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About two out of every three North American manufacturing companies - or 60% - reveal that they are already feeling the disruptions caused by the recent coronavirus outbreak on their production facilities and supply chains. Overall, 34% of survey respondents expect business to decline, while 13% say they expect their business to grow as a result of this outbreak.

These results were collected from a Thomas survey conducted earlier this month examining the impacts of the recent coronavirus (COVID-19) outbreak on the manufacturing industry.

Coronavirus' Impact on Manufacturing: Survey Highlights

1 in 5 Manufacturing Companies Has Production Facilities in China

One of the biggest issues North American suppliers are facing is an absence of definitive shipping dates and a lack of communication from China. Because the virus hit during the Chinese New Year, back up inventories were already delayed.

Negative Business Impacts

46% of suppliers report that their shipping and logistics have been disrupted, 35% report incidents of offshore factory suspension and/or production restrictions, and 8% report that the coronavirus outbreak has caused the cost of goods to surge.

Alternative Solutions

28% of suppliers report they have been coping by seeking alternative international supply sources, while 28% are seeking domestic sources of supply and 31% are turning down or delaying orders.

Changes in Demand

Uncertainty is the most dominant sentiment. 46% of respondents say they are unable to predict how this outbreak will affect demand for their products and services. However, for those who responded, 15% are seeing an increase in demand and 27% of suppliers report no change. Only 10% reported a decrease in demand and services.

“Ultimately the coronavirus outbreak will cause a slowdown, especially for the automotive and tech sectors,” said Tony Uphoff, president and CEO at Thomas. “In addition, new data seen on Thomasnet.com® shows more than a 1,000% increase month over month in sourcing activity for hazmat suits, masks, and respirators. As the challenges in China continue, businesses may need to diversify their supply chains to be able to meet surging demands. It is clear from many of our survey respondents that the longer this drags on, the more the North American manufacturing sector and economy will feel its effects.”

Additional Insights

For companies that have sought out alternative suppliers, production is resuming at a reduced rate. Others report they will likely increase production or have to work overtime once they finally receive product.

For the manufacturers who expressed less concern about the impacts of coronavirus, it’s because they can rely on their safety stock inventories, and a few are considering financing options to increase their safety stock. Despite this, buyers should remain aware of the Bullwhip effect (incorrectly over-projecting) when considering demand forecasting.

The most in-demand industrial materials and products required to stabilize industrial businesses include metal (such as steel and aluminum), materials (such as plastic and rubber), and parts (such as electronic components, fasteners, motors, and sensors). And, of course, personal protective equipment (PPE), such as masks and protective suits.

Manufacturers expressed that this event may prompt them to more aggressively diversify their supply chain and consider reshoring some of their production capacity back to North America.

“This event is putting a lot of pressure on Indian and Mexican sources as OEMs and Tier Ones seek alternative to Chinese sources," said a custom manufacturer in Wisconsin. "If this sustains, it should result in some reshoring."

“We've long aimed to be a domestic alternative to Chinese manufacturers, anyhow," a Washington-based agricultural OEM shared. "If anything, this just further asserts that we are on the right path.”

Methodology

This Thomas Industrial Survey, conducted between February 14-21, 2020, involved 1,104 participants and resulted in 755 qualified responses from members of businesses with revenues spanning from less than $4.9 million to over $500 million.

Download the Full 2020 Coronavirus Survey Report

Click here to download the full report of the Thomas Industrial Survey: Coronavirus’ Impacts on North American Manufacturers.

Additional Resources

Image Credit: angellodeco / Shutterstock

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