Supply chain problems a 'whack-a-mole game'

Will Green is news editor of Supply Management
1 October 2021

Supply chain delays and material and labour shortages combined to slow UK manufacturing growth to a seven-month low in September.

The IHS Markit/CIPS Manufacturing Purchasing Managers’ Index dropped to 57.1 in September, down on 60.3 in August but still above the neutral reading of 50.

The fall comes as firms report continuing supply chain disruption, with Next saying it has pushed up selling prices by 2% and Costco announcing it will charter ships to ensure supplies from Asia.

Rob Dobson, director at IHS Markit, warned of the risk of stagflation as manufacturing output dropped while input costs and selling prices “continued to surge higher”.

“Companies are facing a growing list of headwinds, which includes declining new export orders, component shortages, delays to air, land and sea freight, staff shortages exacerbated by Covid-19 illnesses, Brexit disruptions, sharply rising costs and now fuel shortages,” he said.

Average vendor lead times increased to one of the greatest extents in survey history, while manufacturers continued to report labour shortages.

However, 62% of companies forecast output would increase over the next 12 months, linked to recoveries in domestic and global markets, new product launches, and reduced difficulties from supply chains, Covid and Brexit.

Firms reported building contingency stocks, leading to a further increase in input inventories and purchasing activity.

Duncan Brock, group director at CIPS, said: “The sector is feeling the strain of an ongoing onslaught of snags and hitches at every stage of the supply chain from sourcing raw materials through to component shortages and delivery disruptions.

“Like a whack-a-mole game where once one difficulty is resolved, another appears soon after, the sector may be challenged but remains stoically convinced that things can only get better in 2022 once the next few gruelling months are at an end.”

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