Group Outlook: Raw materials, energy expenses are top of mind for SMEs
By Manufacturing Business Technology Staff -- Manufacturing Business Technology, 2/27/2008 7:41:00 PM
Chicago-based Prime Advantage, a buying consortium for small and midsize enterprises (SME), says recent findings from its Group Outlook Survey pinpoint the top economic concerns of these manufacturers in 2008. Raw material and energy costs head the list of cost pressures in 2008, according to nearly 100 respondents that include business owners, VPs of procurement, and purchasing directors.
“The Prime Advantage Group Outlook Survey identifies key economic factors of influence for small and midsize manufacturers throughout North America,” says Louise O’Sullivan, president and founder of Prime Advantage.
The survey, conducted in January, polled Prime Advantage members on issues that will shape their economic plans in 2008.
More than 46 percent of respondents agree that raw materials—including stainless steel, nickel, copper, and other metals; as well as plastics—comprise a major concern in 2008, followed by energy costs as the second-largest concern, with 17.5 percent; and logistics and supply chain costs, following closely at 16.4 percent.
Inflation (8 percent); labor (4 percent); foreign competition (3.4 percent); overhead costs (2.8 percent); and health-care 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 midsize manufacturers,” says O’Sullivan. “As a buying consortium, we’ve been successful in addressing that exact concern. Since its inception, Prime Advantage has returned more than $60 million in rebates and discounts to its members. These are real savings that are helping U.S. manufacturers gain a powerful competitive advantage in the face of growing international competition.”
The survey also found 66 percent of Prime Advantage members plan significant capital improvements in 2008, including equipment upgrades such as press brakes, turret punch presses, and equipment for laser cutting, robotic welding, and stamping.
|
|
The Group OutlookSurvey conducted in January by Prime Advantage reveals the issues respondents say will shape their economic plans in 2008. |
This is supported by findings from the Business Roundtable’s CEO Economic Outlook survey for Q4 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 survey are focused on improving at least one of the following areas in 2008: cost savings, efficiency measurements, and supplier diversity goals. Another 11 percent plan to address IT systems improvements—including investments in new applications, data visibility and data accuracy—while just 2 percent are planning investments in industry certifications or education.
The Prime Advantage survey reveals a positive outlook for revenue expectations and hiring, with 59 percent indicating a revenue boost in 2008. Meanwhile, just 1 percent says 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 says. “They realize that while high oil prices may continue contributing to higher energy, transportation and materials costs, the collective buying power offered through Prime Advantage becomes an even more powerful asset to their bottom lines.”
