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US Buyers Optimistic for 2012

The general outlook by US purchasing professionals has turned the tide, according to a recent survey, and optimism should prevail for the remainder of 2012.

Prime Advantage, a buying consortium for small and midsized manufacturers based in the US, said 88 percent of members plan to make the same or higher capital investments in 2012 than in 2011. More than half (56 percent) plan to increase staffing, and 72 expect their revenue to increase.

“The results at first glance are very similar to 2011 in that hiring and revenue are expected to go up,” Mike McDonald, vice president of new business relationships for Prime Advantage, told us in a phone interview. “But we've seen a shift in what our members view as concerns.”

The cost of raw materials was the top overall concern for 51 percent of respondents, the survey found. By comparison, 66 percent called this their top overall concern in 2011. In previous years, the cost of components ran second to the cost of raw materials as a top concern, but in 2012, the second most commonly cited top concern was purchasing processes, such as efficiency, measurements, and cost savings.

“What this tells us is when members see less pricing pressure, they are turning to other avenues for efficiencies in their procurement operations, such as data analysis, tools, and better aggregating of spend,” McDonald said. “When pricing pressure is high, issues such as improving business processes get a lot less attention.”

Here is a summary of the survey's findings:

  • The positive hiring trend continues into 2012, with 56 percent of companies planning to add employees in 2012 (up from 48 percent measured in February 2011)…
  • Overall, 97 percent of companies plan to keep or increase the number of domestic employees, with 56 percent expecting to hire in 2012 (up from 48 percent in February 2011 and 24 percent in February 2010)…
  • When asked to indicate the top three cost pressures causing the most concern, respondents most frequently cited the cost of raw materials… The number of respondents citing it as the top cost pressure concern declined from 76 percent in 2011 to 55 percent in 2012.

The expectation that Prime Advantage members will invest in IT equipment bodes well for the electronics supply chain.

“We've been seeing a gradual increase in IT spending,” McDonald said, “but 2012 seems to the turning point in terms of members' willingness to invest.”

He also said members are looking to establish stronger relationships in the Americas. Though the consortium sources globally, members are seeing cost advantages from companies based in Mexico and many southern US states. “We are seeing, in the past couple of years, an influx back into Mexico. The infrastructure there is well equipped for commerce. I think what we are seeing is a rebalancing of sorts: Members are deciding makes sense to source globally and locally.”

10 comments on “US Buyers Optimistic for 2012

  1. bolaji ojo
    April 30, 2012

    Barb, This has been one of the longest-running period of generally low pricing in the history of the electronics components market. Even following the Japan earthquake last year and the Thai flooding, pricing didn't really get seriously out of hands. I can understand therefore that many in the purchasing community are more concerned about processes rather than about pricing.

  2. Barbara Jorgensen
    April 30, 2012

    Hi Bolaji–actually, for these buyers, it is more than just components: they source things like steel (encasings); plastics (ditto); and a lot of things that are based on petroleum and oil. So, while components have been stable, there are a lot of heavy materials that have been subjected to peaks and valleys over the past few years.

  3. bolaji ojo
    April 30, 2012

    Thanks for that clarification. You are right in that so many things derived from crude oil and used in the electronics industry have been subject to crazy price swings in recent months. I am also now thinking of transportation (logistics) costs for many of these companies. Negotiating long-term agreements in this area too must be difficult for the service providers and the companies involved. I wonder, with the situation right now in Europe, how the the rest of the year will shape up.

  4. Taimoor Zubar
    April 30, 2012

    @Bolaji: Because of the hike in fuel prices, I think the logistics cost will be severly impacted. I believe this is the primary reason why many companies are forecasting their raw material prices to go up.

  5. Taimoor Zubar
    April 30, 2012

    @Barbara: Great to see the positive change in the hiring trend. What do you think is the reason behind this? Are buyers looking to expand their operations and need more resources for it? Or, is because they had layoffs earlier on and now want to bring the headcount back to normal?

  6. ITempire
    April 30, 2012

    Investment in IT and recruitment reflect the confidence buying entities have in the economic situation. With target cost controlling as a result of increasing efficiency in processes, right kind of investment in IT and human resources may help achieve that.

  7. ITempire
    April 30, 2012

    With costing worries in the manufacturing and purchasing circle, optimism in the economy may well mean that consumer-side buying may increase. If consumer-side buying increases, the lesser profit margins (due to higher costs) may well be covered by increased revenue. Also, efficiency improvement in process may afterall cover a lot of impact of cost increases.

  8. Daniel
    May 1, 2012

    “88 percent of members plan to make the same or higher capital investments in 2012 than in 2011. More than half (56 percent) plan to increase staffing and 72 expects their revenue to increase”

    Barbara, I think this is a very positive sign for the economic system. After recession and slow down phase, now economic systems are showing the growth phase. So this type of optimistic thinking of companies and investors can further accelerate the financial positions.

  9. Daniel
    May 1, 2012

    Waqas, for the last several years the economic and financial sectors are in a self reform state. Now it’s moving towards the growth phase and for growth it requires further investments. If investments are happens, then more job opportunities may create as a part of expansion and in turn a better return for the investment.

  10. SunitaT
    May 12, 2012

    I wonder, with the situation right now in Europe, how the the rest of the year will shape up.

    @Bolaji, already the weakness in the europe is pushing the oil prices lower. If this trend continues oil will soon reach 80$ which will help push the transportation cost lower.

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