Supply Chain Pmi Md 61a9045909bf3

Manufacturing Supply Chain is Slowly Untangling

Dec. 2, 2021
A small improvement in the November PMI ties in with optimism that supplies are finally improving.

This article appeared in Machine Design and has been published here with permission.

Manufacturing supply chains have begun the long process of untangling, and that spurred a small uptick in the monthly PMI Index from the Institute for Supply Management.

The PMI index rose 0.3 percentage points to 61.1% in November, the 18th straight month of growth for the index. While supply disruptions and labor shortages remain the largest barriers to further manufacturing growth, there were small signs of improvement, according to Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee.

“Manufacturing performed well for the 18th straight month, with demand and consumption registering month-over-month growth, in spite of continuing obstacles,” Fiore said in a press release. “Meeting demand remains a challenge, due to hiring difficulties and a clear cycle of labor turnover at all tiers. Panelists’ comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover. Indications that supplier delivery rates are improving were supported by the Supplier Deliveries Index softening. Transportation networks, a harbinger of future supplier delivery performance, are still performing erratically.”

Three of the key indicators of manufacturing growth all trended in the right direction in November. The New Orders Index registered 61.5%, up 1.7 percentage points compared to the October reading of 59.8% The Production Index registered 61.5%, an increase of 2.2 percentage points compared to the October reading of 59.3%. The Prices Index registered 82.4%, down 3.3 percentage points compared to the October figure of 85.7%

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement. All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products,” Fiore said.

“Coronavirus pandemic-related global issues—worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems—continue to limit manufacturing growth potential," he continued. "However, panel sentiment remains strongly optimistic, with 10 positive growth comments for every cautious comment. Panelists remain focused on the importance of improving supply chain issues to respond to ongoing high levels of demand.”

Among the comments from panelists:

  • “International component shortages continue to cause delays in completing customer orders. Backlog continues to increase.” (Computer & Electronic Products)
  • “Petrochemical supply chain is slowly showing signs of improvement after multiple weather disruptions in 2021.” (Chemical Products)
  • “Large volume drops due to chip shortage.” (Transportation Equipment)
  • “Oil is up, but our capital spending remains flat for now. No new orders at this time.” (Petroleum & Coal Products)
  • “All input costs are going up considerably, across the board.” (Food, Beverage & Tobacco Products)
  • "While steel plate and hot-rolled coil pricing seems to be approaching a plateau, the biggest challenge we have at the moment is finding qualified workers.” (Fabricated Metal Products)
  • “We are still seeing shortages with various metals. Plastic resins seem to be slowly improving. Electronic component lead times are still moving out.” (Electrical Equipment, Appliances & Components)
  • “Business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor.” (Furniture & Related Products)
  • “In the first nine months of the year, business conditions were off the charts, and sales by far outpaced capacity. This has put backlog at record levels and, surprisingly, customers have been willing to wait, albeit reluctantly. However, there seems to be a flattening: Sales remain strong but are not growing at the same month-over-month pace from the previous six to nine months.” (Machinery)
  • “We are experiencing significant supply chain disruptions, which are resulting in historically long lead times to get product to our customers. Commodity-based inflationary pressures are widespread, and traditional means of addressing these pressures are not effective due to unprecedented demand.” (Miscellaneous Manufacturing)
  • “We are starting to catch a break in plastic resins, with (November) prices lower in both ethylene and propylene-based resins. Starting to notice improvement in availability/lead time as well.” (Plastics & Rubber Products)

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