ISM survey takes an updated look at the impact of COVID-19 on supply chains

By Jeff Berman, Group News Editor · April 16, 2020

A little more than one month after the Institute for Supply Management (ISM) conducted a member survey focused on how their businesses and supply chains are dealing with coronavirus, or COVID-19, as it continues to wreak havoc on their supply chain operations, the organization a new survey this week.

Data conducted for this new round of research was mainly culled by ISM from its United States-based member respondents, and, as was the case in its first research report published in March, the findings truly highlight the COVID-19-related issues and challenges companies are up against. ISM said that of this survey’s 559 respondents, 55% are in U.S. manufacturing sectors and 45% in non-manufacturing sectors

Revenue and capital expenditures (capex) were front and center, with 47% of ISM respondents noting they have reduced revenue targets of 22%, on average, while 36% said that there was a 27% reduction, on average, for capex. But while revenue and capex reductions were front and center, not all industries were impacted, with Food, Beverage & Tobacco Manufacturing expecting an 8.8% revenue gain, with Wholesale Trade, and Management of Companies & Report Services eyeing revenue gains of 0.3% and 17.5%, respectively.

Another key takeaway focused on demand declines driven by COVID-19, with 57% of ISM member respondents citing a decrease in demand, on average, of 5%. On the other end, though, the data showed, unsurprisingly, that demand for personal protective equipment (PPE), for the Health Care & Social Assistance sector is up by more than 50%, despite revenue targets being downwardly adjusted by 30% or less.

Perhaps the most telling takeaway of the ISM survey was in looking back to the first survey, which found that more than 80% of respondents indicated their companies would see some type of COVID-19-related disruptions. But, by the end of March, when the second ISM member survey was conducted, that tally jumped to 95%.

On a geographic basis, the spread of supply chain disruptions also varied widely, when compared to the first survey. As an example, in early March, ISM said that 6% of ISM respondents said they experienced “severe disruptions across their supply chains generally. That was shown in North America, with 9% for U.S. supply chains and 6% for the rest of North America, at the end of March. In other regions 17% of respondents in Japan and Korea cited severe supply chain disruptions, with Europe and China, at 24% and 38%, respectively.

Other notable takeaways from the ISM survey included:

Average lead times for inputs are at least twice as long as compared to “normal” operations, for Asian (222% for China, 217% for Korea, and 209% for Japan), European (201%) and domestically sourced inputs (200%);

Domestic manufacturing is operating at 79% of normal capacity. Chinese and European manufacturing is at about one-half normal capacity, 53% and 50% respectively;

Firms report that operations in North America have or are likely have inventory to support current operations (U.S., 71%; Mexico/Canada 64%);

Beyond April and into the end of Q2 and Q3, while uncertainty increases, respondent confidence remains relatively steady that inventory will be sufficient to support domestic and global operations, Europe being an exception; and

Nearly two-thirds (64%) of respondents say their firms’ input inventories have been adjusted in response to the coronavirus

As the COVID-19 pandemic continues, there are sure to be more stones unturned, as they relate to the myriad impacts on all aspects of business and supply chain operations. The outcomes are largely unclear, especially now, as there is increasing speculation that the White House is determined to “open up” the economy in May. What happens, though, remains anyone’s guess. Stay tuned.

April 16, 2020