DON’T PANIC! Manufacturers express optimism

Recession? Recession! We don’t need no stinking recession.

03/27/2008


Wall Street is agitated about a possible recession, but small and midsized manufacturers apparently don’t share this consternation, at least according to results of a new survey conducted by Chicago-based Prime Advantage , a manufacturers’ buying group.
Prime Advantage just wrapped up its first ever Group Outlook Survey in which its members, small-to-midsized manufacturers throughout North America, reveal their top perceived economic concerns in 2008. The survey was conducted in January and polled Prime Advantage members on issues that will shape their economic plans in 2008. “The Prime Advantage Group Outlook Survey identifies key economic factors of influence for small and mid-sized manufacturers throughout North America,” said Louise O’Sullivan, president and founder of Prime Advantage.
In contrast to some business indicators, small and mid-sized manufacturers are apparently optimistic about the 2008 economy, with significant capital improvements planned by two-thirds of the group’s members. Raw material and energy costs topped the list of cost pressure concerns, according to nearly 100 respondents that include business owners, vice presidents of procurement and purchasing directors. More than 46% of respondents agreed that raw materials (including stainless steel, nickel, copper and other metals and plastics) were a major concern. Energy costs were the second biggest concern, with 17.5% and logistics and supply chain costs followed closely at 16.4% in agreement. Inflation (8%), labor (4%), foreign competition (3.4%), overhead costs (2.8%) and healthcare costs (1.7%) were among 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,” said 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 that 66% 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 [www.businessroundtable.org] CEO Economic Outlook survey for the fourth quarter of 2007, in which CEOs were predicting a 35% increase in capital spending over the first six months of 2008.
In the Prime Advantage survey, 88% of respondents indicated planned efforts to improve at least one of the following in 2008: cost savings, efficiency measurements or supplier diversity goals. Another 11% 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.
Especially good news for the overall economy, the survey identified a positive outlook for revenue expectations and hiring, with 59% indicating a revenue boost in 2008. Just 1% indicated that job cuts in 2008 could occur, while 23% are planning new hires and 76% 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.
— Edited by C.G. Masi , senior editor

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