Manufacturers Seeking Ways To Mitigate Energy Costs

Jan. 12, 2007
Some turn to improved supply chains.

A recent industry survey conducted by Boston-based Industry Directions found that four times as many companies expect high energy prices to hurt their profit margins this year compared to last year.

The study entitled "The Energy Cost Factor: Transforming the Supply Chain to Offset Margin Squeeze,' reported that top manufacturing executives (79% vs. 77% in 2005) are focused on supply chain issues to energy costs. In fact, executives indicated that virtually every aspect of the supply chain -- topped by logistics and transportation; procurement, production, inventory management, and planning -- is being seriously impacted by increased energy costs. Warehouse management, reverse logistics, procurement and planning are being impacted at a larger portion of companies than in the previous year.

"This year's findings are significant because they demonstrate that companies are not simply bearing the brunt of high energy costs in the most obvious areas of the supply chain," said William Brandel, principal at Industry Directions. "Further, they now recognize that they cannot pass these higher costs on to customers or demand lower costs from suppliers." Only 15% believe they can pass higher costs on to customers, compared to 31% in 2005. Moreover, fewer companies expect lower costs from their suppliers to offset energy costs going forward.

This study, sponsored by Logility and Manhattan Associates, is available at

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