As a follow up to survey results released on March 11, 2020, April 14, 2020 and July 20, 2020, today the Institute for Supply Management (ISM) released its fourth round of dedicated research on COVID-19 impacts on businesses and their supply chains. Insights reflect input gathered by ISM, primarily from U.S.-based respondents between December 22, 2020 and January 11, 2021.
The majority of respondents (64%) feel business will be better during the second half of 2021 compared to the first half of the year, and 66% report their organization feels better about business overall over the next 12 months.
Revenue budgets are reported to increase by 7.8% and CAPEX budgets are also reported to increase this year by 4%. Survey results note that demand for products and/or services is forecasted to increase 10% in 2021 compared to 2020 actuals.
For 2021, respondents most often mention concern about risk to suppliers, shipment delays and remote work issues. Thirty percent report concern over increased risk to Tier-1 suppliers, more than half (56%) are concerned over delays in shipment and supply, 31% report a concern over managing remote work, and 21% report needing to invest more in remote work infrastructure.
“Around the globe, even with concerns around supplier risk, shipping delays and work from home challenges, companies are continuing to adapt to the changing environment created by the COVID-19 pandemic and feel bullish, particularly about the second half of 2021,” said Thomas W. Derry, chief executive officer of ISM. “There is a strong positive sentiment that business activity will be substantially better than in 2020, and revenue, CAPEX and demand for products are all expected to increase this year. That said, supply constraints – notably in shipping and freight, scarcity of many raw materials and components, and a widely reported inability to hire qualified labor – are limiting the ability of some firms to take maximum advantage of the surge in aggregate demand.”
In July 2020, many regions reported an increase in severe supply chain disruptions, however, only 36% of respondents reported severe disruptions in China, a small improvement over what was reported in April 2020 research (38%). By the middle of January 2021, severe disruptions improved in all regions. In North America, severe supply chain disruptions were reported at 10% of respondents for the U.S, 8% of respondents for Mexico, and 7% of respondents for Canada. Outside of North America, severe supply chain disruptions were reported at 28% of respondents for China, 15% of respondents for Europe, 10% of respondents for Japan, and 9% of respondents for Korea.
“Compared to Round 2 and Round 3 of ISM’s research, practitioners are more optimistic about the impact of the pandemic on 2021, and the easing up of severe supply chain disruptions is one indication of that sentiment,” said Derry.
Global and domestic U.S. organizations are reporting the following primary supply chain impacts, as the virus’ impacts continue.
In regards to manufacturing capacity, this latest ISM research finds that domestic manufacturing is operating at 87% of normal capacity. Chinese manufacturing is at 86% and European manufacturing is at 76% of normal capacity.