Quality Magazine

Manufacturers Continue To Experience High Levels of Supply Chain Risk

January 26, 2010

ATLANTA–For the second straight quarter, more than one-third of North American manufacturers responding to MFG.com’s MFGWatch survey 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.

MFG.com conducted its latest two-part survey in early January 2010, targeting supply-side manufacturers and buy-side original equipment manufacturers (OEMs) throughout North America. The survey drew responses from 334 manufacturers of parts and services, purchasing professionals and engineers. An array of industries, including automotive, aerospace, medical, industrial equipment, consumer products and textiles are represented in each MFGWatch quarterly survey.

When asked, 35% of purchasing professionals said they had experienced a significant supply chain disruption and had to seek alternative sources to recover. And 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 and trend.

In the October 2009 MFGWatch survey, 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%) 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. “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.”