Tracking COVID-19 Supply Chain Disruptions

As the list of COVID-19-related global supply chain disruptions continues to expand, the amount of time it takes to get products made and delivered has grown substantially for some manufacturing centers.

According to a new Institute for Supply Management (ISM) report, average lead times for inputs are at least twice as long as compared to “normal” operations, for Asian (222% for China, 217% for Korea and 209% for Japan), European (201%), and domestically sourced inputs (200%).

Overall, ISM says response to the coronavirus is expected to “substantially diminish” organizational revenue and capital expenditures as impacts start to solidify within more organizations. It notes that almost one-half (47%) of respondents’ report reduced revenue targets of 22% on average, with 36% reporting a 27% reduction on average, in CAPEX plans.

The majority (57%) reported that demand for their products has decreased by an average of five percent. “Domestic and global companies are in the midst of rapid shifts in supply chain planning, operations, and inventory management to address coronavirus impacts,” said ISM CEO Thomas W. Derry in a press release.

“The data suggests that even as companies adjust to supply disruptions—even anticipating normalizing supply conditions by the third quarter—they are expecting lower aggregate demand this year,” he continued, “which promises to be the most long-lasting impact of the virus outbreak.”

Anticipating Major Impacts

In early March more than 80% of respondents believed their organization would experience some impact due to COVID-19 disruptions; by late-March, that number had grown to 95%.

“Severe supply chain disruptions were experienced in multiple regions to varying degrees,” ISM reports, noting that in early March, 6% of firms reported “severe disruptions” across their supply chains. By the end of March, severe disruptions were being reported in North America (9% for U.S. supply chains, 6% 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).

“We’re seeing further feedback that organizations [that] diversified their supplier base after experiencing tariff impacts,” said Derry, “are potentially more equipped to address the effects of COVID-19 on their supply chains.”

Here’s the Breakdown

As the daily evolution of COVID-19’s impacts on the world’s supply chains continues, ISM is tracking these primary impacts:

Lead Times

ISM says lead times for inputs are at least twice as long as compared to “normal” operations, for Asian (222% for China, 217% for Korea, and 209% for Japan); European (201%); and domestically sourced inputs (200%).
Compared to the end of 2019, 86% of respondents report that lead times for inputs from China have pushed out. Seventy-four percent report longer lead times for European inputs and between 34-44% report lengthening lead times for inputs sourced from North American countries.
Through the end of April, 69% of companies expect lead times to lengthen for U.S. inputs and 57% of respondents expect longer lead times from Canadian or Mexican suppliers. Europe is expected to be most impacted, with 85% of respondents expecting longer lead times for European inputs.

Manufacturing Capacity

Domestic manufacturing is operating at 79% of normal capacity, ISM reports.
Chinese and European manufacturing is at about one-half normal capacity, 53% and 50% respectively.

Inventory

Firms report that operations in North America have or are likely to have inventory to support current operations (U.S., 71%; Mexico/Canada 64%).
Beyond April and into the end of the second and third quarters, while uncertainty increases, “respondent confidence remains relatively steady that inventory will be sufficient to support domestic and global operations (Europe being an exception),” ISM reports.
Nearly two-thirds (64%) of respondents say their firms' input inventories have been adjusted in response to the coronavirus.

Labor

In an already-tight talent market, the majority of respondents (54%) to ISM’s survey report that their organizations will likely delay hiring this quarter, 33% will reduce hours and 24% will reduce headcount
In late February, respondents reported that staffing levels in China stood at 56% of normal. By March, levels had recovered to 82% of normal.