Disaster Impact Report part 3 of 3 - Manufacturing

US Factory output returning to normal after hurricane

Social and broadcast media make it easy for us to stay looped in on happenings around the country. We saw the broken homes of residents in states impacted by Hurricane Harvey and Irma, but they were not the only ones left picking up the pieces. A wide range of businesses were also greatly effected, from oil, to agriculture to manufacturing. ProcureAbility’s Intelligence team kept a close eye on the impact of these storms on industry infrastructure and shared their findings in our three-part blog series.

3 Part Blog Series

Part 1 = Oil and Gas – Posted on 10.31.17 – Click here to read

Part 2 = Utilities and Agriculture – Posted on 11.6.17 – Click here to read

Part 3 = Manufacturing

How was Manufacturing impacted by the 2017 hurricane season?

The economic effects of a chain of disasters is magnified by the number of events in a brief time span. Shortly after Hurricane Irma, the Institute for Supply Management (ISM) issued a report documenting potential economic impacts based on a survey that asked members (mostly Supply Managers) to assess how the hurricanes might impact six key business metrics.

  • 67% believe input materials pricing will be somewhat negatively impacted over the next three months
  • 27% expect that prices will be negatively or very negatively impacted
  • 56% believe supplier deliveries will be at least somewhat negatively impacted over the next three months
  • 19% expect deliveries to be negatively or very negatively impacted
  • 56% expect that 6 months post-hurricane, at least some negative impact on prices will remain

The manufacturing sub-sectors are more concerned than their non-manufacturing counterparts about negative price impacts. The findings regarding supplier deliveries are similar, but less dramatic.

  • 54% of respondents expect at least some negative impact to deliveries in the three months following the hurricanes
  • 19% expect negative to very negative impacts
  • 36% expect at least some negative impact on prices at least 6 months post-hurricane

ISM said its index of national factory activity surged from 58.8 in August to 60.8 in September, the highest reading since May 2004.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.

The ISM also said that Harvey and Irma caused supply chain and pricing issues in the chemical products sector where there were concerns about the disruptive impact of the storms on the food, beverage and tobacco products industries, among others.

What can we learn from this and our previous posts in the Disaster Impact Report series?  Preparation is key to “weathering the storm”, so to speak!  Below are some tips:

  • Connect all business partners in a single, integrated cloud-based platform
  • Enhance visibility of supply chains, including second, third and even fourth-tier suppliers
  • Collaborate with suppliers in real-time via cloud-based platforms
  • Improve control of key operational and quality processes
  • Enhance agility to improve responses to adverse changes in external environments
  • Engage in what-if and disaster planning that includes elements such as asset and resource mobility
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Effects of Hurricanes on ProcurementContract Guides