businesses and then that firefighting of, oh, this program just got put on hold or, oh, this program that we thought was going to launch in six months is now delayed again. So I think the tariff piece of it is a big piece of it. We can talk about that some here today, but the other aspect is just this ongoing uncertainty and how that's driving changes in the marketplace. While at the end of the day, manufacturers still just need to focus on improving their processes, right? And getting more sales in the door and running good, stable and successful businesses, but it's becoming harder and harder with all of these other things coming into play.
Bryan Powrozek 06:27
Yeah, you know, it's interesting when we were prepping for this, you know, we kind of talked about that, and you brought up the automotive industry, you know, having a lot of automotive clients myself, and, you know, some of them were very excited, you know, the last four years about the push for electric vehicles. Now a new administration comes in, and it's, you know, maybe there's not gonna be that same appetite for, you know, for incentives and things like that to try and get that out into the market.
And so they're sitting back saying, Well, I don't know where to go with this, right? I was I was thinking it was electric, and now it's, you know, kind of going back to internal combustion, and even some of the things I've seen coming out of the, the OEMs themselves that they're planning these flexible platforms where it could be electric, it could be hybrid, it could be internal combustion. So now it just it creates so much variability, that you can't just say, Okay, well, this is going to be my strategy, and away you go. So, so I get with that in mind, and kind of where, you know, where we're starting off here, you know, what kind of advice do you have, or how, you know, to for business owners, how do we build in some of that agility, right? Because you still need to, you still need to, you know, put a target out on the distance and aim for it, just knowing that that target is probably going to move a number of times before you actually get there. Right. And so
Cara Walton 07:49
Right. Yeah. And I think like to your point that the target's going to move a bunch of times, we can't, and maybe we could, but I think it's a bad idea to put it better. It's not the best practice to run a business for every four years.
Because right now that's part of what's happening, right? Is that to your point, for the last four years of the Biden administration, we were excited, some people were excited about battery electric vehicle content, not necessarily because of the adoption rate for the consumer, but because that BEV content that was being released was increasing tooling. So a lot of our tool shops have more work in the automotive space, but then that was also increasing opportunities for those plastic processors, stampers and die casters that are really good at low volume, high mix work, right? Because we were, we were continuing to inject more, more mix, more higher mix, lower volume business into the marketplace. So we were saying, Hey, you're going to have this plug-in hybrid variant. You're going to have this full BEV product. You're going to have this full internal question engine product. That was great for those four years, but we always knew back then, right? There was a risk, depending on who came into office in 2025, that that might shift again, because that was somewhat based off of the EPA regulations that the Biden administration, typically more of a democratic agenda put into place. Now we wake up on day one, day two, give or take of the Trump presidency, and we turn around and we see everything's been rolled back. But again, back to the original point, right? For us as business owners and leaders, we can't, we can't just run our business based off whatever it's going to be like for the next four years. And that goes all the way up to the OEM. Again, GM can't sit there and say, okay, for this four years, I'm going to focus on not launching battery electric product again. But then maybe in 2029, meaning 2028 election, when the next president comes into play in 2029, they're going to start putting these emissions regulations back in place. GM can't run their business that way. Product life cycle, even the time it takes to design a vehicle, they're designing vehicles that won't even be on the road until 2029 or 2030. So they can't plan around that, right? Neither can we in our own individual businesses. I think the big challenge that happened right now is we had all these BEVs that the OEMs were bought off on. And now when you set it kind of in your original question, we're pivoting to plug-in hybrid variants so that we can improve adoption, right? Consumer adoption of those products. So what did that do? That means that at this stage, mostly tool shops, some production facilities, for the most part, it hit automotive tool shops, had work. In some cases, they had steel on floors that was fully designed that was already about to be cut for programs that then were removed from the market because the OEM said, whoa, whoa, whoa, hold on. I'm actually going to go from this full BEV product to a plug-in hybrid variant. And what does that mean? That means I have to re-engineer and re-tool a whole bunch of stuff. And that means that you, Mr. Tool Shop, have to wait to do that work.
Ultimately, some version of that is still going to come into play, right? That demand is still going to be there down the road. But again, I'm sure it's going to be the theme for this discussion. And for many of the discussions that you have on the podcast is it's that volatility, right? You have to respond so swiftly to those differences and to those changes. And that's really where that challenge comes into play. Yes, the demand will be there at some point, but how do we then run our business today and respond to, in some cases, the loss of a million dollars, right? Some of these companies have a million dollars of one work that they were already designing that isn't there anymore. And when you're a 20 or 30 million dollar company, a million bucks is a lot of money, right? If you thought it was already going to be part of your forecast for the year.
Bryan Powrozek 11:16
Oh, yeah. Well, and really, you know, what you're, you're talking about there, right is, is data, right, even that information from that information from the OEM of Hey, we're going from this product portfolio and volume mix to this now. And so now the business owners got to adapt to that, you know, and I know that that's a an area that's near and dear to your heart there.
You know, so trying to build a strategy around the available information, because some that information is going to change guaranteed, we've already talked about that at the outset that that's going to change throughout time. But what's the you know, what do you see is the key elements are kind of the legs of the stool, if you will, that that you need to have to build a good data driven strategy for your business.
Cara Walton 12:06
Yeah. So I think there's kind of two, there's two answers to that question. I almost want to split it up into the demand side of the equation and the supply side of the equation. Right. So, um, on, let's start, we'll start with the supply side of the equation because that one is, uh, probably easier to talk about and maybe harder to do. Um, both, I'm sure operations people would say it's harder and then salespeople would say the demand side of the equation is harder. So maybe they're 50 50, but let's talk about the supply side of the equation first. Um, on the supply side, right? In terms of how we're running our businesses, the, the improvement of efficiency is the number one key, right? How do we improve efficiency? How do we continue doing more with the same number of people and utilize our people for their highest and best purpose? We have to continue being able to be flexible. That means we can't have massive amounts of fixed costs in some cases, right? What's the largest fixed cost for many businesses after we look at our machines, right? And our material and things like that, the materials variable, but our machines and our building costs, it's the cost of our people. They're the single most important resource in any manufacturer. We need to have good people when you have capable people and we need to take care of our people. But as business owners and leaders, we simultaneously have to make sure that we manage those costs. So one of the best things I think you can do in this time of volatility is make sure that we are communicating with our people and we're listening and working together to have everyone do what is their highest and best use.
It's an easy thing to say. It's a hard thing to do, right? So what do I mean by that? I mean, do you have people who are super capable who could help you with running a machine or help you with maybe even upscaling into some semblance of design or into other aspects of the business that are currently packing boxes? Could you go ahead and find a small piece of automation equipment that's inexpensive, right? It doesn't have to be some massive automation system, but something that comes in and builds up that corrugated for you and then helps you then have a system to fill those boxes so that then you can, utilize that person for what they're better at, right? How do we look at task inventories and say, okay, what are all the things that my people are spending their time on right now? And how do I take away the 20% that's menial in some cases that maybe I could automate with all the automation that we see coming out in the market today and then have them utilize that 80% because what did you just do? You just increased your ability to take on more revenue with the same number of people. So improve your profit when that point in time comes. And simultaneously you're potentially maintaining your total fixed costs so that if a dip in the market comes or if a million dollars in business that you thought you had gets lost from the market, then you still are in a circumstance where you have a manageable set of fixed costs where you can be flexible and you can respond accordingly. So I think that's one of the primary things on more of the supply side of the equation, right?
Is focusing on that efficiency, focusing on that process improvement and not taking the foot off the gas there. Right? There's going to be all these challenges. There's going to be these things that keep coming at us. But nonetheless, the core of what we do day in and day out is, and I, maybe there are people on this phone call who don't do it, but they all care about the manufacturing industry, right? Is we make pieces and parts or we make tools. We make something that comes in one door in one way and goes out another door in another way. We can't lose focus on that ability and on that skillset and on that sweet spot of being able to make something better and more efficiently and doing it slightly more innovatively every day than the day before in order to improve our businesses. And I think sometimes, and I'm guilty of it too, even within my own team. And I mean, we, when I work for Wipfli, right? So it's a little bit different on more of the services side, but I'm guilty of it as well. Sometimes I see all these headlines and I need to respond to those immediately. And I forget to focus on the core, which is how do we continue building better data? How do we continue collecting more viable information so that we put more informed information out there that's backed by data, right? That we take positions backed by information. That's my day to day. That's my building and pieces of parts, but I do it too. I respond to everything that's happening. And then I struggle to make sure that I focus on what's what we're doing in the four walls of our business. So that was a long winded way of answering the supply side of the equation. But I think to your point on the demand side of the equation, you have to look really closely and utilize one of the things that we like to talk about at Wipfli and especially in the organizational performance in the OP group is how do you vet your forecast appropriately? So what I mean by that is in a lot of cases, we walk into businesses today where they say, well, this is my customer's forecast. So this is my forecast. It's not the wrong approach makes sense, right? That's a consistent customer of yours. You've been manufacturing parts for them for a couple of years. That's one option of your forecast. And that's great. But we like to term it as kind of the three legs of the stool. So it's, what does your customer forecast say? You need to know that. That's very important.
But sometimes and oftentimes, especially in today's market, your customer forecast changes. So you also need to look at two other aspects of the stool. And the point of a three-legged stool is that with two of the legs, it doesn't stand up. So you need all three legs. You need all three aspects of this demand planning in order to successfully have this stool set up, AKA, have a vetted forecast. So one of them is your customer forecast. And the second one is your own business's performance in the prior years. So this is someone that you've worked with, right? Let's say, I'll pick an easy program because a lot of people probably know it, right? Let's say you're producing parts for the Chevy Silverado, just to pick something, right? Pretty high volume program. You've consistently done a lot of parts for that over the years because, well, there's a lot of Chevy Silverados on the road. So you got GM, Chevy specifically saying, hey, you're gonna make 100,000 units a year of this. You're gonna do 20,000 on these months, and you're gonna do 6,000 on these months just because of supply and demand matching that, okay? Great. And then you can look at your prior years and you can say, actually, in the last three years, we've only ever done 75,000 units per year. And of that, GM is telling us we're gonna see the largest uptick in the back half of the year, but we actually saw things start to slow down in the third quarter. So that's kind of your second leg of the stool, right?
Is what is the historical evidence that you have within your own ERP or within your own sales management tools, whatever you're doing to look at that historical revenue, to understand how many products you were building, and then take that as step two. Step three, so that kind of third leg of the stool, is what are outside forecasting resources that you can utilize to vet this on the open market? So that's not a pitch for Wipfli. We do help with those types of things, but that's a pitch for an outside forecaster. So if, again, we go down the Chevy Silverado piece of it, can you go to an AFS, an auto forecast solutions? Can you go to an LMC? Can you go to an IHS and buy their forecast and then use that as your third pillar? The pro and con of the automotive industry is, the automotive industry is really tough to navigate, but they do have some pretty solid outside forecasting tools. If you're in another space, if you're in consumer products, if you're in medical, sometimes those are a little bit harder to be able to get that outside third-party forecast. They frankly don't provide them the same way, but to the best of your ability in that third pillar, still go try to get that outside forecast.
Your alternative, and something that you should probably be doing anyway, but especially if you're in a market where it doesn't, you don't really have access to that outside forecast, is you can look at that OEM's financials. So like, for example, if you're in medical and it's really challenging to understand the specifics from an outside forecaster of medical device demand for something that's hot in the market today, Ozempic, right? GLP ones, so many people are manufacturing things for those, meaning some of the aspects of that. How can you then go look at that OEM's financials or their most recent earnings report and say, okay, XYZ, a large percentage of their profit came from that GLP one manufacturing at this point in time. So probably their forecasts there are the closest to accurate because they're clearly making a lot of money.
But if I'm someone that supplies into a different area of that medical device OEM, like, I don't know, respirators, for example, maybe the OEM is continuing to tell me that they're gonna have a similar forecast to what they had last year, even though if you look at their earnings report, you might see, oh, they've actually had a decline in respirator sales every year for the last four years because they have a really big year in 2020 and 2021 for obvious reasons, not that we have to rehash COVID, but there's obviously a big reason why they had a big demand there, right? So that's also kind of a third aspect of that third pillar. If you can't get to the specific third parties forecasting, then you can at least go look at those earnings reports from that OEM and try to cross poorly there. It's not perfect, but at least that way, you then have three separate sources of data that you can culminate and you can make executive decisions and strategic decisions based off how you know your business runs to plan for what you should actually expect to manufacture every single month. And the best part about that is that then that gives you the opportunity to say, okay, I can make sure that I have my fixed costs managed appropriately for these expected ebbs and flows in the market. The one other piece there, and this is kind of more on the supply and the demand side of the equation, but to your point of, hey, what can we do, right? We can talk about volatility all day long. We can talk about the reasons why things are volatile, but what can we do about it as manufacturers? The biggest thing that we're talking about a lot right now and working a lot of our clients on is How do you scenario plan? So part of that comes from that three-legged stool that we just talked about, right? How do you use the data at your fingertips to make the most informed decision and plan for the future? But the follow-up question to that is how do you understand the art of the possible, right? I think what you said at the start of this call or at the start of this podcast, excuse me, was the only thing that's certain is that something else is gonna come that's gonna make there be more uncertainty, right? That's the only certainty we know in the world. If something else is gonna happen and that's gonna impact our businesses. So how do we scenario plan within our business to the best of our ability, prepare ourselves for that? The questions, and this depends on the business, right? But at a high level, it depends on the industry you're in.
What happens if you have a 25% reduction in total revenue? What does that do to your workforce? How many machines do you keep running? What does that do to your fixed costs? What does that do to your sales? What does that do to your profit? What does that do to your cashflow? Same question, what if you have a 25% increase in revenue? What does that do to your business? Because you don't wanna be in a position where you have to say no to a 25% increase in revenue.
We want that when that comes up, but you gotta be able to flex up. What happens if you're in the automotive industry to our prior conversation if 80% of the internal combustion engine products that are expected to launch in the next six months no longer launch? I'm not saying that that's the forecast, right? I don't think that that's what's gonna happen, but it could, right? The only thing that we know for sure is we don't know.
So what happens if that does occur in your business? How do you use that in this case, right? That automotive outside forecasting data to say, okay, I'm gonna dock every single BEV or plug-in hybrid program, or I'm gonna push them all out by 18 months, because I'm seeing that as a big trend in the marketplace right now. What does that do to your business? What happens to your business if you have to have a 25% reduction in labor? If you have, or if you can't fill open positions, how does that impact it, right? So I think the best first step, at least in my opinion, is getting a group of smart people in your business and outside advisors. Maybe you have a board of advisors, maybe you work with someone like Wipfli, whatever it may be, get everybody in a room and say, okay, how do we scenario plan? How do we utilize the data that we have access to in the market until we have access to to better plan for the possible? And then you get some really smart analysts and people to go run those numbers for you and tell you what could happen, and then you can make business decisions around.
Bryan Powrozek 23:42
Yeah, exactly. And especially there, I mean, you're now, you know, you're obviously not going to have fully developed plans for each of those scenarios, right? But the you've at least got the start of it. And you're not, you're not looking back at your last quarter financial performance and going, Oh, shoot, we got a problem. Now we need to start coming up with a strategy like you've already got those. And you can if you're if you're looking at this on a regular basis, you know, be that monthly, or every couple weeks, or however, whatever frequency decide, now you're, you're kind of catching the the path at at shorter points, shorter intervals, it's not as big of a swing, and you can start correcting your course.
And then I also liked what you talked about, you know, having that third party, which, you know, even I know some of my clients use resources from their industry association, right? Where it's, you know, hey, what are other, you know, plastic injection molders or system integrators? So what is everybody else seeing? Because you get that little bit of with the second leg of the stool, you get that little bit of confirmation bias, right? Oh, you know, sales are down, but we're sure it's just because of the election or whatever it might be, and it's going to pick up in first quarter of next year. But then if you go to that third party, and you see everybody else in your association is is killing it, and they're so now you're, you're the anomaly, and you can't just run with with what your your gut was telling you. So no, I think that's, that's a great, a great approach. And, you know, I mean, shameless plug for Wipfli. But, you know, the some of the studies you talked about, I know, we just wrapped up kind of our q1 survey. And that's kind of a general manufacturing survey, what what people are seeing. Talk a little bit about what what information is available in that.
Cara Walton 25:35
Yeah, it is a little bit of a shameless plug, but it's also useful because we don't necessarily charge for access to some of the data. So it's a medium shameless plug, too.
Um, but I think I want to start there. One of the things that you said that I think is important, and this is what we found in the study when we first looked at it. So we just completed what we call our pulse study. So we do three pulse studies a year. Um, these are very high level state of the industry, 10 to 15 question studies. Uh, right now they're focused on different types of manufacturing. So plastics, uh, plastics, processors, metal farmers, die casters, tool builders, contract machinists, automation manufacturers, uh, forgers, and then some fastener manufacturers. We had about 300 respondents to the study. It's one of the highest individual study response rates we've had in the wild. So we're really excited about that.
That is my shameless plug, Bryan, just so everybody knows that. Um, but one of the most interesting things we found in the data, and we've actually seen this every quarter for the last two years is we're always, excuse me, we've seen this in the first quarter of every year for the last four years. I said that incorrectly. We always have seen an increase in optimism in the first quarter.
So my best example for you based off the Q1 study findings is that we saw on average, 57% of manufacturers expect profit to increase from 2024 to 2025. And then either 27% of them expect no change. So that means in January and February of this year, you had over half of the manufacturing industry, so more than 150 manufacturers across process type who said, yeah, we think profit's going to increase compared to 2024 in 2025. The exact same thing happened in the first quarter last year. We had give or take 50 to 60% of the manufacturers who said, yeah, profit's totally going to go up in 20 to 24 compared to 2023. And you wonder what happened every single quarter after that, the number of manufacturers who thought that their profit was going to improve year over year went down. So by the third quarter of last year, we had more like 30 to 40% of manufacturers who said they actually thought that their 2024 profit was going to be better than their 2023 profit.
So what does that mean? That means similar to what you talked about before, right? Sometimes we just get that confirmation bias of, oh, it's okay. It's the start of the new year. It's just the election. It's just the Bureau of Recessions. It's just the most recent launches that got moved. It's just this one thing. Everything's going to get better. So we need to totally fine for the whole year. This isn't me saying that you should have concern, right? There are still very successful businesses. Some of the tariff and trade environment is going to benefit some North American manufacturers might not benefit others, but it'll benefit some. But nonetheless, we have to be realistic. And that's what the data showed us that it's not all going to be sometimes the term I like to use as rainbows and sunshine. It's not all going to be rainbows and sunshine throughout the whole year, despite us forecasting that in the first quarter of the year. So like a couple other considerations within that, and I think this is where that scenario planning is so important as well, right? Is on average, most manufacturers ended 2024. So the first quarter, 2020, or the last quarter, 2024, and in the first quarter, 2025 data, we ended up between 55 and 65% capacity utilization. Depends on the process type, right? Our die casters ended a little bit lower at 51% capacity utilization, plastics processors are slightly higher than that at 53. And then you had metal formers actually doing the best in terms of the processors or the production suppliers that we work with at 63%. So a little bit of a varying aspect, depending on the type of process type that they're in. But what we also saw is that every single one of those industries, or excuse me, process types that I just quoted, all solve forecasted capacity utilization increases.
And what our team has done before is every single quarter, we always compare forecasted capacity utilization to prior quarter actuals. So what we say is, okay, last quarter, you said that your capacity utilization was going to be 60%. If you pick a number, this quarter you told us your actual capacity utilization is 52%. On average, when we look at that across all manufacturers in our data set, which at this point, specific to the capacity utilization number is over 2000, all in the US and Canada. What we see is that without fail, we always forecast our capacity utilization to be between three and five percentage points higher than our actual utilization. So similar to that forecasted profit piece of it, right? We're a little bit of rainbows and sunshine every quarter when we forecast for the next quarter. Again, I'm not trying to doom and gloom about it, but as we talk about the volatility, as we talk about the changes in the marketplace, we have to be realistic about what the implications are to our businesses. We had a pretty large percentage, I think it was over 50% of manufacturers who said that they expect the tariff to negatively impact their business. And those were both US and Canadian manufacturers, because what we're seeing is in a lot of cases, it's a very integrated supply chain. So you have US manufacturers who rely on Canadian steel, or you have US manufacturers that rely on a Canadian tool, or they rely if you're sitting in Detroit, sometimes it's easier to get your tool or get some parts across the border to have an additional like value add assembly or work done to them than it is to get it somewhere else in the US. I'm sitting in Detroit right now, I could, if I had a good arm, throw a rock and probably hit Canada, right? Not really, the river is a little bit wider than that. But that's still chance, the truck ride is a lot less. So a lot of manufacturers across different process types and across different countries are very concerned about these consistent tariffs, especially between the US, Canada and Mexico. Same thing goes for Mexico, we rely a lot on the Mexican marketplace for some of the manufacturing that we do domestically, meaning in the continental United States. So I think there's a lot of concern and uncertainty as we talked about the start in the market, and the data, the q1 data is showing us that my biggest pause, or if I had a by the microphone for a minute, which I guess I do here today yourself, is making sure that we're being realistic about what's actually going to happen for the rest of 2025. And not necessarily saying, Oh, yeah, it's going to be a great year, because President Trump was elected, or Oh, it's gonna be a great year, because we're putting tariffs on manufacturers out in other countries.
Maybe it will be for you, maybe it won't be. But look at the data and scenario plan appropriately based off the actual impacts to your business with the information that you know, for sure today, not on the hope of it being better in the future.
Bryan Powrozek 31:57
Yep. You know, it's interesting. One of the, one of the interesting examples, I read that the other day was actually a Canadian brewer or brewery that they buy their aluminum lids from someone in the U S and that's the only place they can get the aluminum lids for their cans from. And so it's like with the Canadian government proposing kind of retaliatory tariffs, they're like, Oh, so now we're going to get hit. Cause this is like the only place we can get it from.
Um, and so you might see that six pack going up at a store. If you're a fan of Canadian beer here in Metro Detroit, the, so just to get this in here, we're going to be wrapping up here shortly, but the, if, if you don't, if one of the listeners doesn't have that data source right, that third party, uh, and you'd mentioned, so our, our ask for anyone to get our survey result is just participate, put your own data in, right? It doesn't, it doesn't cost you much of anything other than a little time to enter that in. We've got another study coming up here shortly, right? The,
Cara Walton 32:59
Yeah, so I appreciate you asking that. I probably should have said that before, but thanks for the follow-up.
Bryan Powrozek 33:03
Thatā€™s why I'm here.
Cara Walton 33:04
Yeah, I appreciate it. So yes, this Q1 survey is closed now. So that one was conducted, it was launched in mid-January, closed in mid-February. And then we're actually, I reviewed, I'm publicizing results with you guys today, but they'll go out to all the respondents here later this week. So that one's done.
The only policy there is you got to give us your data to get an output back, right? So you don't have to be a Wipfli client. Obviously, we would love for you to be a Wipfli client, right? But at the end of the day, we want to make sure that we're getting good information in front of you regardless of whether or not you're a current client. Our next study is a little bit of a bigger study, it's called our annual benchmarking study. And that is launching on April 16. So the day after tax day, so you'll have all this free time for anyone who's dealing with taxes right now. On April 16, I'm sure exactly what you want to do is respond to a benchmarking study. But nonetheless, what you have to do there is it's going to focus on financial. So we'll collect income statement and balance sheet information, we will do another pulse question. So those higher level questions like what we just chatted about a minute ago, we'll also look a little bit at your operations, your sales and marketing and your workforce section. Again, my selfless plug is for selfish plug, I should clarify, is please respond to that study, it's going to take a little bit of time, you can divide and conquer among different functional areas within your business, it doesn't have to be the president or the CEO or one person responding to it. But just for responding to that study, we'll send you a very detailed output of performance in the manufacturing industry, and we'll break it down by individual process type to the best of our ability.
That just comes from giving us your data. So if you are interested, once this goes live, you can see at the bottom, I think in the speaker notes, whatever Bryan, you and I were saying is the specific subset, you'll have the option to go click on that link and send us an email, we'll make sure you get a link to respond to that study. But in addition to that, so that's kind of what you get just for giving us your data, what we're also starting to do, and I'm really excited about this is provide more custom benchmarking, and on site visits with manufacturers. So I don't know about you, Bryan, but for me, I love looking at data. But the only thing I love more than looking at data is looking at that data and then walking into the manufacturer that that data came from, and understanding how the two things correlate, right, set it at the start of this discussion. At the end of the day, we all make pieces and parts, we all have to focus on what's going on within those four walls. So one of the things that we're starting to do is for current weekly clients, people who want to become a weekly client, as we're saying, hey, for a pretty low price, depends on the type of manufacturer you are, but for a pretty low cost, we can come on site, we can review custom benchmarking data with you. And we can have a really honest conversation about how you're performing against your competitors, and others in the industry and talk about opportunities for improvement. Right? As we talked about at the start of this meeting, the biggest thing that you have to do is you have to be able to change in these volatile times, you got to be able to respond, it's that flexibility factor. So those are kind of the two shameless plugs, if you will, but please give us your data, we will send you a report back, no matter whether or not you want to do something more broadly with us.
My one other thing to you, Bryan, and to your point about the beer can piece of it, right, and the increase in costs, to depersonalize it for manufacturing, or at least the manufacturing that you and I deal with, I actually have the pleasure of renovating a home right now. And what I found out, and I didn't know this, I'm very adamant about North American manufacturing is hopefully you can tell those of you who are listening based off this discussion. So the wood floors, my husband and I sourced are from Canada. So they're Canadian wood floors, because I was like, I want to buy wood floors that are made in North America. I'm less concerned about US versus Canada, but that are made in North America. We had to pre order all of our hardwood floors before the original February 4th deadline. And the problem is I'm here looking at tariffs every single day. So I'm like, Oh, I know everything about tariffs. I had no idea, our interiors company emailed me I was like, Hey, there's gonna be this pending tariff coming into play. Did you know that? I didn't even think twice about it. But it's the exact same issue. I was going to have an immediate 25% increase in my hardwood floors, because they were coming from across the border. Now, obviously, the tariff got delayed until March, I had a little bit more way over them than I originally anticipated. But nonetheless, it's, there are impacts that I think all of us are unaware of until it hits us, right? Whether when you go to buy a Canadian beer at the grocery store, whether you go to renovate a home, whatever the situation may be. So I agree, there's there's always more impacts that we have to be aware of.
Bryan Powrozek 37:23
Exactly. Well, Cara, I appreciate you coming in and sharing your insights today. And as Cara mentioned, I think we're going to have a link to that survey listed in our show notes. If for some reason we can't get that in there, you know, obviously, just just follow up on Wipfli.com or reach out to Cara or myself, we can get you the link to the service. It really is for a small commitment of time, the information, the value of the information you get back is is well worth it. So Cara, thanks again for coming on and we'll speak again soon.
Intro/Outro Narrator 37:55
Thank you for tuning in. Don't forget to like us, subscribe and share on social. To learn more about Wipfli, visit us at Wipfli.com. That's w i p f l i.com. Perspective changes everything.
