U.S. Manufacturers and Distributors Report Significant Increase in Inflationary Pressures...

U.S. Manufacturers and Distributors Report Significant Increase in
Inflationary Pressures Over Last Three Months According to RSM McGladrey
Survey
Profits impacted by companies absorbing escalating costs

MINNEAPOLIS, July 31 /PRNewswire/ -- RSM McGladrey released data gathered
in the last ten days that shows global competition for raw materials and
rising energy costs are driving up costs and substantially reducing the bottom
line of middle market manufacturers and distributors more than they were just
three months ago.
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As a follow-up to the 2008 RSM McGladrey Manufacturing and Wholesale
Distribution survey conducted in April 2008, the new survey polled the same
respondents concerning expected price increases in energy, transportation and
raw materials. A majority of respondents were from private companies, offering
rare insight into the strategies and challenges of private manufacturers and
distributors.
"The impact of the rising cost of energy is rippling throughout the
manufacturing and distribution sectors," said Tom Murphy, executive vice
president of manufacturing and wholesale distribution for RSM McGladrey. "With
at least 50 percent more companies expecting energy, raw material and
transportation cost increases of ten percent or more, we can expect
profitability to take a hit over the next several months as companies absorb
these costs."
According to the findings, 48 percent of companies are expecting energy
prices to rise by ten percent or more -- 50 percent more than in April 2008.
In addition, 43 percent of companies predict raw material costs to increase by
ten percent or more, a 60 percent increase from April. For projected
transportation costs, 52 percent of companies expect drastic increases
compared to 20 percent previously -- an astounding 160 percent increase from
just three months ago.
"Various global demand pressures are contributing to increased commodity
prices which are reflected in the raw material costs for many manufacturers
and distributors," said Murphy. "Product costs are additionally impacted by
the significantly higher freight costs driven by the cost of fuel."
While companies are taking immediate action to offset the impact of rising
costs, RSM McGladrey also recommends that companies consider a long-term
strategy to managing the structural cost changes being driven by the new
realities in commodities pricing and transportation costs.
"The disconnect in the supply chain has the potential to cause a deeper
fault line if companies are not prepared moving forward," commented Murphy.
"This inflationary surge is not an anomaly -- it's a sign of a new, long-term
global cost environment. It's paramount that companies change the way they do
business to survive now and thrive in the future."
Initiatives RSM McGladrey recommends to shield companies against rising
energy costs include:
-- Turning to export markets as an alternative for growth
-- Sourcing product through the global value chain to reduce import and
material costs while maintaining product quality -- including
reconsidering domestic suppliers, which may be attractive options due
to escalating transportation costs
-- Implementing lean manufacturing -- a key component of cost reduction
under any circumstances
-- Pursuing cost savings opportunities to curtail unnecessary
expenditures
-- Taking advantage of government programs and tax incentives to support
efficiency efforts and boost cash flow

Research Methodology
The RSM McGladrey 2008 energy cost survey was conducted the week of July
21, 2008 and includes responses from 357 senior level executives -- including
CEOs and CFOs -- from small and medium manufacturing and distribution
companies. This survey was conducted as a follow-up to the 2008 RSM McGladrey
Manufacturing and Wholesale Distribution survey which polled executives in
April 2008 and was recently released earlier in July 2008. The follow-up
survey polled the same respondents on questions related to projected price
increases in energy, transportation and raw material costs experienced between
April 2008 and July 2008.
For an audiocast of Tom Murphy detailing the new data, visit
http://www.rsmmcgladrey.com/energysurvey.
For more information on the complete RSM McGladrey 2008 Manufacturing and
Wholesale Distribution National Survey with insight from more than 960
industry executives, visit http://www.rsmmcgladrey.com/2008survey.
RSM McGladrey:
RSM McGladrey is a leading professional services firm providing
accounting, tax and business consulting. RSM McGladrey operates in an
alternative practice structure with McGladrey & Pullen LLP, a partner-owned
CPA firm that delivers audit and attest services. Through separate and
independent legal entities, they work together to serve clients' business
needs. Together, the companies rank as the fifth largest U.S. provider of
accounting, tax and business consulting services (source: Accounting Today),
with 8,000 professionals and associates in nearly 100 offices. RSM McGladrey
Inc. and McGladrey & Pullen LLP are member firms of RSM International, an
affiliation of independent accounting and consulting firms. RSM McGladrey is
the official accounting, tax and business consulting firm of The PGA of
America.
SOURCE RSM McGladrey

Betsy Weinberger of RSM McGladrey, +1-980-233-4711, cell, +1-980-939-5426,
betsy.weinberger@rsmi.com; or Misty Zelent of Fleishman-Hillard,
+1-919-457-0742, cell, +1-512-799-0180, misty.zelent@fleishman.com, for RSM
McGladrey