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Decline in Manufacturing Order Amidst Ukraine War

Decline in Manufacturing Order Amidst Ukraine War

Decline in Manufacturing Order Amidst Ukraine War and Shutdown in China

Overview

  • A sag in exports and rise in prices has hurt manufacturing orders during the month of March, which is usually busy after the invasion of Russia in Ukraine. In addition, the COVID-19 pandemic has also caused a shutdown as per the Institute of Supply Management’s monthly Manufacturing Business Survey.
  • The companies that had taken four to six months to increase costs last year are raising them sooner because they are anticipating higher energy prices. According to Committee Chair Timothy R. Fiore, energy and feedstock prices make their way to everything.
  • The lead times have also been extended by the president which has caused a push for many companies to place their orders in advance. Fiore said it could ease some time in the summer.

Low Inventories in March

Most orders are placed during the month of March, and it is known as one of the biggest months of the year. They stock their inventories during summer and fall. Moreover, the demand stays strong, and the inventories remain ow for the 20th month.

However, as the procurement teams are continuing to face inflated prices; they have difficulty in procuring raw materials and they have extended lead times from the previous month. Fiore added that some of them paused to see if there would be any improvement in the conditions.

He further added that if he was buying at a desk and had his order laid out well compared to his normal streams of order, which wasn’t excess, he would also be rushing to place orders in the month of March. Despite the high prices, he said.

He said that lead times have forced the buyers to place out further orders. That also means that they can pause it for a little bit with an expectation that the prices will come down. But that is not confirmed, even for the lead times and their ease. However, if it does happen, it will happen during the summers.

Supply Chain Comments

The supply chain comments made up the bulk of the concerns of the respondents. The rising prices are the main problem respondents chief worry about. They were subjected to 39% of the responses to the survey. Furthermore, they increased from 30% in the month of February.

The comments about the issues in delivery fell from 50% to 39% in March from the month of February. It indicated that rising prices will be relacing or matching the concerns among the manufacturers about deliveries.

Fiore said that the main issue for the supply managers during the month of March was the rising prices.

75%of the respondents claimed that they raised their prices by 56% in March compared to the month of February. The orders for export also slowed down and 8% of the respondents said that there were lower export orders as compared to the 3% in the previous month. The conflict in Europe and the pandemic impacts in Asia made the companies slow down their export orders as per Fiore. However, there was an ease in labour challenges slightly in the previous month.

Fiore said,

“Production growth rate remains weak relative to demand and backlog, but the labour market is back on improvement which should release the production number and allow it to reach its potential”

 

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