Grappling with Supply Chains, Labor Shortages:

A Look at How Manufacturers Are Surviving

Grappling with Supply Chains, Labor Shortages:

A Look at How Manufacturers are Surviving

IndustryWeek and L.E.K. Consulting polled manufacturers to learn how they got through 2021 and how they plan to succeed in 2022.

How can labor, logistics and materials delays all be compounding yet factories continue to boost productivity? With partner L.E.K. Consulting, IndustryWeek surveyed manufacturers to ask how you’re doing it all. The short answer: hustle and determination.

Overcoming Lockdowns

How Manufacturers Made it Work

Making Tough Decisions

Manufacturers delayed key projects, overrode long-term lean initiatives and created workarounds for the constant problems they faced. They kept the lights on in the short term, but some worry about the long-term costs in terms of technological readiness and efficiency.

Tightened relationships with the suppliers that can deliver and dropped the ones that couldn’t

Moved supply chain issues from a shop priority to an executive concern

Invested in technology to enhance productivity and improve supply chain visibility and flexibility

Managing Supply Chain Disruptions

Almost all manufacturers experienced supply chain disruptions last year.

Unscheduled Downtime

Changed Suppliers

Substituted Materials

Changed Purchasing Policies

Lost Contracts

Disruption Warnings

Nearly half of companies received no warnings or minimal, last-second warnings about missing goods or supplies.

No warnings/minimal warnings

Small Companies

Large Companies

Small companies (less than $50 million in revenue) were twice as likely to receive no warning than larger companies.

Communications

Manufacturers changed how often they met with key suppliers with weekly meetings becoming the most popular.

Manufacturers changing how often they met with suppliers

Manufacturers changing how often they met with customers

The Great Resignation

Labor was the biggest shortage of 2021, and manufacturers expect it to be even worse this year.

Manufacturers listing labor shortages as 2021’s largest challenge

Manufacturers expecting labor shortages to be 2022’s largest challenge

Other Key Findings

Larger manufacturers ($1 billion+) remain concerned with shipping and logistics bottlenecks with about half expecting scarce shipping container availability throughout 2022.

Access to capital isn’t a major concern, despite rate increases. No large companies expressed worries about access to capital, and only 10% of smaller manufacturers did.

The vast majority (72%) of manufacturers expect to have the staff to meet 2022 production demand, thanks to alternative work schedules and more training. Only one-third said they were raising wages, with those increases concentrated in mid-sized companies. Manufacturers remain dedicated to lean principles (68% haven’t cancelled or delayed projects), yet 44% stockpiled supplies, and companies elevated supply chain issues from the shop floor to the executive suite.

Challenges

Shipping & Logistics

Large manufacturers ($1 billion+) expressed concern over the recovery of the logistics industry, a worry not shared by smaller firms (less than $100 million in sales) less likely to arrange their own shipments.

39%-to-41% of bigger companies called the lack of logistics capacity a problem
44% of $100 million-to-$1 billion companies expect further logistics problems in 2022
45% of $1 billion+ companies worry about logistics capacity

Finance Fears

13% of respondents fear 2022’s credit markets, compared to only 8% experiencing difficulties in 2021. With interest rates expected to climb, financing concerns are most concentrated in smaller companies.

10% of respondents with less than $100 million in sales fear tighter credit markets in 2022
No $1 billion+ companies expect issues

Workforce Disruption

72% of manufacturers expect to have the staff needed to meet 2022 production demand. Common strategies for staffing include:

Alternative work schedules to better fit employees’ needs
Increased training
Only one-third listed higher wages;
Mid-sized manufacturers ($100 million to $1 billion) were an outlier with nearly half saying they’ve raised wages—only 30% of very large or very small manufacturers reported wage increases.

Lean Dedication

More than two-thirds of manufacturers said they hadn’t delayed or cancelled a single lean project. However:

44% started stockpiling supplies
16% threw more people into supply chain and inventory management
Nearly 60% moved logistics from a shop floor concern to an executive one

Technology to the Rescue

Most large companies ($100 million in sales or higher) already use ERP systems to address supply chain issues, but one-third (33%) of $1 billion+ manufacturers say they plan to invest further to improve supply chain management and visibility. More than half (59%) have invested in ERP or plan to do so in the near future.

Inventory & Tracking

56%

of companies have implemented or are considering inventory and material handling tracking systems.

View of Materials

7%

of companies targeting improved visibility felt they had a complete view of materials.

Visibility Targets

17%

of those who set visibility targets feel they’ve reached them.

View of Supplies

51%

of companies with visibility targets achieved full or improved views of supplies; 26% that hadn’t prioritized visibility improved views of supplies.

Automation Continues to Grow

are spending on robots, conveyors and other automated equipment

are using automation to address supply chain concerns or plan to do so

of automation investments target higher throughput

targeting quality gains (the most popular No. 2 response)

of respondents said they seek increased flexibility

How Ready Are You?

Almost all respondents noted some form of supply chain disruption in 2021, with the largest number of respondents having to weather unscheduled downtime and shuffle suppliers to get needed goods and materials. Despite those challenges, few said they lost work, and a handful gained new contracts.

Unscheduled Downtime: 39%
Changed Suppliers: 36%
Subsitituted Materials: 34%
Changed Purchasing Policies: 33%
Lost Contracts: 18%

When asked if they’re prepared for what 2022 has to throw at them, the most popular answer was “maybe?”

Additional Resources

Grappling with Supply Chains, Labor Shortages

IndustryWeek and L.E.K. polled manufacturers to learn how they got through 2021 and how they plan to get through 2022. Download the PDF version of this site for easy reference in the future.

Surviving Supply
Chain Chaos

Surviving Supply Chain Chaos

Massive disruptions to global supply chains continue, making an already challenging job that much more difficult for manufacturers. So, IndustryWeek reached out to companies and asked how they’re getting through nearly daily crises.

Laying the Groundwork
for Success

Placeholder for Incoming Third Resource

Digital transformation presents attractive opportunities to industrial firms for increasing efficiency and profitability. L.E.K. asked 600 senior executives about the barriers to adoption and how they were finding success. Here’s what they told us.