I recently had an opportunity to read Industry Week’s list of the 50 best performing, publicly traded ‘manufacturing’ companies. I was disappointed to see that, of the 50, there were few that would be viewed as manufacturers by most people.
11 of the 50 best manufacturers, according to IW, are actually oil, minerals or chemical companies. Deluxe, the folks who probably printed your personal checks, along with Harte-Hanks, the people who print up the fliers that are inserted into your newspapers or left hanging on your doorknob, made the list, along with another printing company. There are another 20 companies that make food, beverages (you might be interested to know that Budweiser is a product of one of the 50 best manufacturers in the land), clothing, software or manipulate information in one way or another.
They are all fine companies – as demonstrated by the fact that they made the list. The criteria used by IW consisted of revenue growth, profit margins, inventory and asset turnover ratios, return on assets and return on equity. These companies all pegged those numbers quite well.
But only 16 of the top 50 are companies that cut or shape metal, mold plastic, stuff circuit boards and assemble anything. The few of them that made the list – Dell, Harley-Davidson, Winnebago and others are very well managed manufacturers that, for the most part, still do most of their manufacturing in the U.S.
I’m not quite sure what to make of this. Are there really that few good old fashioned, publicly traded manufacturing companies performing well? Or maybe the list is an indictment of IW’s ignorance of the difference between an oil company and a manufacturer. Maybe they think that anyone who puts out a tangible product is a manufacturer. I suspect, however, that the answer to my first question is "Yes" – there are fewer and fewer publicly traded, excellent manufacturing companies. IW has to stretch the criteria to find 50 excellent manufacturers to the point of absurdity.
For years the manufacturing community has pointed out that the pressure to provide Wall Street with short term results is a long term deterrent to manufacturing capability. I am afraid that what IW is pointing out is that the complaint has merit. It certainly seems as though it is easier to find a legitimate lean manufacturing success story among privately held businesses than among those that are beholden to Wall Street.
If my suspicion is correct, it is too bad for the investing public. They will have killed the goose that lays the golden eggs with their voracious appetite for immediate returns; and soon all of the good manufacturing investments will be private – beyond the reach of Wall Street.