According to a new report released by AMR Research, the National Association of Manufacturers and its Manufacturing Institute, 90 percent of U.S. manufacturers see the cost of materials sourced from the chemical industry increasing. Due to the increase in the cost and availability of chemicals -- a vital raw material for most manufacturers - 25 percent of U.S. manufacturers will move some production overseas if current conditions persist. Across all companies that plan to move production offshore, the average amount of production shifted will be 32 percent.
The report titled, "The Hidden Backbone of U.S. Manufacturing," is based on findings from a survey of 165 U.S. manufacturing companies ranging in size from 100 employees to more than 50,000. The impact of rising costs is severe given that most manufacturers depend on chemicals for some form of production and, as a raw material expense, chemical costs are a key driver of profitability. In fact, 55 percent overall have significant, direct dependence for production and 73 percent of food, medicine and other process manufacturing operations rely on chemicals.
"The most immediate and obvious risk is to the resilience and competitiveness of U.S. manufacturing, and with it millions of jobs and domestic production. But less obvious, and more troubling, is the consequence of an over reliance on offshore suppliers -- our inability to respond effectively to a national crisis such as an earthquake, pandemic, or terrorist attack," says Kevin O'Marah, senior vice president at AMR Research and co-author of the report.
The report adds that there is little alternative for manufacturers as 50 percent say that materials sourced from the chemical industry are impossible to replace and a remaining 40 percent add that alternatives are available but at a far greater cost. As chemical inputs are both difficult to replace and invisible to consumers, margin pressures on U.S.-based manufacturing are severe.
