From responses to PURCHASING Magazine's latest readership survey, it looks like corporate buyers are not getting much sleep. Purchasing managers nationwide appear to be lying awake nights troubled by such big, national issues as rising prices—particularly for energy and energy-related products—a slowing economy and a shortage of qualified workers. And these worries come on top of purchasers' woes at their own companies.

Fifty-nine percent of corporate buyers responding to the survey see rising prices as their company's biggest procurement headache in 2001. Other purchasing pains expected in the months ahead: making accurate forecasts (43%), managing inventory (41%), constricting operating budgets (28%), and obtaining on-time delivery (25%).

"Rising energy costs reflected in the products we buy" is the concern of one buyer who appears to speak for the majority of survey respondents. What's more, "the market for our product continues to be unpredictable at best ... It's hard to manage inventory when it consists of long leadtime items."

Says another buyer, "since we manufacture pipe fittings, demand from petroleum industries has risen sharply. At the same time, costs for natural gas have tripled and electricity rates have jumped. We have to increase production, meet customer needs, and save anywhere we can on natural gas, electricity and propane."

Many respondents seem to blame the previous presidential administration's lack of an energy policy for the nation's problems in this area, which, in the words of one buyer "has caused delays in new energy exploration and development."

Another 43% of respondents see "making accurate forecasts" as a trouble spot for their companies' buying operations this year. "Since business dropped off so dramatically, our 2001 forecast is skewed," says a director of purchasing in Ohio. "We'll have to use an educated guess on what is going to happen. Raw materials prices to make what we buy are increasing, but due to slow demand, overall purchase prices have dropped. Leadtimes have increased and are increasing in some instances as suppliers are keeping their inventories down to offset low demand."

"Our sales have slowed 15% to 20% and our suppliers have been building inventory," says another respondent who works for a company in Florida. "We are increasing our marketing efforts to get more business. It is difficult to forecast future demands."

"Managing inventory and sales forecasts go hand in hand," says Thomas B. McSwain, purchasing manager, The Steelworks Corp., Denver, Colo., speaking of another procurement headache. "Without accurate sales forecasts, it is almost impossible to have an ideal inventory level and balance. With the slowdown in the economy (hard or soft landing) the sales forecast is fuzzy at best."

"With the downturn in business, my inventories need to be smaller and so my orders are smaller," adds Rod Nally, purchasing agent, Columbian TecTank, Parsons, Kan. "This in turn loses leverage on prices. My leadtimes then get shorter since I have to keep less in stock. To do this, I have to spend more time watching inventories."

Constrained operating budgets are a bother for other respondents. "It is difficult to pass along increases to our customer base," says one buyer who requested anonymity. "If the increase does not go through, our operating budget must be cut. It's a vicious circle."

"As 2000 came to an end, the number of qualified people filling orders at our suppliers was smaller and the accuracy of their fill rates fell," says another respondent. "In addition, customer forecasts are very poor. As our economy softens, our budget constraints are hindering our ability to negotiate deals properly."

It's not surprising that these procurement headaches are directly related to larger, national issues, namely the energy crunch, rising prices related to that situation and a slowing economy.

"Rising costs of natural gas have already created fuel surcharges, and it looks like it will continue to cause power outages," says one respondent who requested anonymity. Another respondent says that the power situation in California and Washington closed the facility where she worked, and engendered a permanent move to Canada.

For a purchasing agent from Illinois, "mergers, downsizing and changes in the economy that result in significant changes in supply" could create problems for his company: "We do not expect any significant growth in our sales due to weakness in the economy."

A national worry for Maurice Bouffioux, purchasing manager, Ohio Steel Industries, Structural Division, Summit Station, Ohio, is "a recession brought on by negative, inaccurate media information."

Some buyers working in the steel industry are concerned about government intervention: "Increased government involvement in the steel industry will cause our cost of goods sold to rise dramatically," says Tim Gentry, purchasing manager, Easley, S.C. "Our products are 95% steel. Rising energy costs are also directly related to this."

"Political pressure on steel imports and viability of many domestic steel manufacturers creates an environment for pricing instability in the marketplace," says Steelworks' McSwain.

Other national issues that buyers believe may touch their workaday lives: the slowdown in auto manufacturing and housing and other construction, availability of qualified help, environmental regulations, and problems associated with increased globalization.

When asked to nail down specific commodity or component areas where they anticipate problems, buyers again cite price increases for energy or anything related to or made from energy products, for example, metals and plastics.

"We anticipate price increases in metals, ceramics, heat treating, utilities and much more," says a purchasing manager working in Texas. "Anywhere a great deal of energy is used there will be price problems."

Other anticipated problem areas and buyer comments:

• Fiberglass—"is in tight supply due to strong demand and production restrictions from manufacturers."
• Natural gas and electricity—"too volatile to hedge and restricted supply," says a purchasing agent from Illinois.
• Polycarbonate—"due to rising oil prices; plastics due to rising resin costs."
• Transportation—"of all products due to oil prices and also products that need a lot of heat to process," says Columbian TecTank's Nally.
• Steel—"due to automotive, many companies face bankruptcy."
• Aluminum extrusions and stainless steel sheet—"both are markets that seem to be affected by a slowdown."
• Kevlar/Aramid—"yarns due to increased usage in fiber optics."
• Operating systems hardware and software—"Our newest generation of machines require hardware and software support that is not quite perfected."
• Castings—"Most companies are trying to buy offshore, thus creating a real problem for foundries," says Larry Scheetz, corporate purchasing manger, Hunt Valve Inc., Salem, Ohio. "I buy a lot of nickel-based alloys for the Navy. It has to be domestic and this is becoming a problem (small quantities)."
• Motors—"Manufacturers are trying to reduce their cost of goods sold and therefore trying to pass along increases due to higher metal prices," says a supply chain manager from Illinois.

A majority of respondents say fostering strong relationships with a few key suppliers brings welcome relief to many of their procurement ailments. Jack Cunningham, purchasing manager, Woodgrain Millwork, Fruitland, Idaho, is "maintaining good partnerships with present suppliers" while another buyer is "developing additional sources and requesting that current sources stock additional material for our exclusive use." The supply chain manager from Illinois is "looking to our internal purchasing systems to streamline work on cost-reduction projects with key suppliers." Other tactics taken recently:

• "We have a 24-month contract with a large distributor, giving 99% of our volume, thus maintaining a 'strategic customer' rating," says a purchasing agent from Indiana.
• Bouffioux of Ohio Steel Industries is "keeping good lines of communication open with the top management at the steel mills that supply us, and talking positively and accurately about the economy."
• To keep our inventory manageable, we are sacrificing quantity discounts and dealing through distributors where it makes sense," says Tim Gentry, purchasing manager, Bes-Pac, Easley, S.C.
• Installing efficient boiler systems at a major expense! This will help lower our energy costs."

Several respondents also have re-addressed transportation methods, with some changing shipping methods.