The goal of this three-part series to assess trends and determine how major supply chain participants, including downstream, upstream and transportation  are currently experiencing and viewing 2010 business levels, and how the general post recessionary recovery is manifesting itself among industry supply chains. In Supply Chain Matters Global Supply Chain Snapshot-Part One, we observed Q1 results of some lower-tier downstream companies that supply various other upstream supply chains.

In this posting, we will focus on some major global based manufacturers to ascertain Q1 trends. As noted in our initial posting, we certainly do not pretend to be trained economists, and please do not view these postings as a basis to plan for the remainder of the year. It is, however, interesting to put information points into a context, and begin a commentary on what lies in store for the remainder of 2010.

Similar to our observations of downstream companies, major manufacturing companies are showing a collective uptake in revenue and production activity.  This is also reflected in the latest Institute for Supply Management (ISM) index of manufacturing activity which rose to 60.4 in April and reflected broad based expansion within 17 of 18 industries surveyed. The index for new orders also rose by 4.2 points, reflecting that momentum may continue in the first half of Q2.

A snapshot of key companies indicates the following:

Caterpillar

Revenues fell 11% to $8.24 billion compared to $9.23 billion a year ago

Profit of $233 million compared to a loss of $112 million a year earlier based on lower manufacturing costs and favorable price realizations

Volume decline was the smallest since the worldwide recession began in Q4 2008

Order rates and production levels have increased

Export markets described as robust, including mining equipment, oil & gas industry products

Asia Pacific markets up 40% in machinery sales, and 15% for engines

Raised full year outlook for revenue and profitability expectations

Cummins

Revenues of $2.48 billion, up 1.6% from $2.44 billion a year ago; revenues declined 27% from previous quarter primarily due to decline in North America

Profit surged to $149 million from $7 million a year ago

Gross margin climbed to 24.3% from previous 18.3%

More than half of revenues now generated from export markets- benefited from growth in China, India and Brazil

Three of total four business segments reported improved profitability

Increased financial guidance for remainder of 2010

3M

Revenues of $6.3 billion, up 25% from a year ago

Profit increased to $1.0 billion, up 79% from $563 million a year ago

Each of the company’s six business segments posted double digit sales growth and increased margins; year-over-year growth: Industrial and Transportation +29.2%; Health Care +12%; Consumer and Office +14.7%; Display and Graphics +42.4%; Safety +20.4%, Communication +38.6%

Growth strongest from emerging markets- noted as 47%

Increased financial guidance for remainder of 2010

Samsung

Revenues up 21 percent from year ago; Industry related breakdown: Semiconductor up 57%; Memory up 76%; LCD up 40%; Telecom up 5%; Mobile up 8%; Digital Media up 18%; Appliances up 21%

Profits up 12%

Siemens

Revenues of $18.227 million euros, down 3.8% from $18.955 million euros a year ago

Profits of $1.498 million euros, up 32% from $1.013 million euros a year earlier

Exceptional cost management noted- free cash flow improved $1.6 billion euros on improved working capital management

Order volumes down 15% year over year; book-to-bill ratio slightly higher.  Geographic breakdowns- EMEA down 17%; Asia down 7%; Americas Flat

Noted that overall demand is still stabilizing in the aftermath of recession and slightly increased 2010 financial guidance.

Whirlpool

Revenues of $4.27 billion, up 20% from year ago. Geographic breakdown: Asia +60%, Latin America +65%, North America +7%, Europe +6%

Profit of $164 million, up from $68 million a year earlier

Noted that “people came back to the stores”

Expects industry-wide shipments of appliances in North America to increase 3.5% this year.

Hyundai Heavy Industries

Revenue up 30.5% from a year ago

Profit up 6.8%

Increased demand for shipbuilding and plant construction

In the global automotive sector, the Financial Times compiled figures (free sign-up account may be required) from 12 of the world’s biggest car makers which noted that global automobile production levels surged by more than 50 percent in Q1, which is another optimistic sign that consumers are feeling a bit more confident and returning to showrooms.

From our brief snapshot of global manufacturers, the overall tone is one of a positive resurgence but there remain some cautionary notes.  Demand for manufactured products, whether from inventory replenishment or select end-item customer demand, is on the upswing.  The cascading effects of government induced stimulus programs may also be apparent, driving demand in automotive, alternative energy related and industrial sectors. Siemens and Whirlpool expressly noted this positive impact.

It is, however, rather important to note that as indicated by many economic forecasters, and our Supply Chain Matters Predictions for 2010, demand in the developing regions (Asia-Pacific, Brazil, China, India) is clearly generating the bulk of current growth.  One of the more important signs that I will be watching is whether any significant uptake in growth comes from North America as the year progresses.

We did not include major high tech and consumer electronics manufacturers such as Apple, Cisco, HP, LG and others since it is clearly evident that these companies are experiencing their own very positive recovery, in most geographic regions, and they would tend to bias our overall outlook.

Our take-away from a snapshot of major global manufacturers controlling multitudes of other supply chains is that positive momentum is underway, but cautionary notes remain.

In our third posting, we will focus on a snapshot of the major transportation carriers that service and support all of the various tiers of global supply chains.

In the meantime, feel free to add your own observations in the comments section noted below this posting.

Bob Ferrari