Study suggests COVID-19 supply chain effects
More than 80% of surveyed companies believe that their organization will experience some impact because of COVID-19 disruptions.
On March 11, the Institute for Supply Management (ISM, Tempe, Ariz., U.S.), a nonprofit professional supply management organization, revealed the first-round results of a survey focused on COVID-19 business and supply chain impacts.
According to ISM, nearly 75% of the companies that completed the survey report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions, and more than 80% believe that their organization will experience some impact because of COVID-19 disruptions. Of those, one in six companies (16%) report adjusting revenue targets downward an average of 5.6% due to the coronavirus.
“The story the data tells is that companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak,” says Thomas W. 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.”
Primary reported supply chain impacts include:
- 57% of respondents 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 do not have a plan in place to address supply disruption from China. Of those, a majority (23% of respondents) report current disruptions.
- Of the companies expecting supply chain impacts, the severity anticipated increases after the first quarter of 2020.
- Six in 10 (62%) respondents are experiencing delays in receiving orders from China.
- More than half (53%) are having difficulty getting supply chain information from China.
- Nearly half are experiencing delays moving goods within China (48%).
- Almost half (46%) report delays loading goods at Chinese ports.
“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 says.
According to ISM, more than 60% of companies that ordinarily travel to China have no plans to do so over the next six months. Additionally, nearly half (47%) note travel to other international areas is subject to extra scrutiny or limitations, with the most mentioned areas being Korea, Italy, Japan, broadly Europe, Hong Kong and Singapore.
Conducted between February 22 and March 5, the survey’s 628 respondents largely represent U.S. manufacturing (52%) and non-manufacturing (48%) organizations, 81% of which have revenues of less than $10 billion, ISM reports.
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