Purchasing Pros: Sales Grow for Small & Mid-Sized Companies in 2018

A large majority — 88 percent – of purchasing managers for small and mid-sized businesses across the U.S. expect their revenue will increase during the next 12 months. However, more than one-third of them identified cyber security as their top concern for the same period.

The buying consortium Prime Advantage, which surveyed more than 750 U.S. manufacturing companies, found businesses are optimistic about their prospects for 2018. Increased customer demand from innovative products is the biggest factor -- listed by 34 percent of manufacturers -- as the biggest factor fueling revenue growth. Bringing on new customers is another significant factor driving revenue, mentioned by 20 percent of those responding as well. Ninety-one percent expect to maintain or add to their headcount during the next 12 months and 83 percent expect to increase their capital investments. Some of that investment will likely go toward efforts to combat security breaches.

Thirty-four percent of survey respondents said their companies had experienced a digital security breach in the past year, while 38 percent said they have increased their intellectual property (IP) protection efforts. Thirty-three percent reported that they perform regular security vulnerability tests, and 16 percent said they had improved their cyber-risk teams in 2017.

The top cyber security threats in 2017 for small and mid-sized industrial manufacturers were identified as phishing attacks, IP theft and third-party security breaches.

There are several external factors that could limit U.S. manufacturers’ growth. One is the increased cost of raw materials, which has also been identified as a concern in Institute for Supply Management (ISM) surveys. The second is a lack of qualified help.

For the fourth year in a row, a lack of qualified workers is the biggest potential external barrier to business growth, according to 40 percent of respondents to the latest Prime Advantage survey. Analytical skills are the most sought-after skillset in purchasing with 90 percent of manufacturing professionals prioritizing this proficiency. Other top talents that are in demand are negotiation skills at 76 percent, and relationship management at 69 percent. Also notable: Fifty-four percent of manufacturers said that they are currently burdened by limited engineering resources.

While these were again the highest-rated potential business barriers, they all decreased from the 2016 survey. The top five potential business barriers have all dropped steadily since 2015.

Procurement teams continue to identify raw materials as the top cost pressure at 94 percent, with logistics and transportation as the second biggest cost pressure at 62 percent. Raw material costs have been identified as the top cost pressure in every Prime Advantage PM Survey since its inception. This year, 61 percent also identified a shortage of component parts as a concern; certain electronics components have been in short supply for as long as six months, according to the ISM.

Outside of the three core supplier measures (price, quality and on-time delivery), which are metrics used by more than 90 percent of all survey respondents, small and mid-sized industrial manufacturing professionals are also searching for added value from their supplier partnerships. Among the value improvements sought from suppliers are responsiveness to change requests (87 percent), flexibility to respond to unexpected demand (84 percent), and communication (78 percent).

Related to this, time pressures remain the biggest challenges facing procurement operations in 2017, according to 40 percent of the Prime Advantage respondents. This represents an eight percent increase from 2016.

Other highlights from the report:

In response to the question about projecting capital spend for the remainder of 2017, Prime Advantage members have shown this to be a priority, with 83 percent saying they would increase (27 percent) or stay the same (56 percent) from last year. This is a slight increase from 2016’s Prime Advantage PM Survey, when 81 percent believed their capital spending would increase (28 percent) or remain steady (53 percent) for the year.

A survey record high of 65 percent of respondents predicted to add headcount in 2017, and 50 percent have already done so. This surpasses last year’s projections, where 57 percent predicted new hires for the year. It is even stronger than the PwC Manufacturing Barometer, which saw 35 percent of industrial manufacturers predict new hires for the year.

“Small and mid-sized industrial manufacturers have come a long way in the past few years, and the Prime Advantage PM Survey shows that these organizations should be optimistic about future growth opportunities,” said Dan Grant, president, Prime Advantage. Prime Advantage aggregates small companies' purchasing power and helps qualify suppliers. “We are proud to support these remarkable organizations through our innovative procurement solutions,” Grant concluded.