The impact of the COVID-19 pandemic on the global supply chain is something that the industry will analyze for years to come. This crisis has left no industry untouched, as some pivot to manufacture essential goods and others do their best to simply manage through increased disruption in their everyday processes.
Recently, SourceDay’s Vice President of Product, Josh Tong, joined a panel hosted by MachineMetrics to discuss the “State of Manufacturing,” taking a close look at COVID-19’s impact on the machine tooling industry.
As part of this panel, Josh dug into SourceDay’s own wealth of data to examine the impact COVID-19 has had on SourceDay’s customer base, which is largely made up of mid-market manufacturing companies. While some findings reinforced our suspicions (disruption was, in fact, occurring), others came as a reassuring surprise.
Here we’ve compiled our top findings about the state of manufacturing from the perspective of SourceDay customers.
1. Changes to PO Lines Increased—Significantly
Here at SourceDay, we like to break purchase orders down to their individual lines. This allows us to see more than just the total number of POs with changes (which would be extremely high) and to analyze change on a line-item basis.
In other words, how many items on order experienced changes?
Historically, we’ve found that an average of 36% of line items will change over the lifecycle of a PO. In the wake of the COVID-19 crisis, that average has jumped up to 61% of PO lines.
Historically, we’ve found that an average of 36% of line items will change over the lifecycle of a PO. In other words, “business as usual” means that about a third of line items will change from the time that a manufacturer sends a PO to when that PO is delivered in full.
In the wake of the COVID-19 crisis, that average has jumped up to 61% of line items changing. In many ways, this jump is not surprising. Suppliers and buyers are pivoting their business models all over the place. Manufacturers are responding to dramatically increased and decreased demand from their customers. Change is inevitable.
However, SourceDay has also found that the majority of PO changes are still communicated through email. So while PO changes are par for the course in the world of supply chain management, a sudden increase in change requests results in two things:
- More time spent managing an inbox and ensuring that all changes have been requested, acknowledged, accepted, and updated in the ERP.
- More room for error if any of those changes gets overlooked.
Expense reduction remains a top priority for manufacturing businesses, and errors can be extremely costly. So it’s more important than ever to communicate change quickly and to make sure there are no gaps in that communication.
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2. Buyers & Suppliers Coordinated Early
One somewhat surprising find from our data is that requests for changes began to pick up well before the pandemic spread globally. By the end of the first quarter this year, stay-at-home orders were in full swing and manufacturers in the United States were pausing operations.
However, our data shows that change requests picked up in earnest in the fourth quarter of 2019.
Many manufacturers work with overseas suppliers, so it’s not too surprising that they began to feel the effects of COVID-19 before it spread from China. That said, it’s heartening to see that changes increased gradually throughout the fourth quarter. This signals that SourceDay customers were able to take proactive action to address this disruption early.
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3. Supplier Responsiveness Remained Steady
Proactive change requests can only get you so far, of course. As we mentioned earlier, changes must be requested, acknowledged, and accepted in order for all that proactive planning to play out smoothly.
As part of SourceDay’s Supplier Scorecard offering, we keep a close eye on supplier responsiveness and how quickly they respond to POs and change requests. When comparing average responsiveness rates from 2019 to this year, SourceDay found that supplier responsiveness remained largely unchanged, increasing only slightly during the peak of COVID disruption.
At a time when change requests have drastically increased, supplier responsiveness remained steady by comparison. This is due in large part to the ease of communication in the SourceDay platform. Buyers can request changes or cancellations through our software, rather than sending dozens of emails, and suppliers can accept or reject those changes with a few clicks. And any team member with access can respond, so communication does not hinge on the inbox of one contact.
In times of disruption, manufacturing agility is as much about diversifying suppliers and analyzing data as it is about communicating effectively and quickly.
While we’ve seen the pain that our customers have experienced as a result of this crisis, we’re comforted by the fact that we have been able to help them manage through this crisis more easily than if they had relied on email as their primary means of supplier communication.
Where Do Manufacturers Go From Here?
Josh Tong referred to the COVID-19 crisis as a “black swan” event, one that could not have been predicted by experts. These incidents occur periodically, cropping up as natural disasters or geopolitical events every 15-20 years, and there’s little manufacturers can do to anticipate them. As globalization continues, many expect these large-scale events to happen more frequently in the future.
The answer to how to plan for the next big event, then, is not to spend time trying to anticipate them. Rather, it’s to look for ways to make your business more resilient—now.
To learn more about SourceDay, request a personalized demo today and see how we can help you navigate the next big unknown.
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