Quality Magazine

Rising Costs Raise Concerns Among North American Manufacturers

September 1, 2008

CHICAGO-Prime Advantage, a buying consortium for mid-sized industrial manufacturers, has announced the findings of its second Group Outlook Survey, revealing the top economic concerns for the second half of 2008. Raw material and energy costs continue to top the list of cost pressure concerns, but this time they have become an overwhelming worry among North American manufacturers.

The results of the first survey, released in January, revealed that the group’s manufacturing members were apprehensive of rising material (43%) and energy (17.5%) costs. This latest study reveals that 93% agree that material costs will be an economic concern for the rest of 2008, with a 67% agreement on energy costs following closely behind.

Survey data was collected from 72 senior-level representatives of industrial manufacturing companies, including business owners, vice presidents of procurement and purchasing directors.

“The survey has served as a reliable indicator by identifying key economic factors of influence for mid-sized manufacturers throughout North America,” says Louise O’Sullivan, president and founder of Prime Advantage.

Unlike the first survey, inflation is now the third highest concern, with 39% in agreement, up 31 percentage points from January. Logistics and supply chain costs followed closely at 38%, up 21.6 percentage points. Healthcare (18%), foreign competition (12%), overhead (11%) and labor (8%) were among the other cost pressure concerns identified by survey respondents. In addition, 51% of respondents have shifted the top sourcing priority to identifying reliable and cost efficient sources for raw materials, rather than improving efficiency measurements.

The survey also showed confidence for employment opportunities in the second half of 2008. While 17% expect job cuts within the next six months, another 17% expect job growth and 66% expect no change in their current employee base.