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Chief Executive Group’s inaugural benchmarking study of U.S. manufacturing companies unearthed a trove of insights into the performance of operations of every size.
In this era of near-constant disruption and change, what’s the real state of American manufacturers? And how do you stack up? Last year Chief Executive Research surveyed 408 manufacturing companies on key benchmarking metrics to find out.
We received detailed data about manufacturing companies’ revenues, EBITDA, inventories, capacity utilization, plant operations, cost of goods sold, as well as marketing and sales. The substantial response provided data points for companies across revenue ranges, headcount, types of manufacturing, distribution models and pricing strategies.
In doing the analysis, one of the areas we found most interesting was R&D expenditures—and their impact on the rest of the organization. Here’s a quick snapshot of our findings:
Our survey found the median investment of manufacturing companies in R&D is only 1.25 percent of net total revenues. In contrast, 10 percent of manufacturers invest 8 percent of their net total revenues in R&D, and another 10 percent don’t invest in R&D at all.
As one would expect, the most profitable companies tend to invest more in R&D than other companies, but, interestingly, we find that many unprofitable companies (presumably early-stage companies) also invest heavily in R&D.
Similarly, companies that derive more of their revenues from new products (defined as products developed internally in the past five years) tend to invest more in R&D.
Two-thirds of surveyed manufacturing companies say they set their R&D budgets with a zero-based strategy based on the potential return of their R&D investment, vs. 16 percent who allocate a percentage of revenues to R&D upfront.
Of course, innovation does vary by type of manufacturer, with Computer and Electronics manufacturers deriving the most revenue from new products, and Food, Paper and Primary Metal manufacturers among those that derive the least.
Chief Executive Group’s Key Benchmarks for Manufacturing Companies is a rich trove of insights for anyone operating a manufacturing business who wants a true sense of how they’re performing against peers. The report is intended to help you identify opportunity areas for your company to improve price realization, profit margins and asset and inventory utilization, as well as uncover cost-reduction opportunities and get the most from your R&D, marketing, sales and other investments. For more information, go to ChiefExecutive.net/KPIreport
Wayne Cooper
Wayne Cooper is Executive Chairman of Chief Executive Group.
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FAQs
Our survey found the median investment of manufacturing companies in R&D is only 1.25 percent of net total revenues. In contrast, 10 percent of manufacturers invest 8 percent of their net total revenues in R&D, and another 10 percent don't invest in R&D at all.
How much do US companies spend on R&D? ›
The estimated total for 2022, based on performer-reported expectations, is $885.6 billion. Businesses reported a projected $84.1 billion increase in 2022 R&D performance above 2021. (All amounts and calculations are reported in current dollars unless otherwise noted.)
Who is the biggest spender on R&D? ›
Amazon spent the most on research and development in the fiscal year 2022, with over 73 billion U.S. dollars. Meta, Alphabet, Apple, and Huawei rounded out the top five of companies with the highest R&D spending that year.
Why do companies spend so much on research and development? ›
R&D spend is the lifeblood of technology companies—all the more so as companies race to build and incorporate AI into their products to remain competitive. Without a product that provides unique value to customers, nothing else matters.
What industries spend the most on R&D? ›
In 2022, the highest share of research and development spending (R&D) was made within the hardware technology producing industry, accounting for a total of nearly 23 percent of the global R&D spending. The health sector and software producers followed in second at nearly 21 percent each.
Which automaker spends the most on R&D? ›
R&D spending worldwide by selected automotive manufacturers 2020-2022. Out of the five automotive manufacturers surveyed, Volkswagen was forecast to record the largest research and development costs in 2022 at some 20.9 billion U.S. dollars, followed by Toyota.
How much does China spend on R&D? ›
China's R&D expenditure exceeds 3.3 trln yuan in 2023: minister. BEIJING, March 5 -- China's research and development (R&D) expenditure exceeded 3.3 trillion yuan (about 458.5 billion U.S. dollars) in 2023, an 8.1-percent year-on-year increase, Minister of Science and Technology Yin Hejun said Tuesday.
Which country has the best R&D? ›
The United States is the leading country worldwide in terms of spending on research and development (R&D), with R&D expenditure exceeding 760 billion purchasing power parity (PPP) U.S. dollars. China is invested about 620 billion U.S. dollars into R&D.
Which country is number one in R&D? ›
Israel and South Korea are the world's leading spenders on research and development (R&D) as a percentage of gross domestic product (GDP). In pure dollar terms, however, the United States is consistently the largest spender on R&D.
Does Apple spend a lot on R&D? ›
Research and development (R&D) expenses have grown every year since the start of 2013 and total just over $175 billion through the end of the fiscal first quarter of 2024 (Dec.
The consulting firm BCG found that across all software publicly listed companies, spend on R&D is between 17% and 26%, depending on the speed of their growth. Higher growth companies spend more, which reinforces their position at the top of the growth charts.
What are the disadvantages of research and development? ›
Disadvantages. One of the major drawbacks to R&D is the cost. First, there is the financial expense as it requires a significant investment of cash upfront. This can include setting up a separate R&D department, hiring talent, and product and service testing, among others.
What is a good R&D expense ratio? ›
The price-to-research ratio is a measure of comparing companies' R&D expenditures. A PRR ratio between 5x-10x is seen as ideal, while a level above 15x should be avoided. PRR does not, however, measure how effectively R&D expenses translate into viable products or sales growth.
What is Amazon's R&D budget? ›
Analysis. Amazon.com's r&d expenses for fiscal years ending December 2019 to 2023 averaged 58.712 billion. Amazon.com's operated at median r&d expenses of 56.052 billion from fiscal years ending December 2019 to 2023. Looking back at the last 5 years, Amazon.com's r&d expenses peaked in December 2023 at 85.622 billion.
What is Amazon's annual R&D budget? ›
Amazon annual research and development expenses for 2023 were $85.622B, a 16.95% increase from 2022. Amazon annual research and development expenses for 2022 were $73.213B, a 30.62% increase from 2021. Amazon annual research and development expenses for 2021 were $56.052B, a 31.15% increase from 2020.
What does Amazon spend R&D on? ›
>> Technology and content costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our stores, curation and display of products and services made available in our online stores, and infrastructure ...
How much do most companies spend on R&D? ›
In 2022, the 10 largest Nasdaq companies by market cap spent roughly $222 billion on R&D—a figure that has risen considerably in recent years.
What percent of US GDP is on R&D? ›
The ratio of U.S. research and development (R&D) to gross domestic product (GDP), at 3.40% in 2021, exceeded 3% for the first time in 2019. However, the decades between the previous peak, 1964, and recent years have witnessed notable changes in the funding sources for domestic R&D.
What percent of revenue do companies spend on R&D? ›
From an industry perspective, technology companies are the most R&D intensive. On average, leading software companies invest between 10–15% of their revenue in R&D. In a report by Crunchbase that analyzed 108 companies provides some in-depth granularity.
What percentage of GDP is R&D spend? ›
❖ The Gross Expenditure on R&D (GERD) in the country has been consistently increasing over the years and has more than doubled from Rs. 60,196.75 crore in 2010–11 to Rs. 127,380.96 crore in 2020–21. ❖ India's GERD as percentage of GDP remained at 0.66% and 0.64% during the years 2019–20 and 2020–21, respectively.
In this era of near-constant disruption and change, what’s the real state of American manufacturers? And how do you stack up? Last year Chief Executive Research surveyed 408 manufacturing companies on key benchmarking metrics to find out.
As one would expect, the most profitable companies tend to invest more in R&D than other companies, but, interestingly, we find that many unprofitable companies (presumably early-stage companies) also invest heavily in R&D.
Similarly, companies that derive more of their revenues from new products (defined as products developed internally in the past five years) tend to invest more in R&D.
Two-thirds of surveyed manufacturing companies say they set their R&D budgets with a zero-based strategy based on the potential return of their R&D investment, vs. 16 percent who allocate a percentage of revenues to R&D upfront.
Of course, innovation does vary by type of manufacturer, with Computer and Electronics manufacturers deriving the most revenue from new products, and Food, Paper and Primary Metal manufacturers among those that derive the least.
Chief Executive Group’s Key Benchmarks for Manufacturing Companies is a rich trove of insights for anyone operating a manufacturing business who wants a true sense of how they’re performing against peers. The report is intended to help you identify opportunity areas for your company to improve price realization, profit margins and asset and inventory utilization, as well as uncover cost-reduction opportunities and get the most from your R&D, marketing, sales and other investments. For more information, go to ChiefExecutive.net/KPIreport
