Survey: Hiring, cap ex spending to keep rising
Prime Advantage report shows room for growth, concern over material costs
The ninth semi-annual Group Outlook Survey, published by Prime Advantage, shows the majority of its members are forecasting revenue increases and planning to hire more employees.
Solid revenue and capital expenditure projections
Most procurement professionals expect growth in 2012, with 72% of respondents expecting revenues to increase over last year. These findings are similar to the ISM Semiannual Economic Outlook, where 69% of respondents expected revenue increases for 2012. The main reasons cited for expecting higher revenues are an increase in overall customer demand (63%) and the introduction of new product lines (46%). These results show that the U.S. manufacturing economy continues to gain strength; only 56% of respondents cited an increase in overall customer demand in 2011.
Capital expenditures are on the rise, with 88% of respondents planning to increase or maintain the current level spending in 2012, and 41% expecting increases (this percentage is on par with 2011). Similar results were published by the ISM, with 42% of companies predicting an increase in capital expenditures for 2012.
The positive hiring trend of 2011 continues into 2012. Overall, 97% of companies plan to keep or increase the number of domestic employees, with 56% expecting to hire in 2012 (up from 48% in February 2011 and 24% in February 2010). These results are similar to the findings by the McGladrey Manufacturing and Distribution Monitor, where 60% of respondents expected to increase their workforce.
The cost of raw materials remains the top overall concern for 51% of respondents, although fewer respondents selected this concern in the top spot than in 2011 (66%). In prior years, the cost of components closely followed the cost of raw materials as a top concern, but in 2012 respondents cited purchasing processes, such as efficiency, measurements and cost savings, as their second biggest concern.
When asked to indicate the top three cost pressures causing the most concern, respondents most frequently cited the cost of raw materials (indicated by 55% of respondents in the top position). While cost pressures on raw materials also caused the most concern in 2011, the number of respondents citing it as the top cost pressure concern declined from 76% in 2011 to 55% in 2012. While 96% of respondents included this concern in 2011’s top three, only 81% included it in the top three in 2012. Respondents indicated that cost pressures on base materials for components is their second highest concern, with 52% including it in the top three. Healthcare costs were the third most frequently chosen, with 49% including it in the top three, up from 37% in 2011.
Forecast accuracy (scoring 4.9/5.0) and the ability of suppliers to keep pace on predictable demand (scoring 4.3/5.0) remained the biggest obstacles in purchasing.
In February 2011, respondents also selected these top two obstacles; however the gap between forecast accuracy (76%) and ability to keep pace on predictable demand (41%) narrowed from 2011 to 2012. Understaffing in purchasing ranked third highest on level of importance (3.0/5.0).
Lean Manufacturing the favored method
The survey showed that companies are actively deploying efficiency improvement programs and procedures. Lean Manufacturing was the most frequently cited improvement methodology, currently used at 69% of respondents’ facilities.
3D printing and additive manufacturing are slowly making progress in the manufacturing world. Of the surveyed companies, 22% have purchased, are planning to purchase, or currently outsource additive manufacturing techniques to third parties. The majority of companies have not yet embraced this technology, with 49% of respondents being unaware or unsure of the benefits of 3D printing technology, and 29% not seeing the benefit of such technology. Yet, the industry is expected to grow at a rate of 7.2% annually, according to the IBISWorld report.
"We are seeing a strong growth trend from our members in revenue, capital expenditures and hiring, which are all healthy signs for our membership and manufacturing as a whole,” said Louise O’Sullivan, founder, president and CEO of Prime Advantage. “As the economy continues to pick up steam, our members know they have access to stable supply partners within our group with savings programs in place to make them more competitive. We’re fortunate to have industry leaders in our group, both on the member and supplier sides of our business, and we’ll continue to deliver savings as they grow their businesses.”
Summary of Findings
- 72% of respondents expect to see their revenues increase in 2012 (compared to 73% in 2011)
- 88% of companies expect to make the same level or higher capital expenditures in 2012, with 41% planning to increase capital expenditures from 2011 levels
- The positive hiring trend continues into 2012, with 56% of companies planning to add employees in 2012 (up from 48% measured in February 2011)
- The cost of raw materials remains the top cost pressure concern for purchasing professionals, followed by the cost of base materials and healthcare costs.