Supply chains will mean everything for composites in early 2021
Lengthening order-to-fulfillment times caused the reading for supplier deliveries to surge, lifting the overall December Composites Index into expansionary territory.
Lengthening order-to-fulfillment times caused the reading for supplier deliveries to surge, lifting the overall Index into expansionary territory for the month. Disruptions to supply chains were particularly acute in December as seasonal holiday sales and COVID-19 vaccine distribution efforts overwhelmed logistics providers.
The Composites Index ended the final month of 2020 at 52.2, a slight increase from November’s 51.8, signaling modest industry expansion for the fourth consecutive month. Unfortunately, the increase in the overall Index was due almost exclusively to slowing order-to-fulfillment times which elevated the supplier delivery reading, and thus affected the general Index calculation. Further, December’s survey respondents reported slowing growth in new orders and production while employment activity expanded only slightly. Backlog and exports activity issued slowing contraction readings.
Gardner’s fourth quarter supply chain outlook unfortunately proved true. The consequence has been upward pressure on backlogs as firms struggle to maintain inventories and by extension production.
The latest supplier delivery reading also marks the third time in 2020 that the reading exceeded 65. For comparison, the record-high reading before COVID-19 was 64.9, set during the peak of the 2017-2019 business cycle expansion. While present-day supply chain challenges are affecting the manufacturing sector as a whole, composites fabricators have most acutely reported on their supply chains struggles and the domino effect resulting from it. From the data, it is evident that production activity is struggling to keep pace with new orders, backlogs are growing and material prices are surging. The data also suggest that managing supply chains in 2021 will be an essential goal of any successful fabricator.