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Manufacturers Feeling the Heat, Changing Their Ways

October 29, 2008
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ATLANTA, GA, October 27-Manufacturers are changing business practices and embracing green initiatives in light of rising fuel and energy costs, according to a survey conducted by MFG.com, an online marketplace for the manufacturing industry.

The MFGWatch survey asked buyers to describe their business's response to the rising cost of fuel. 30% stated they would raise prices to their customers, 29% would make savings or productivity gains in other areas and 14% would absorb the cost and accept lower profitability. 21% responded there would be no changes, while the remaining buyers would react by asking suppliers to charge less.

When asked what changes were planned to lower or offset fuel costs for their businesses, buyers replied:

  • 28% of the participants are buying materials from suppliers closer to their facilities
  • 25% are reviewing all transportation and logistics providers contract arrangements
  • 22% are planning no changes
  • 18% are changing their approach to production, for example, moving from make-to-stock to make-to-order
  • 7% are changing their warehousing, distribution and service center locations and/or strategies regarding supply chain network design

    In addition to transportation costs rising as a result of fuel price increases, buyers were asked to identify associated factors impacting their businesses:

  • 42% of the participants had increased raw materials costs, for example, oil derivatives such as plastics and chemicals
  • 22% of buyers encountered increased costs for manufacturing processes requiring heating and cooling
  • 12% of the respondents experienced reduced demand for their, or their customers, products or services
  • 9% of buyers had greater difficulty attracting and retaining staff
  • 3% responded that they were losing sales to more energy efficient competitors

    Going Green

    When asked if their company was actively pursuing green manufacturing practices, 51% of the participants responded affirmatively, 36% stated no changes were being made, and 12% did not know if their companies were pursuing green initiatives. The affirmative respondents were asked to describe the green initiatives they were currently practicing:

  • 25% are recycling manufacturing waste
  • 22% are reducing waste through more efficient manufacturing practices
  • 17% have minimized power consumption through more efficient machine use
  • 16% use recycled materials as a part of their raw materials
  • 16% use green materials, such as wood from managed forests, toxic-chemical free materials and bio-degradable materials

    Buyers employing green-manufacturing practices also were asked how it affected their bottom line:

  • 29% stated green practices saves them money
  • 27% stated green practices attracts more business
  • 20% did not know if there was an effect on their bottom line
  • 13% stated green practices have no effect
  • 12% responded that green manufacturing practices cost them more money

    The survey also inquired if buyers were developing new products to reduce their own fuel-related costs, such as reducing the size and weight of components and intermediate packaging. Sixty six percent of the participant responded negatively, while 28% stated they were developing new products. Six percent did not know if their companies were taking steps to develop new products.

    Buyers were asked if they were developing new offerings that would enable their customers to reduce the fuel costs associated with using their products and services. Thirty one percent of respondents stated they were developing new offerings, while 60% stated they were taking no steps in this direction.

    More than 450 North American respondents from the MFG.com buyer community completed the survey, with 88.2% of the participants from the United States and 11.8% from Canada. Participants included engineers, purchasing professionals and operations managers.
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