Rising Raw Material & Energy Costs Driving Concerns
Prime Advantage , a buying consortium for mid-sized industrial manufacturers, recently announced the findings of its second Group Outlook Survey, revealing the top economic concerns for the second half (H2) 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 percent) and energy (17.5 percent) costs. This latest study reveals that 93 percent agree that material costs will be an economic concern for the rest of 2008, with a 67 percent agreement on energy costs following closely behind. Survey data was collected from 72 senior-level representatives of industrial manufacturing companies, including business owners, procurement vice presidents and purchasing directors. The H2 Group Outlook Survey follows as an update to the first survey conducted in January 2008 when members were asked to predict their expected cost pressures for 2008.
Top Expected Cost Pressures For H2 2008In addition to seeing an overwhelming 93 percent of respondents agree that raw materials were a major concern for H2 2008, two-thirds of all manufacturers (up 49.5 percentage points from the first survey) agree that energy costs will be a major concern for the rest of the year. "Other indicators, such as the Institute for Supply Management's June 2008 Manufacturing ISM Report On Business®, reflect that rising commodity prices, combined with a fluctuating Purchasing Managers Index, are putting great pressure on U.S. manufacturers," explains Louise O'Sullivan, president and founder of Prime Advantage. "The bottom line is that pricing pressures for raw materials and commodities will likely continue to be an obstacle to success for many North American manufacturers." Other highlights of interest from the report include:
- Inflation is now the third highest concern, with 39 percent in agreement (up 31 percentage points from January).
- Logistics and supply chain costs followed closely at 38 percent-21.6 percentage points higher than the first Group Outlook Survey.
- Healthcare added up to 18 percent.
- Foreign competition composed 12 percent of concern.
- Overhead came in at 11 percent.
- Labor was identified at 8 percent by survey respondents.
Other Expected Cost Pressures In H1 Vs. H2 2008Healthcare (18 percent), foreign competition (12 percent), overhead (11 percent) and labor (8 percent) were among the other concerns that received greater attention in the latest survey. In the H1 survey:
- Healthcare was cited by just 1.7 percent of respondents.
- Overhead was identified by just 2.8 percent.
- Foreign competition was listed at just 3.4 percent.
- Labor concerned 4 percent of respondents.