We’ve got a new No. 1.

Align Technology Inc. has knocked out Patrick Industries Inc. to grab the top position in the 2019 IndustryWeek 50 Best U.S. Manufacturers, IW’s exclusive annual ranking of the United States’ top-performing manufacturing companies.

The maker of Invisalign orthodontics’ trajectory to the top can be summed up like this: from nowhere to No. 1. Indeed, Align Technology was completely absent from the IW 50 list in 2017, ineligible even to contend because its annual revenue missed the minimum threshold, then rocketed to the No. 3 position last year on the strength of 36% revenue growth, in combination with other measures.

And now comes 2019. Earlier this year Align Technology released its most recent annual financial results, which showed record revenue, continued explosive revenue growth (again, over 30%) and a profit margin of greater than 20%. It’s been a grin-inducing past few years for Align Technology, whose business is building a better smile.

All that said, Patrick Industries didn’t slide far. After two years atop the list, the manufacturer of component products for both the RV and manufactured housing markets moved into the second position, while Thor Industries Inc.—the previous year’s No. 2 manufacturer—slipped to No. 3. Like Patrick Industries, Thor serves the RV market, as does Winnebago Industries Inc., which climbed into the top 10 ranking at No. 7. All three companies benefited from a robust RV market over the past few years. Shipments in 2018, for example were the second highest on record, down 4% from a record-setting year in 2017, according to the RV Industry Association.

Also of note is Apple Inc., which rebounded on the IW 50 list in 2019 following consecutive slides in the previous two years. The iPhone maker, which sat at the No. 1 position in 2016 but slipped to No. 6 in 2017 and No. 13 on last year’s list, bounced back in part thanks to a profit margin of 22% and revenue growth of nearly 16%, taking the No. 4 spot.

Apple joined 11 other manufacturing companies that improved their positions on the IW 50 Best ranking, most notably Louisiana-Pacific Corp., which gained 29 spots to land at No. 18. On the other hand, 17 manufacturers lost ground, with the biggest decline attributable to Sherwin-Williams Co., which slid 22 positions.

But what does this data tell us, other than providing interesting fodder for the data junkie? Before we proceed further, let’s explain how data determines the IW 50 Best.

IndustryWeek has carved out a precise definition of what it takes to become one of the IW 50 Best U.S. Manufacturers. First, the IW 50 is drawn from the IndustryWeek 500, our annual listing of the top 500 publicly held U.S. manufacturing companies based on annual revenue for the most recent fiscal year. For the 2019 version of the IW 50 Best U.S. Manufacturers, therefore, a manufacturer must have earned revenue of at least $1.186 billion to be considered.

From there, we examine six additional measures—a combination of operational and financial—over a three-year time frame. Those measures are inventory turns, profit margin, asset turnover, return on assets, return on equity and revenue growth. The most recent year’s numbers are the most heavily weighted, at 50% of the formula we employ.

Here Today, Gone Tomorrow

With that as a backdrop, the data suggest a couple of things.

It tells us that being the best, and then staying the best, is difficult. The number of new entrants to the 2019 IW 50 Best Manufacturers tells that tale. Fully 40%—which means 20—of the manufacturers that appear on the current ranking were not on last year’s IW 50 Best list. But for those 20 to join the 2019 ranking, 20 of the manufacturers that earned an IW 50 Best position last year did not repeat in 2019. In short, attaining a position on our ranking is no predictor of retaining a position on the IW 50 Best.

Nevertheless, there is a sense of familiarity at the top of the IW 50 Best. None of the new manufacturing companies entered the charts above the 14th position (Steel Dynamics Inc.), and six of the top 10 positions are held by companies that were top 10 manufacturers last year.

The data also tell us that you cannot point a finger at any one industry and say this one will produce a top manufacturer. Twenty different industry segments are represented on this annual ranking, with the highest concentration in the computer and other electronics industry, at seven manufacturers. (That said, five of the seven manufacturers in the computer and other electronics vertical were not on the IW 50 ranking last year.)

You can, perhaps, make an argument that age equates to greater potential to be the best. Many of the companies on the IW 50 Best, such as KEMET Corp. (No. 22), which this year hits the century mark even as it makes its first appearance on the IW 50 Best ranking, or A.O. Smith Corp., which celebrates 145 years in 2019, have significant age on their side. Indeed, 44% of the companies on the IW 50 Best have origins dating back 100 years or more.

On the other side of the equation, however, are a handful of younger firms, like Align Technology, which has yet to hit even the quarter century mark, and NVIDIA Corp., which only recently passed that milestone. (NVIDIA, by the way, ascended 10 positions in the 2019 IW 50 Best to grab the fifth position, following a leap of 30 places the year before. While not quite as meteoric a rise as Align Technology, the company is fast-stepping its way up the charts.) Yet, only one manufacturer that has reached the century mark—Clorox Co. —holds one of the top 10 positions within the IW 50.

What to Look Out For

It’s difficult to say with certainty, but it may be time to note an increasingly digital and advanced technologies influence on the makeup of the IW 50 Best. In addition to the already mentioned number of new computing/electronics members to nab positions this year, there is Apple, Align Technology, LCI Industries and NVIDIA sitting at the top of the IW 50 as added examples.

Align Technology has been riding growing demand for digital orthodontia, and 3D printing is core to its products. NVIDIA develops computing products with a growing emphasis on artificial intelligence. LCI Industries is introducing smart components for the recreational industry, and Apple needs no further explanation. Even Clorox, a company not necessarily associated with advanced technologies, is bringing smart glasses into their facilities and developing technologies to more quickly share information across their operations.

Will digital play a growing role among IW 50 Best companies? Time will tell, and we’ll be watching.

I Need More Data

For readers who always are in search of more data-driven findings, here are a few additional gems we teased from the IW 50 Best:

Six measures over multiple years comprise the formula for selecting the IW 50 Best. That said, we also identified the individual leaders for each measure for the most recent fiscal year, which revealed the following: Schnitzer Steel Industries Inc. grabbed the revenue-growth leader award (or would have if such an award were to exist). Revenue jumped by slightly more than 40%. Texas Instruments Inc. took the profit margin crown with an amazing 35% margin, easily outpacing the No. 2 contender in this category, Monster Beverage Corp., which reported a 26% profit margin. Leaders among the other components that comprise the IW 50 are Thor Industries in asset turnover, Huntington Ingalls Industries Inc. in inventory turnover, NVIDIA in return on assets and Lennox International Inc. in return on equity.
The median profit margin among the 2019 IW 50 Best is 10.62%, while the average is 12.80%. Both figures are higher than those reported on the 2018 rankings.
Median revenue growth among the 2019 IW 50 Best is 13.06%, and the average is 13.53%. The average was higher in the 2018 ranking, at 16.3%, while the median was lower at 8.58%.
Nine manufacturing companies on the 2019 IW 50 Best ranking also appeared on the ranking a decade ago. Those companies are PepsiCo Inc., Apple, Nucor Corp., Schnitzer Steel Industries Inc., Lam Research Corp., Herman Miller Inc., Amphenol Corp. and Steel Dynamics.