A majority of manufacturers plan to beat 2012 revenues, keep capital investments strong, and bring international sourcing closer to the U.S.
Prime Advantage, the leading buying consortium for midsized manufacturers, announced the findings of its 11th semi-annual Group Outlook Survey, revealing financial projections and top concerns of its member companies for 2013. The results find manufacturers optimistic about revenues, and planning to retain or grow their workforce.
Summary of Findings
Sixty-eight percent of respondents expect revenues to increase in 2013 (compared to 72% in the 1H 2012 GO Survey)
Eighty-seven percent of companies expect capital expenditures to grow or remain constant in 2013, with 39% planning to spend more than 2012 levels
Forty-three percent of companies plan to hire more employees in 2013 and 52% plan to maintain current employment levels
The cost of raw materials is a concern and is among top cost pressures for 90% of manufacturers
Anticipating Strong Revenue, 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 as strong 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.
Top Concerns: Raw Materials, Purchasing Processes, Forecast Accuracy
The top concern of this year, 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. Healthcare costs held second place, with 57% of respondents including it in the top three. The cost of base materials for components, although still in third place, was cited by fewer respondents as a concern than in prior years. Procurement processes, such as cost savings and efficiency measurements, remained the second biggest concern.
Nearshoring is Here
Companies are seeking the benefits of nearshoring – in the past 12 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%).
“We are encouraged to see that our Members expect to see growth in 2013, after a very strong 2012 for most,” says Louise O'Sullivan, founder, president, and CEO, 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."
To request a copy of the Prime Advantage 2013 1H Group Outlook Survey click here.