Study: Economy Improves, but Pandemic Still Gumming Up Supply Chains
The Institute for Supply Management (ISM) has released data on December 2020 manufacturing performance, and its findings look like a classic good news/bad news deal. Although, to be fair, most people viewing the data probably would walk away (correctly) feeling most indicators were headed in the right direction as the year came to a close.
On the one hand, ISM reported that economic activity in the manufacturing sector grew in December, “with the overall economy notching an eighth consecutive month of growth.” Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee, said new orders, production and employment were all trending positively. A majority of sectors ISM monitored reported growth in December, including apparel; furniture and related products; electrical equipment, appliances and components; and food and beverage.
“The manufacturing economy continued its recovery in December,” Fiore said. “Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential.”
And that brings us to the “other hand.” ISM reported the pandemic’s effects continued to cast a pall over industry, particularly in supply chain operations, which Fiore said “continue to struggle.” Comments from survey recipients bore this out.
“COVID-19 outbreaks are causing supply chain issues for Tier I and Tier II suppliers,” said a transportation equipment manufacturer. “More work needs to ensure suppliers keep us in the loop with any problem in their supply chain. But end-customer demand for products is keeping production and future outlook positive.”
A representative within the food/beverage/tobacco sector noted that “COVID-19 is affecting us more strongly now than back in March. Vendors/service suppliers [are] unable to maintain levels of service due to employee shortages. Logistic issues also [are] hurting us due to coronavirus-related problems.”
One area where the pandemic still had a negative impact was in supplier deliveries. “Suppliers continue to struggle to deliver, with deliveries slowing at a faster rate compared to November,” Fiore noted. “Transportation challenges and challenges in supplier-labor markets are still constraining production growth — and to a greater extent compared to the previous month. The [data] reflects the difficulties suppliers continue to experience due to COVID-19 impacts. Supplier labor and transportation constraints are not expected to diminish in the near to moderate term due to COVID-19.”
Want to dive into the data? You can access ISM’s latest report here.