Midsized Manufacturers Product Pipeline Primed

While preparing for a tough year, manufacturers will be introducing plenty of new products.

In spite of tough economic conditions, industrial manufacturers retain the optimism to bring new products to market. A survey by Prime Advantage, a buying consortium for industrial manufacturers, shows that 87% of the respondents will be introducing new products this year, and 70% plan to introduce products in 2010.

"The development of new products is a strategic growth direction for our business and helps demonstrate to our customers that we continue to change to meet their specific needs," said Tommy Short, director of purchasing for Amerex Corp., a manufacturer of hand portable and wheeled extinguishers. He added that the company was able to do this because it had "planned ahead for this in the previous years by setting aside the resources needed...."

Nearly two-thirds of the surveyed companies expect their revenue to decline in 2009, with 37% of this group expecting revenues to decrease up to 10% and another 25% expecting a revenue decline exceeding 10%.

Manufacturers said raw material costs, such as metals and plastics, were the top cost pressure they faced. Other costs cited were overhead costs (50%) and logistics/supply chain costs (49%), followed by healthcare (43%), energy (27%), foreign competition (27%), inflation (25%) and labor (23%).

The top external concern cited by respondents was customer demand (83%). Credit markets and interest rates was cited by 44% of manufacturers, while 37% expressed concern about the volatility of the dollar.

Sixty-six percent of manufacturers said capital spending for U.S. locations, including significant capital improvements or new purchases of property or equipment, would decrease from 2008 levels. Thirty-four percent expect capital spending to be equal to, or more than, last year's spending amounts.

More than 9 out of 10 manufacturers will be looking to their vendors to provide vendor-managed inventory or consignment agreements in order to boost cost savings in 2009. In addition, 41% want their vendors to assume more R&D responsibility and costs, whle 38% want to see business process cost reduction steps, such as electronic transactions and outsourcing administrative functions, implemented.

The Prime Advantage survey included manufacturers in more than 25 durable goods industries, including commercial foodservice, packaging, truck/trailer, material handling, food processing and construction.

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