According to a recent article in Reuters, “The ISM said its index of national factory activity inched up to 59.9 last month from a reading of 59.5 in July. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy.” Manufacturing is on the rise, yet every industry is struggling with an impaired supply chain. Will things get better anytime soon? How can manufacturing businesses manage shortages in the meantime? We share some thoughts in this episode of Making Chips!
Segments
The Great Supply Chain Disruption
Manufacturing is becoming increasingly busy but supply chain woes linger. It’s the #1 thing on our minds right now. Most machine shops are at or near capacity. But we’re having trouble getting aluminum, brass, steel, and finished goods. Even getting containers to ship the goods is a struggle. This phenomenon is being dubbed “The Great Supply Chain Disruption.”
Whenever you’re making a systemic change, it’s going to cause disruption. No matter how much planning you put into something, disruption happens. This should have been expected.
The disruption that comes with reshoring
Reshoring is more relevant than ever. And this isn’t a new topic to our show. What is driving the reshoring initiative? COVID. Everything that was coming from overseas halted or decreased. Ships weren’t coming through the Panama Canal. Ships weren’t being unloaded because the workforce was at home.
When China started rethinking its business environment and they started to incorporate more free-market tendencies, they wanted to become an export economy. They didn’t have the technology to export high-end goods so they started on the low end. But now they’re catching up. Now, China is focused on export as well as making branded goods for their economy.
People spent their time in quarantine buying low-cost things that are sourced from Amazon—from exercise equipment to kitchen mixers. They’re buying computers, TVs, headphones, etc. Many things that are sourced from China.
Will the supply chain get better anytime soon?
Lead time and prices are going to increase. Everyone is dealing with it right now. We can’t be the link that absorbs all the cost increases. The federal government knew that the influx of money into the economy plus the supply chain issues were going to lead to increased prices. This is going to lead to inflation. Inflation does slow growth. But everyone is saying that interest rates will be holding steady ingo 2022. We think the supply chain issues will continue into 2022 but it’s currently a game of wait and see.
So what can manufacturers do in the meantime to mitigate the problems that come with supply chain issues? We share a few tips in this episode you don’t want to miss. Check it out!
BAM!
– Jim
Resources mentioned on this episode
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