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Strong Capital Spending Anticipated for Small and Midsized Manufacturers

March 05, 2013, 07:33 AM
Filed Under: Manufacturing

Prime Advantage, the leading buying consortium for midsized manufacturers, announced the findings of its eleventh 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 2012)
  • Eighty-seven percent of companies expect capital expenditures to grow or remain constant in 2013, with 39% planning to spend more
  • 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 and Capital Spending

Most small and midsize manufacturers expect to beat strong revenues of 2012, with 68% of respondents anticipating an increase in sales in 2013. Introducing new product lines is 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 the levels of 2012.

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.

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.

Companies are seeking the benefits of nearshoring. 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% of respondents indicated they brought sourcing closer to the U.S.

A large majority — more than 70% of respondents — have increased their 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," said Louise O'Sullivan, founder, president and CEO of 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."

Methodology: In January 2013, Prime Advantage surveyed executives and purchasing professionals that represent durable goods manufacturing firms, with annual revenues ranging between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million. The survey received a 16% response rate from 490 top professionals representing U.S.-based manufacturers in more than 25 different industries, including commercial foodservice, packaging, truck and trailer, material handling, food processing and construction. Prime Advantage has polled its membership for their impressions of current economic conditions on a semi-annual basis since February

To request a copy of the Prime Advantage 2013 1H Group Outlook Survey visit:

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