Quality Magazine

Capital Spending and Hiring on the Rise for Midsized Manufacturers, but Increasing Costs Cause Concern

April 28, 2011

CHICAGO– Prime Advantage, a buying consortium for midsized manufacturers, announced the results of its seventh Prime Advantage Group Outlook (GO) Survey, revealing the top economic concerns of small and midsized North American manufacturers for 2011. The survey results show companies are even more confident compared to six months ago about economic growth for U.S. manufacturing in 2011. Moreover, these results support the latest findings in the Prime Advantage Group CFO Survey, which showed optimistic expectations for revenue growth, hiring, and capital spending despite growing concerns over rising costs.

“Our members, who represent a diverse cross section of manufacturing industries, are experiencing stronger growth and plan to invest back in their businesses, whether through capital expenditures or hiring more employees,” says Louise O’Sullivan, founder and CEO of Prime Advantage. “What’s unique and challenging about this rebound is the rate at which firms must address pricing inflation in both raw materials and components. As a buying group, with leveraged programs based on group volume, our members are positioned a little ahead of the curve and our job is to make sure we help them maintain that advantage.” The highlights of the findings are:

  • Seventy-two percent of the small and midsized manufacturing professionals who took the survey reported that their companies expect revenue increases in 2011, with 24% expecting increases of more than 10%;

  • The top three cost pressures for the next six months are: the cost of raw materials (with 96 % including it in the top three concerns), followed by inflation (52%) and healthcare (37%);

  • Sixty-five percent plan capital expenditures for manufacturing equipment and tools in 2011, greatly triggered by available federal tax credits;

  • More than 80% said their companies were making changes toward developing more sustainable products, largely driven by customer requirements and compliance regulations; and

  • While 40 % of respondents that source products from off-shore vendors are planning to bring sourcing back to North America in the near future, indicating a rebalancing in sourcing strategy, another 60% are planning to add more offshore vendors.