Exploring a Decline in Global PMIs and Related Manufacturing Procurement Strategies (Part 1)

In mid-July, Lisa Reisman and I hosted a direct materials procurement webinar exploring the changing world of manufacturing procurement, offering six strategies and tactics that procurement organizations should pack for the rocky industrial road ahead. The webinar was in-part based on a Spend Matters Perspective: A Direct Materials Guidebook – Six Key Principles for the Manufacturing Road Ahead. As part of the webinar discussion, we began by exploring current manufacturing numbers across the globe, suggesting that if we explore June's PMI (manufacturing) numbers, "over 90% of the largest world manufacturing economies appear to be in decline or static...contrast this with twelve months ago, when the numbers were largely inverted."

For example, in June, the US (49.7), Brazil, Czech Republic, France, Germany, Greece, Italy, Netherlands, Poland, Spain, Switzerland, UK, China, Japan, Korea, Taiwan, Australia, New Zealand and South Africa all showed manufacturing PMI declines. Certain countries were in far more dire manufacturing production straits. Among these, it should not come as a surprise that some of those hardest hit in the EU (Italy, Greece and Spain) had some of the worst manufacturing results, showing PMIs of 44.6, 40.1 and 41.1 respectively for June (12 months ago the same country PMIs were 49.9, 45.5 and 47.3). Not only does this suggest a continued year over year decline in manufacturing -- it suggests the trend is accelerating in certain markets.

I next framed the discussion for the webinar by rhetorically asking the audience what words/concepts come to mind when thinking about global manufacturing today? I provided my own answer by giving a few examples (besides the obvious: "decline"). Among these, I noted the following words and concepts: global, volatile, commodities (as a focus point), localizing, re-shoring, risk management, trade, politics, currency and credit. In short, we're facing a highly complicated global environment where a range of factors is closely correlated in balancing supply, demand, inventory, capacity, cost and availability.

What does this mean for manufacturing procurement and sourcing strategies today? Stay tuned as we provide a couple of suggestions.

- Jason Busch

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