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Purchasing Execs Expect a Strong Finish for 2014

Oct. 9, 2014
Capital spending will rise as a result, but healthcare costs and a talent crunch weigh heavily on the minus side.

Purchasing executives expect their companies’ revenues to be up in the second half of this year, and their optimism is reflected in their purchasing plans for capital equipment. According to 82 manufacturing companies responding to a survey from Prime Advantage, the Chicago-based manufacturers buying group, 49 percent expect revenues to increase in the second half of 2014 compared to the first half. Twenty-two percent of these companies, most of whose revenues range between $20 million and $500 million, anticipate revenue growth will be more than 10 percent greater this year than last year, while 28 percent expect revenue growth of up to 10 percent.

Capital expenditures are expected to increase in the second half of 2014 for 42 percent of companies, an increase of twelve percent from 2013’s survey projections.  What’s more, half of them expect to hire in the next six months, and only one percent are predicting layoffs. However, the top prediction for potential barriers to continued business growth is a lack of qualified workers at 53 percent.

The cost of raw materials is also a purchasing concern for 41 percent of the respondents, and the survey indicates an increased focus on process cost savings and efficiency. Processes and efficiencies within purchasing were the second greatest purchasing concern (38 percent), followed by the cost of baseline materials for components, such as oil and gas (17 percent). 

When asked to identify the top three cost pressures for the last half of 2014, respondents cited raw materials (45 percent), up 13 percent from last year and on par to the 42 percent cited in February 2013). Healthcare cost pressures remain the second greatest concern (21 percent), though down from a year ago, followed by labor costs (18 percent), which have been steadily climbing since February 2013.

Although lack of quality workforce was identified as the top barrier to business growth over the next 12 months for more than half of respondents, legislative and regulatory pressures were next (45 percent), followed by foreign competition (30 percent).

“Our Members are making some of the highest projections for the next six months that we’ve ever seen,” said Louise O’Sullivan, founder, president and CEO of Prime Advantage. "Revenue forecasts, capital expenditure plans and labor force expectations are all at record levels.”

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