Manufacturers Continue To Experience High Levels of Supply Chain Risk

New survey says expectations for excess capacity and employment growth expressed last quarter did not fully materialize.

For the second straight quarter, more than one-third of North American manufacturers responding to the MFGWatch survey, which drew responses from 334 manufacturers of parts and services, purchasing professionals and engineers, say they've experienced a significant supply chain disruption in the past three months.

Also, expectations for excess capacity and employment growth expressed last quarter did not fully materialize. In October 2009, 62% responded that they expected to maintain the capacity of their plants in the coming quarter -- but only 34% said they had in the most recent survey.

As for employment, 13% of manufacturers stated in October that they anticipated staff reductions, but 38% actually reduced staff.

With regard to significant supply chain disruption 35% of purchasing professionals said they had experienced disruption and had to seek alternative sources to recover. Additionally, 34% of supply-side manufacturers stated that they had received queries from buyers experiencing supply chain disruptions within the past quarter. For the second quarter in a row, one-third of all manufacturers responding have stated that they have experienced supply chain disruptions, a significant number.

In the October 2009 MFGWatch survey, sponsored by MFG.com, only 6% of sourcing and purchasing professionals said that they expected to reduce the number of their active suppliers by year's end. Instead, 19% say they in fact reduced their supplier base during that time. Similarly, while 40% of the same group indicated in October that they expected to add suppliers, only 23% did so.

In terms of specific supply chain risks, buy-side OEMs cited material costs (47%) and supplier stability (46%t) as the most important issues to their supply chains. Supply-side manufacturers identified customer stability as the most important issue for the second straight quarter (81%).

"Manufacturing continues to lag behind other sectors in the American economy -- and of all the challenges we face, employment appears to be the most serious at the moment," said Mitch Free, founder and CEO of MFG.com, which is a global sourcing marketplace for the manufacturing industry."While there are opportunities, and the national debate is focusing more on manufacturing's role in our economy, it will be difficult to take full advantage until we revitalize manufacturing investment and stimulate growth."

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