The latest ISM Report on Business finds the manufacturing sector on a quickening upturn — it’s fastest since 2004. The results confirm what we are hearing in our discussions with clients. Stable energy prices and continuing high unemployment may be staving off significant inflation threats for the time being — although manufacturers did report more cases of rising prices in the March survey. We are continuing to watch that closely.
Here is the summation of the results from Norbert Ore, CPSM, C.P.M., and chair of the Institute for Supply Management™ Manufacturing Business Survey Committee.
“The manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February’s reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation — perhaps signaling manufacturers’ willingness to increase inventories based on expected levels of activity.”
Link to a comprehensive summary: http://www.ism.ws/ISMReport/MfgROB.cfm
Have you seen your suppliers lately? As the economy still struggles through a slow recovery — it makes sense to pay your suppliers a visit.
Are you wondering what pressures are building over the next year?
Our ADR eBulletin provides some quick insights on those two questions. It’s worth a look.
Governments around the world have pumped billions. Wait. Trillions into economic stimulus and bailout programs. Although you may still be able to leverage prices down right now — my colleague in London, Robin Jackson suggests that you ought to be prepared for rising prices ahead.
Here’s his analysis and list of tips.http://www.adr-international.com/BusBrief-Oct09-golden-age.shtml
To see the all latest ADR International commentary and analysis use this link:
Posted in News Analysis
Tagged commodity prices, cost containment, economic stimulus, global business, government bailout, procurement, purchasing, recession, recession strategies, sourcing, supply chain, supply management
As light begins to appear at the end of the economic tunnel, there are some key steps businesses should take to streamline their procurement —
Read more of this article published in the ADR International e-Newsletter.
Also in the current e-Newsletter, an article by Rebecca Howard about getting the most out of every training dollar. Professional development for procurement teams is usually a slam dunk return on investment — but training programs are not all equally effective. Read more here.
ADR has recently launched its own ADR Academy with nine online courses on fundamental topics — from portfolio, cost and market analyses to global sourcing. Here’s a link to an article about it, and another link directly to adracademy.com.
Congress and the President are getting ready to put a few hundred bucks into the pockets of most American families as a way to keep the economic pump primed. But how much difference will that make if manufacturers try to take advantage by passing along their higher costs across a broad spectrum of commodities?
Record commodity prices, such as $100-a-barrel oil, record wheat and soaring precious metal prices, have penetrated many of our supply chains. However, it’s pretty clear that consumers are not in any mood to simply absorb higher prices. Cost containment strategies by manufacturers are imperative to avoid a sharp reduction in consumer spending.
To avoid a spike in consumer costs, take action now:
Conduct cost analyses. Manufacturers should analyze supplier costs to understand the mix of material, labor, overhead and profit that are driving costs higher. An understanding of costs puts manufacturers in a better position to negotiate with suppliers seeking price increases.
Don’t accept price increases as “business as usual.” Manufacturers should make suppliers work hard for price increases by demanding three months notice, in writing, of all increase requests and insist that they are accompanied by a detailed statement of the actions the supplier has taken to reduce or eliminate the need for an increase.
Know your options. Investigate alternative materials, designs and suppliers now, before you face requests for higher prices. Manufacturers who don’t have options and market intelligence are at a disadvantage when they negotiate with suppliers.