Manufacturers face supply chain disruptions because of COVID-19

by Talk Business & Politics staff ([email protected]) 5,034 views 

Nearly 75% of companies have reported supply chain disruptions as a result of coronavirus disease, or COVID-19, according to a new survey released by the Institute for Supply Management (ISM). The ISM announced Wednesday (March 11) the first-round results of a survey focused on the effects of COVID-19 on business and supply chains.

More than 80% of companies expect to experience some impact because of COVID-19 disruptions, the survey shows. Of those, 16% have adjusted revenue targets downward an average of 5.6% because of the virus.

“The story the data tells is that companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak,” said Thomas Derry, CEO of ISM. “For a majority of U.S. businesses, lead times have doubled, and that shortage is compounded by the shortage of air and ocean freight options to move product to the United States — even if they can get orders filled.”

Companies reported the following impacts:

  • 57% noted longer lead times for tier-1 China-sourced components, with average lead times more than doubling compared to the end of 2019.
  • Manufacturers in China report operating at 50% capacity with 56% of normal staff.
  • More than 44% of respondents don’t have a plan to address supply disruptions from China. Of those, 23% report existing disruptions.
  • The companies that report supply chain impacts expect the severity to rise after the first quarter of 2020.
  • 62% are experiencing delays in receiving orders from China.
  • More than half are having difficulty receiving supply chain information from China.
  • 48% are experiencing delays moving goods within China.
  • Nearly half report delays loading goods at ports in China.

“We’re seeing that organizations who diversified their supplier base after experiencing tariff impacts are potentially more equipped to address the effects of COVID-19 on their supply chains,” Derry said.

More than 60% of companies that regularly travel to China have no plans to do so over the next six months. Nearly half noted that travel to other international areas will be subject to extra scrutiny or limitations, with the most mentioned areas being Korea, Italy, Japan, Europe, Hong Kong and Singapore.

The survey was completed between Feb. 22 and March 5 and had 628 respondents. More than half of the respondents represent U.S. manufacturing companies, while 48% include non-manufacturing organizations, with 81% reporting revenues of less than $10 billion. The ISM is expected to continue to assess how COVID-19 is impacting the global and regional supply chains. The ISM also releases the monthly Manufacturing ISM Report on Business, which includes economic indicators for the manufacturing industry.