SDCExec.com |

Port Angeles, WA — May 7, 2009 — Opportunities for supply chain managers and industrial purchasers to shine have never been greater than today. Alas, the potential pitfalls loom larger than ever, too, as suppliers struggle to survive a global recession.

Manufacturing cost declines generally have outraced the wholesale prices that producers are charging their customers. As a result, industry margin winners are outpacing margin losers. Indeed, manufacturing margins were up from year-ago levels in 382 industries and were down in only 74 industries as tracked by economists at www.ALERTdata.com.

"To restore profit margins to their five-year average level, this month's ALERTdata cost model shows 219 industries have margin room to discount their average product prices by at least 5 percent," says economist Elizabeth Baatz. "Last month the 5 percent price-cut club contained 187 members."

According to Baatz, Industries that have the most room for cutting prices include many in the fabricated metals sector, where 38 out of 42 industries enjoyed a bottom-line bonanza. Makers of custom rolled-formed metal products scored the biggest prize. Here, price/cost trends have pushed margins (per $100 of product sold) a whopping $19.41 above year-ago levels.

Meanwhile, despite the recession pummeling automobile sales, all 11 industries in the motor vehicle parts sector currently are favored with margins well above both year-ago and five-year average levels. These margin cushions will be critical for automobile parts makers to survive the recession.

The motor vehicle seats and trimmings industry is fairly typical. Here, the amount spent to make a unit of output has tumbled 6.1 percent since March 2008, while the average price the industry charged for that unit increased 0.8 percent. This escalation disparity has boosted margins by an estimated $7.54 for each $100 of product.

Producers of aluminum rolling & drawing products, asphalt shingle & coating materials, fatty acids & other organic chemicals, and metal cans also saw their margins boosted significantly last month.

Some negotiation hazards, however, do linger. Despite a bottom-line boost in March, margins in the petrochemicals industry remain well below year-ago and five-year average levels. Here, industry price tags would have to increase by 8.72 percent in order to generate a return on costs equal a year ago.