Margins stand at all-time low
Producers of operating materials and supplies are under increasing pressure to hike prices. The reason: covering the cost of manufacturing these supplies is becoming more and more difficult. Indeed, the cost of manufacturing in the PLANT ENGINEERING market basket of operating supplies grew at a fast 5.
Producers of operating materials and supplies are under increasing pressure to hike prices. The reason: covering the cost of manufacturing these supplies is becoming more and more difficult.
Indeed, the cost of manufacturing in the PLANT ENGINEERING market basket of operating supplies grew at a fast 5.1% pace in the 12-mo period ending April 2004. That compares to a 1.2% cost escalation rate in the 12 mo ending April 2003 and a 1.7% cost decline in 2002. Over the past eight years, manufacturing costs grew at an average annual rate of just 0.9%.
The average prices that this market basket of industries charged grew just 2.5% in the 12 mo ending April 2004. As a result of the cost/price mismatch, 10 industries now sport an F-minus margin grade, meaning manufacturing margins stand at an all-time low. Seven others registered an F grade, and the remaining two enjoyed an average C grade.
Hit hardest, the copper rolling and drawing industry saw its production costs soar 42.3% between April 2003 and April 2004. Luckily for the producers, if not so for plant engineers, copper rollers managed to hike their average product prices by 36.2% over the same time period, which meant margins fell only $3.66 for every $100 of product sold.
Not so lucky, makers of wood pallets faced a 24.4% cost jump, but only managed to increase prices for their products by 3.6%. The distressing result: industry margins dropped by $13.73 for every $100 of product sold
Plant engineers who are looking for a calm port in this inflationary storm may want to focus on their purchases of rubber and plastic hose and belting. The industry that makes this product hiked average prices by only 1.7%, while costs of production increased an even milder 1.6%.
Operating Materials & Supplies
Average Product Prices % Change During 12 Months Ending
Direct Manufacturing Costa and Margins Grade
Growth in U.S. End Markets % Change During 12 Months Ending
1 Average product price changes are calculated from the producer price index for each 4-digit SIC (standard industrial classification) industry from the U.S. Bureau of Labor Statistics.
Polishes & specialty cleaning preparations
Surface active agents & related agents
Lubricating oils & greases
Rubber & plastic hoses & belting
Steel wire drawing
Copper rolling, drawing & extruding
Insulated wire & cable
Fabricated metal plate work
Bolts, nuts, screws, rivets & washers
Fluid power valves & hose fittings
Metal & plastic plumbing fixture fittings
Metal cloth, fence & other wire products
Fabricated metal pipes & fittings
Ball & roller bearings
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Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey