Rising material, energy costs concern North American manufacturers

Five hundred and forty-one mass layoff events in the U.S. manufacturing sector in June 2008 resulted in 76,514 initial claims for unemployment insurance, according to a recent report from the U.S. Department of Labor, Bureau of Labor Statistics. In spite of that, the North American midsized manufacturing sector seems “cautiously optimistic,” according to Prime Advantage, a buying consortium for midsized industrial manufacturers.

Prime Advantage recently conducted a survey, which revealed top economic concerns for the second half of 2008. Survey data was collected from 72 senior-level representatives of industrial manufacturing companies, including business owners, vice presidents of procurement, and purchasing directors.

Raw material and energy costs top the list of cost pressure concerns.

The first survey, conducted in January 2008, asked members to predict expected cost pressures for the year. At that point, group members were apprehensive about rising material (43%) and energy (17.5%) costs. The new study shows 93% agreeing that material costs are an economic concern for the rest of this year, and 67% agreeing that energy costs are close behind.

Fifty-one percent of respondents shifted the top sourcing priority to “identifying reliable and cost efficient sources for raw materials” rather than “improving efficiency measurements.”

Inflation has become the third highest concern, with 39% in agreement (up from 31% in January). Logistics and supply chain costs followed with 38% agreeing, up from 21.6%. Healthcare (18%), foreign competition (12%), overhead (11%), and labor (8%) were other concerns.

Contrary to an earlier survey, a higher percentage of respondents expect capital spending to decrease or stay the same as in the first half of 2008, and 39% expect capital spending to decrease in the next six months; 42% expect it to remain unchanged. Previously, respondents predicted no change from 2007 (52%), or an increase (36%) from 2007.

The survey showed second half confidence for employment opportunities; 17% expect job cuts within the next six months, another 17% expect job growth, and 66% expect to make no changes and keep their current employee base the same.

www.primeadvantage.com

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