U.S. Manufacturers Focus on Growth, Prune Supply Chains

A new report from the Institute for Supply Management (ISM) predicts U.S. manufacturing growth in 2013 with revenues expected to increase in 17 manufacturing industries.

Capital expenditures—a major driver in the U.S. economy—are expected to increase by 7.6 percent in 2013, double that of 2012, but hiring will be stagnant with less than 1 percent growth in the employment base.

Expectations for 2013 were positive across the 18 industry sectors surveyed, with 62 percent of supply management professionals indicating they expect revenues to be greater in 2013 than in 2012. A 4.6 percent net increase in overall revenues is expected for 2013, compared to a 4 percent increase reported for 2012.

Industries forecasting revenue gains include: Primary Metals; Petroleum & Coal Products Computer & Electronic Products; Wood Products; Furniture & Related Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Paper Products; Chemical Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.

The inclusion of wood and related products is promising with its strong connection to the housing market and suggests renewed interest in home buying. On the flip side, it’s surprising to find fabricated metal products—strongly tied with the automotive industry—at the bottom of the list, perhaps suggesting that the auto sector will experience a slowdown come 2013.

Conversely, the fabricated metal industry will be doing much of hiring in 2013, along with the petroleum and coal industry.

The ISM survey reveals that most manufacturers are currently operating at 77.5 percent of their normal capacity, down from 81.6 percent reported earlier in 2012 (85 percent is considered optimal). Some industries—including paper and wood products, nonmetallic mineral products, machinery, apparel, and computer and electronic products—are doing slightly better.

Following soft demand on the back half of 2012, manufacturers stated that they are most worried about poor sales going into 2013. Over 30 percent also said that increased government regulation is a big concern, along with inflation and taxes.

A significant number of manufacturers are also worried about lack of a quality workforce as it becomes more difficult to find skilled labor in key areas.

Globally, manufacturing purchasers are predicting growth in exports and imports in 2013 with a stronger US dollar, while raw material costs will creep up by 2.8 percent, triple that of the previous year.

In terms of supply chain management, surveyed manufacturers said they would focus on cleaning up and reducing their supplier base by deselecting suppliers while also looking at ways to manage and control inventory through processes and information systems improvements.

Supplier performance management is top of mind in 2013, with manufactures looking to assess their suppliers in much the same way as a company assesses and manages an employee’s performance, said Bradley Holcomb, chair of the ISM.

Photo Credit: Tinkerbrad on Flickr (CC BY 2.0)

This entry was posted in Industry News, Supply Chain & Compliance and tagged , . Bookmark the permalink.

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