Raw materials and energy costs top list of economic concerns

Feb. 27, 2008
Manufacturers Buying Group releases results of 2008 Group Outlook Survey

Prime Advantage (www.primeadvantage.com), a buying consortium for small and midsized manufacturers, released the findings from its Group Outlook Survey, revealing the top economic concerns of nearly 100 manufacturers in 2008. Raw material and energy costs topped the list of cost pressure concerns in 2008. Survey respondents include business owners, vice presidents of procurement and purchasing directors.

“The Prime Advantage Group Outlook Survey identifies key economic factors of influence for small and mid-sized manufacturers throughout North America,” Louise O’Sullivan, president and founder of Prime Advantage said. The survey was conducted in January and polled Prime Advantage members on issues that will shape their economic plans in 2008.

More than 46 percent of respondents agreed that raw materials (including stainless steel, nickel, copper and other metals and plastics) were a major concern in 2008. Energy costs were the second biggest concern, with 17.5 percent and logistics and supply chain costs followed closely at 16.4 percent in agreement.

Inflation (8 percent), labor (4 percent), foreign competition (3.4 percent), overhead costs (2.8 percent) and healthcare costs (1.7 percent) were among the other concerns identified.

“More than rising energy costs or inflation, the uncertainty around pricing pressures for raw materials continues to be an obstacle to success for many small and mid-sized manufacturers,” O’Sullivan said. “As a buying consortium, we’ve been successful in addressing that exact concern.”

The survey also found that 66 percent of Prime Advantage members plan significant capital improvements in 2008, including equipment upgrades such as press brakes, turret punch presses, plus equipment for laser cutting, robotic welding and stamping.

This is supported by findings from the Business Roundtable’s CEO Economic Outlook survey for the fourth quarter of 2007, in which CEOs were predicting a 35 percent increase in capital spending over the first six months of 2008.

Also, 88 percent of respondents to the Prime Advantage Group Outlook Survey indicate planned efforts to improve at least one of the following in 2008: cost savings, efficiency measurements or supplier diversity goals. Another 11 percent plan to address IT systems improvements, including investments in new applications, data visibility and data accuracy, while just two percent are planning investments in industry certifications or education.

The survey identified a positive outlook for revenue expectations and hiring, with 59 percent indicating a revenue boost in 2008. Meanwhile, just one percent indicated that job cuts in 2008 could occur, while 23 percent are planning new hires and 76 percent are planning to keep their current employee base at the same level as 2007.

“Even though indicators like the JPMorgan Global Manufacturing PMI, which finished 2007 at a two-year low of 51.6, hint that manufacturing may be facing some trouble, it is clear that our members are confident and hopeful about 2008,” O’Sullivan said.