Engineers fear supply chain challenges could go on “indefinitely”

Of greater concern, however, is that almost two thirds (62%) expect supply chain challenges to last for anything up to five years whilst 15% believe they could go on “indefinitely” according to a new State of Manufacturing 2023 Report, conducted for Essentra Components.

Events of the past few years – with the global pandemic, and more recently the war in Ukraine – have placed immense pressures on supply and logistics operations. Larger firms tend to be more affected than smaller businesses; 19% of small engineering firms (i.e., employing 10 people or less) say they have been unaffected by supply chain issues.

The highest levels of optimism are found in the energy and renewables sectors (excluding oil & gas), where just under half of the sample group expect the challenges they are facing to resolve within the next 12 months.

Organisations are taking a variety of actions to mitigate the effects of these challenges from sourcing new suppliers (64% of respondents) to increasing prices (43%) and exploring ways of reducing overheads (just under 30%). Around a quarter of respondents also report using supply chain forecasting models, and even reshoring aspects of production, to anticipate and address supply chain delays.

Most respondents also report being affected negatively by general global price increases, with 44% reporting a significant impact and 52% ‘some’ impact. Only 3% claim to have been unaffected. When asked to identify other barriers to growth, respondents give a wide variety of answers, the most commonly recurring of which were: the lack of meaningful government support for manufacturing, Brexit, and the war in Ukraine.

Rob Baker Chief Operating Officer at Essentra PLC says the findings further support the idea that global supply chains continue to polarise: “This polarisation effect marks a shift away from low-cost global supply chains towards regional and cluster-focused supply chains driven by the need for greater reliability,” he explains. “Companies are near shoring, bringing manufacturing closer to the point of demand and localising supply. Global uncertainty is driving the supply chain focus away from ‘lowest-cost’ and rapidly towards service and dependability at optimal cost.”

As manufacturers adapt their supply chains, the competition for resources and raw materials intensifies. The consequential change in global demand patterns can result in resource scarcity and higher procurement prices in the mid-term, and this means that planning and being ‘ahead of the game’ are even greater critical success factors than they have ever been before.

“Finding new ‘local’ sources of supply is not easy though,” Rob admits. “In some industries – ours included – it is not a simple case of swapping out one material or product for another. There are specifications and regulations to meet, as well as a significant investment in re-tooling and the re-engineering of processes that result.”

Global uncertainty has also brought about cost inflation: “In the short term, this impact can only be mitigated through ‘quick win’ productivity improvements or price increases,” Rob explains. “In the longer term, customers and consumers may have to accept that higher supply chain costs are a necessity to achieve greater reliability; and this will likely translate into higher prices. Consequently, investment in automation will become more prominent in manufacturing and supply chain strategy delivery.”

To download the full report, visit: https://www.essentracomponents.com/en-gb/state-of-manufacturing-2023