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COVID-19 Forces New Supply-Chain Strategies

July 27, 2020
The pandemic’s impact on manufacturing has made OEMs wary of offshore suppliers as supply chains suffer enormous damage.

If your organization has met with pandemic-related adversity regarding the manufacturing and supply-chain ecosystems, you’re in the same boat with most others, says a new report on the state of global manufacturing. In its survey, 89% of respondents have seen a direct business impact because of COVID-19, manifesting in lower sales, increased costs for both materials and production, and delayed or canceled product launches.

According to the 2020 State of Manufacturing Report, which contract-manufacturer Fictiv commissioned from Dimensional Research, only 17% of respondents gave high marks to their supply chain’s performance over the last year. A majority are revisiting their reliance on China and looking to the U.S. as the next key manufacturing center.

The bright spot, however, is that nearly all (97%) say COVID-19 has created new opportunities, with most making digital transformation a high priority. As one might expect, supply-chain resilience is important to 99% of respondents, with 96% working to increase supply-chain agility.

Fictiv’s report polled hundreds of senior manufacturing and supply-chain decision makers at companies producing medical, robotics, automotive, aerospace, and consumer-electronics products. It found that:

  • Sales are down (44%), cost of materials and components increased (41%), and production times lengthened (41%).
  • 36% had to lay off good employees.
  • 24% have been unable to fill customer orders.

Many of the organizations surveyed are hoping that efforts toward digital transformation of their production and supply-chain processes, coupled with artificial-intelligence advances, will help them to begin turning things around:

  • 87% have a high-priority digital transformation initiative.
  • Reducing cost (46%), increasing supply-chain visibility (42%), and driving efficiencies (40%) are some of the top goals for these digital efforts.
  • Yet, only 14% feel their digital-transformation initiatives are well-funded and 81% face difficulty finding necessary expertise.

In addition, 84% say they will be more cautious about offshoring now than in the past. But while many (73%) will minimize reliance on China, 74% will continue to source some parts from the region.

The upshot is that supply-chain managers are challenged at present, but they see opportunities to build more agile and resilient infrastructures that will help get them past the pandemic woes and positioned for rapid future growth.