Midwest Manufacturing Contracts, Prices Down

While I typically like to write about Spend Management topics from a global perspective, I sometimes find that regional economic growth or contraction can serve as a useful bellwether indicator for broader global, industry sectors. And in some cases, like in this post, I can even slip in a few notes about my regional Midwestern economy -- or as I like to call it, the corn-fed manufacturing one (as opposed to the latte-fueled services one in other areas of the country). By reading the local Chicago-industrial tea-leaves so to speak, we can see that things are not necessarily looking up. According to Crains Chicago, "Prices paid eased [for] ... a fifth consecutive monthly decline as prices for energy and other raw materials ease from summer highs … Surveys have been mixed, but manufacturing data, including output and orders, has recently taken on a softer tone."

If the Chicago-area numbers are a sign of things to come in 2007 and 2008, we should all be ready to go back to the basics from a cost management perspective. Without question, in a down or flat economy, the role of Spend Management will take on a new executive focus, as companies struggle to improve their top line numbers. But besides simply turning to sourcing and operations initiatives to lower costs, advanced companies will look to Spend Management programs to reduce risk as well. Because without question, a continued softening of the economy will most certainly drive increased supply risk as well. And that could spell disaster for leaned-out companies which do not have programs in place to proactively manage risk not just with their own suppliers, but their extended supply chain as well.

Jason Busch

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