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Supply Chain Disruption Remains Significant Risk for North American Manufacturers

Some economic indicators say we're in a rebound. Others suggest the recovery has reached a plateau. Based on the latest quarterly results from the MFGWatch survey, I'd say only one thing is certain: there's still quite a remarkable level of instability out there, and this is no time to ease up on your strategies for supplier risk management.

For example, consider this finding:

Over half (51 percent) of North American manufacturers participating in the MFGWatch survey said they've experienced a significant supply chain disruption in the past three months that's up from 44 percent in the previous quarter, and marks the fourth straight quarter that more than one-third of survey participants have suffered a disruption.

In addition, for the fourth straight quarter, over one-third of small and medium-sized manufacturers (42 percent) said they've received inquiries or work from companies suffering from supply chain disruptions.

The survey results also show that large manufacturers continue to express optimism, but it seems that unfortunately, all that optimism is failing to manifest itself. For instance:

Expectations to increase the number of suppliers engaged for production rose to 43 percent from 32 percent in the previous quarter. However, only 8 percent of the nearly 500 manufacturers surveyed actually grew their stable of suppliers the third straight quarter with such disparity.

Likewise, while nearly one-third (31 percent) expected to increase employment in the second quarter of 2010, only 20 percent actually did so.

Nearly one-quarter of those polled (23 percent) said they decreased staff, up from 10 percent in the first quarter of 2010 and above the 21 percent reported in the fourth quarter of 2009.

"While the economy in North America seems to be cooling down, there are positive signs," says Mitch Free, founder and CEO of "The stated job losses within large manufacturers is troubling because we need to see more consistent employment growth. It's likely that many of these OEMs are sourcing more work to their supply chains, which explains the growth in small and mid-sized manufacturers. But the most perplexing data is around supply chain disruptions; this quarter, over half indicate they've experienced a significant disruption. This number represents a tremendous level of instability and waste. However, any upward movement in small business hiring is welcome news."

More details from the latest MFGWatch survey are available here.

TAGS: Finance
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