Prime Advantage report shows hiring, capital expenditures will rise in 2013

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In its semi-annual Group Outlook Survey, manufacturing buying consortium Prime Advantage said its members are showing great optimism for growth in 2013 despite pressures over raw material and healthcare costs.

Among the study’s findings:

• 68% of respondents expect revenues to increase in 2013
• 87% of companies expect capital expenditures to grow or remain constant in 2013, with 39% planning to spend more than 2012 levels
• 43% of companies plan to hire more employees in 2013 and 52% plan to maintain current employment levels. This is higher than the 39% that indicated they would be hiring in the second half of 2012

The cost of raw materials is a concern and is among top cost pressures for 90% of manufacturers

“We are encouraged to see that our members expect to see growth in 2013, after a very strong 2012 for most,” said Louise O'Sullivan, founder, president and CEO of Prime Advantage. “As they focus on profitability and margins, we look forward to partnering with both Members and Endorsed Suppliers to fuel the bottom line, reflecting Total Cost of Ownership, along with the top line, greater sales and market share."

Anticipating strong revenue and capital spending

Most small and midsized manufacturers expect to beat strong revenues of 2012, with 68% of respondents anticipating an increase in sales in 2013. New product launches are the main reason for expected revenue increases, cited by 61%, followed by an expected increase in overall customer demand, cited by 57%.

Capital expenditure planning remains healthy, as in the previous two years, with 39% of respondents planning an increase from 2012 levels.

Employment continues to grow

Manufacturers’ hiring plans remain in expansion mode, with 43% planning to hire more workers this year. Although this number is slightly down compared with 2012, when 56% of respondents planned hiring, it remains significantly above expectations in 2010, when only 24% of companies were hiring.

The top concern of 2013, the cost of raw materials, is also a leading cost pressure concern. More than 90% of respondents included raw materials in their top three cost pressure concerns and 42% cited this concern in the leading position. However, it is encouraging that this seems to be declining, relative to recent surveys.

Healthcare costs moved back into second place among top cost pressure concerns, with 57% of respondents including it in the top three. And in 2011, healthcare costs were cited as the fourth-greatest concern among small and midsized manufacturers.

The cost of base materials for components, although still in third place, was cited by fewer respondents as a concern than in prior years.

Nearshoring is here

Companies are seeking the benefits of near-shoring. In the past twelve months, more than one-in-five respondents have brought international sourcing closer to United States. These results are similar to the Grant Thornton Study on Nearshoring, where 25% of respondents indicated they brought sourcing closer to the U.S.

More than 70% of respondents have increased material and service purchases from American suppliers and service providers. Mexico is the second choice for sourcing, with nearly 28% of respondents moving sourcing to that region. The most frequently cited benefits that manufacturers hope to see in nearshoring are shorter lead times, as indicated by 67% of respondents, and lower inventories (49%). Among other benefits, companies cited better supply chain control (40%) and better overall communication (39%).