Lead Times Increase to Highest Levels Seen Since 1987
The hope moving into 2022 was that as COVID restrictions across the global supply chain waned and ports gradually improved their infrastructures to match the quantity of inventories being shipped, there would be some signs that the struggles seen in 2020 and 2021 would be waning. Unfortunately, that does not seem to be the case.
In new figures released by the Institute for Supply Management (ISM), it is now taking an average of 100 days for U.S. manufacturers to receive production materials. This represents the longest recorded average time since 1987. Additionally, average commitment times for capital expenditures rose to 173 days, which matches the highest time ever recorded.
As to why lead times remain at historic levels, ISM cites a few parallel reasons. Ongoing transportation and shipping delays remain significant, but producers are also, like many industries, are experiencing difficulty hiring. According to the survey, 34% of respondents indicated they are having trouble filling vacancies, which is up from 28% a month ago. Additionally, ISM notes that COVID-related supplier shutdowns in central supply chain hubs like Shanghai continue to loom large in the global marketplace.
“Demand remains robust, but factories are simply not able to keep up, as supply constraints prevent them from ramping up production,’’ Stephen Stanley, chief economist at Amherst Pierpont Securities.
As it stands, indications that relief may not be in sight until at least 2024, which means manufacturers may need to rethink the structure of their supply chains not just to overcome this current crisis, but all crises that may arise in an unpredictable future. Maximizing on-hand inventory should be one critical consideration, as well as increasing inventory storage capabilities either on-site or through a trusted third party. Manufactures cannot completely sever themselves from their supply chain, but they can minimize their interactions with it by prioritizing large-scale single orders.
For more information on how this can be possible, consider the Partstat Inventory Ownership Solution.