As a follow up to survey results released on March 11 and April 14, the Institute for Supply Management released its third wave of research on COVID-19’s impact on businesses and their supply chains. Insights reflect input gathered by ISM primarily from U.S.-based respondents between May 7 to May 25.
Ninety seven percent of respondents reported that their organizations have been or will be impacted by the coronavirus. Survey results note that more than three quarters (76%) of respondents reported reduced revenue targets of 23% on average, with 61% reporting a 35% reduction, on average, in CAPEX plans. Only the finance and insurance subsector did not report an expectation of reduced revenue.
The majority of subsectors (81%) reported that demand for their products has decreased, with an average decline of 15%; however four sectors did report higher demand: health care and social assistance (+13%), finance and insurance (+7%), food, beverage and tobacco products (+5%), and computer and electronic products (+3%).
“Overall, the data indicate that companies have responded to the pandemic disruption by paying much closer attention to their supply base, reporting increasing communication with existing suppliers while diversifying risk by qualifying alternate and/or additional suppliers,” Thomas W. Derry, CEO of ISM, said. “Firms are also mitigating risk by carrying more inventory as a buffer against disruption.”
In early April, 95% of respondents believed their organization would experience some impact due to COVID-19 disruptions. By the end of May, this increased to 97% of organizations who will be or have already been impacted by coronavirus supply chain disruptions.
Severe supply chain disruptions were experienced in multiple regions to varying degrees, but, as of this most recent survey, they had decreased in Japan and Korea. By the end of March, severe disruptions were being reported in North America (9% of respondents for U.S. supply chains, 6% of respondents for supply chains elsewhere in North America), Japan and Korea (by 17% of respondents for each), Europe (by 24% of respondents) and particularly China (by 38% of respondents). By the end of May, severe disruptions were being reported in North America (15% of respondents for U.S. supply chains, 15% for supply chains in Mexico and 10% in Canada), Japan (by 15% of respondents) and Korea (by 14% of respondents), Europe (by 26% of respondents) and particularly China (by 36% of respondents).
“However, despite these proactive measures, confidence in the outlook for the end of 2020 has declined as an increasing majority of firms now expect moderate to severe impact on operations in the third and fourth quarters of 2020,” Derry said.
As the virus’ impacts continue, global and domestic U.S. organizations are reporting the following primary supply chain impacts:
Lead Times
Manufacturing Capacity
Inventory
Headcount
Reshoring and Nearshoring
The survey’s 676 respondents largely represent U.S. manufacturing (58%) and non-manufacturing (42%) organizations. Eighty five percent of the respondents come from organizations with annual revenues of less than $10 billion, with 49% under $500 million. Respondent roles ranged from emerging practitioner (4%), to chief procurement officer (5%), with 77% being practitioners, managers, directors and vice presidents in a supply chain management role.
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