Industry supply chain volume saw a significant spike in September that’s anticipated to continue for the next few months. Understanding the reason for this spike will help both manufacturers and shippers adjust production rates, prepare inventory, and better manage customer demand. Let’s take a closer look at what’s happening.
Highest Activity in Two Years
The Institute of Supply Chain Management has been compiling inventory and manufacturing information into a Purchasing Managers Index (PMI) for two years. Their data points to a notable, upward trend in supply chain volume, indicating steady growth.
From August to September 2017, the PMI reflected an incredible 2% volume spike, resulting in a 60.8% PMI value. This is the highest reported value in the history of the index and is 8% higher than the PMI average of 52.8%. And this data point isn’t the only anomaly. New orders, supplier delivery, and price indices show increases of 4.3% points, 7.3% points, and 9.5% points, respectively.
While most categories increased, the inventory index saw downward movement, falling 3%. This shows that while customer demand increased, supplies dwindled – even with an increase in prices. So what’s causing these trends?
Post Disaster Reconstruction
Healthy growth is always expected in the last quarter of the year due to the ramp-up manufacturing for the holiday season. But there’s another factor influencing these dramatic increases. This year has seen an influx of strong, destructive hurricanes — most notably Hurricane Irma and Hurricane Maria — that slammed into the US Gulf Coast and island territories. In addition, wildfires on the West Coast have created widespread damage. The need for materials that will go toward natural disaster recovery efforts are, without a doubt, contributing to spikes on the PMI.
Products such as housing materials, appliances, automobiles, and electrical infrastructures will be needed to repair and replace damaged items and to rebuild homes and businesses. With manufacturers rolling out these materials while preparing for the holiday buying rush, production levels are sure to continue to see supply chain volume spikes.
Supply Chain Uncertainty
Manufacturers and warehouse managers are remaining optimistic that volume will continue to increase for the rest of the year and into the first quarter of 2018. Yet, there are a handful of disrupters that could change the path of this upward momentum.
A lack of qualified workers to fill in the manufacturing job gaps, dwindling product supplies, and the increasing inbound material prices may all be contributing factors in stalling production growth. In addition, an uncertain geopolitical landscape and technological disruptions stand to create challenges for manufacturers in every industry.
While data paints a rosy picture now, these issues will continue to be focal for manufacturers and distributors alike. By analyzing trends, predicting needs, and being prepared to adapt to change, supply chain companies can prepare for whatever comes next.