Higher Product Costs Lead to Price Increases for Great Lakes Manufacturing

Nov. 13, 2007
70% of plants increased pricing

Though manufacturing companies in the Great Lakes region have seen a slight increase in their overseas sales, production costs continue to rise faster. This has led to price increases according to the 2008 Grant Thornton LLP Great Lakes Manufacturing Report, which was developed using data from the Industry Week/Manufacturing Performance Institute 2007 Census of Manufacturers.

Seven in ten manufacturers in the Great Lakes region report increasing their prices in the past year, with the vast majority of those (87%) increasing prices from 1 to 10% over last year. These increases in pricing are pretty comparable to what is going on in the rest of the country, with 68% of manufacturers reporting increases in their prices in the past year.

Overseas sales in the Great Lakes region have increased slightly in the last three years to 2.5% of sales volume; however, manufacturers in the rest of the country have seen overseas sales increase to 5.5% -- and only Illinois plants report over 5% of their sales coming from overseas (14%).

"There are few production costs that havent risen in recent years," said Michael Capone, the Midwest Region leader of Grant Thornton LLPs consumer and industrial products industry group. "While that may not be news, the size and impact of these cost increases are staggering."

Four out of five Great Lakes plants report that costs for components, wages, benefits, transportation and energy have risen in the past year, topped by utilities/energy (94% of Great Lakes plants report an increase) and logistics/transport costs (91%). The steepest cost increases -- more than 10% -- were for utilities/fuel (29%) and components/materials (25%).

However, Great Lakes plants are twice as likely as other plants to source from China based on median figures: two percent vs. one percent. Sixty-one percent of Great Lakes plants source something from China (32% of Great Lakes plants source 10% or more) vs. 60% of other plants that source from China (30% source 10% or more).

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