Manufacturers in Buying and Hiring Mood

Managers with this positive outlook must also face rising raw materials costs.

Manufacturers are optimistic about revenues and are planning to retain or grow their workforce, according to results of a survey by Prime Advantage, a buying consortium for midsized manufacturers. Highlights of the group’s eleventh semi-annual “Group Outlook Survey” indicate that:

· Sixty-eight percent of respondents expect revenues to increase in 2013;

· Eighty-seven percent of companies expect capital expenditures to grow or remain constant in 2013, with 39 percent planning to spend more than 2012 levels;

· Forty-three percent of companies plan to hire more employees in 2013 and 52 percent plan to maintain current employment levels (this is higher than the 39 percent who indicated they would be hiring in the second half of 2012);

· The cost of raw materials is a concern and is among top cost pressures for 90 percent of manufacturers.

Anticipating Strong Revenue and Capital Spending

Most small and midsized manufacturers expect to beat strong revenues of 2012, with 68 percent of respondents anticipating an increase in sales in 2013. New product launches are the main reason for expected revenue increases, cited by 61 percent, followed by an expected increase in overall customer demand, cited by 57 percent.  

The 1H2012 GO Survey saw a similar strong revenue projection of 72 percent, while the 2H2012 GO Survey, conducted last August, was less optimistic at 48 percent of respondents predicting revenue growth over the last half of 2012.

Capital expenditure planning remains healthy, as in the previous two years, with 39 percent of respondents planning an increase from 2012 levels. The 1H2012 GO Survey saw 88 percent projecting spending increases over the previous year, and the 2H2012 GO Survey saw 48 percent projecting spending increases over the previous 12-month period.

Employment Growing but so are Costs

Manufacturers’ hiring plans remain in expansion mode, with 43 percent planning to hire more workers this year. Although this number is slightly down compared with 2012, when 56 percent of respondents planned hiring, it remains significantly above expectations in 2010, when only 24 percent of companies were hiring.

The top concern of 2013 is the cost of raw materials. More than 90 percent of respondents included raw materials in their top three cost pressure concerns and 42 percent cited this concern in the leading position. However, this seems to be declining, relative to recent surveys. The 1H2012 GO Survey saw 55 percent indicate that raw materials was the top cost pressure concern, and it was cited as the top cost pressure concern by 76 percent in the 1H2012 GO Survey.

Healthcare costs moved back into second place among top cost pressure concerns, with 57 percent of respondents including it in the top three. The 1H2012 GO Survey had healthcare costs as the third-greatest cost concern (49 percent). And in 2011, healthcare costs were cited as the fourth-greatest concern among small and midsized manufacturers.

Nearshoring is Hot

Companies are seeking the benefits of near-shoring. In the past twelve 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 percent of respondents indicated they brought sourcing closer to the U.S.

More than 70 percent of respondents have increased material and service purchases from American suppliers and service providers. Mexico is the second choice for sourcing, with nearly 28 percent 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 percent of respondents, and lower inventories (49 percent). Among other benefits, companies cited better supply chain control (40 percent) and better overall communication (39 percent).

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