Manufacturers Continue to Report High Levels of Supply Chain Risk

More than one-third N. American manufacturers in MFGWatch survey reported significant supply chain disruptions in past three months; fewer than expected jobs added

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Atlanta — January 28, 2010 — For the second straight quarter, more than one-third of North American manufacturers responding to's MFGWatch survey say they've experienced a significant supply chain disruption in the past three months.

Also, expectations for excess capacity and employment growth expressed last quarter did not fully materialize. In October 2009, 62 percent responded that they expected to maintain the capacity of their plants in the coming quarter — but only 34 percent said they had in the most recent survey. As for employment, 13 percent of manufacturers stated in October that they anticipated staff reductions, but 38 percent actually reduced staff., which bills itself as the largest global sourcing marketplace for the manufacturing industry, conducted its latest two-part survey earlier this month, targeting supply-side manufacturers and buy-side original equipment manufacturers (OEMs) throughout North America. The survey drew responses from 334 manufacturers of parts and services, purchasing professionals and engineers. An array of industries, including automotive, aerospace, medical, industrial equipment, consumer products and textiles are represented in each MFGWatch quarterly survey.

When asked, 35 percent of purchasing professionals said they had experienced a significant supply chain disruption and had to seek alternative sources to recover. And 34 percent of supply-side manufacturers stated that they had received queries from buyers experiencing supply chain disruptions within the past quarter. For the second quarter in a row, one-third of all manufacturers responding have stated that they have experienced supply chain disruptions.

In the October 2009 MFGWatch survey, only 6 percent of sourcing and purchasing professionals said that they expected to reduce the number of their active suppliers by year's end. Instead, 19 percent say they in fact reduced their supplier base during that time. Similarly, while 40 percent of the same group indicated in October that they expected to add suppliers, only 23 percent did so.

In terms of specific supply chain risks, buy-side OEMs cited material costs (47 percent) and supplier stability (46 percent) as the most important issues to their supply chains. Supply-side manufacturers identified customer stability as the most important issue for the second straight quarter (81 percent).

"Manufacturing continues to lag behind other sectors in the American economy — and of all the challenges we face, employment appears to be the most serious at the moment," said Mitch Free, founder and CEO of "While there are opportunities, and the national debate is focusing more on manufacturing's role in our economy, it will be difficult to take full advantage until we revitalize manufacturing investment and stimulate growth."

The "glass half empty" results of the MFGWatch survey contrast with a "half full" report from Advanced Technology Services (ATS), based on a survey conducted by Frost & Sullivan, which suggested that as many as a quarter of manufacturing companies had "escaped the wrath of the economic downturn." While that survey suggested that many manufacturers had seen no impact from the recession, the report also highlighted what the author's described as a looming skilled labor shortage that threatens the manufacturing sector's long-term viability. Read more here.