Supply chain woes threaten global recovery

Large industrial companies around the world are defying fears of a “double-dip” recession, reporting signs of increasing strength in demand and striking a cautiously optimistic note about the growth of the global economy.
Many industrial groups reported better-than-expected profits for the second quarter and raised their full-year growth forecasts. However, big manufacturers could be held back by their inability to secure vital components from supply chains weakened by the downturn and unable to increase production fast enough to meet demand.

While big players such as Caterpillar in the US, Honda in Japan and Siemens in Europe exceeded analysts’ consensus forecasts, some suppliers to large industrial multinationals that cut costs sharply in the early part of the downturn are finding it hard to increase production capacity rapidly. Many report that financing remains expensive and difficult to access and manufacturing supply chains in the US and Europe are showing signs of straining to cope with demand.

“The problems that suppliers are facing in this upturn are noticeably bigger than in the comparable stages of the recoveries we saw after previous recessions,” said Daniel Corsten, a supply-chain expert at IE business school in Madrid.

Some 51 per cent of big US manufacturers said they experienced “significant supply chain disruptions” in the second quarter, while 42 per cent of small and medium-sized suppliers said they had received queries or work from larger companies in need of urgent assistance because of supply chain problems, according to a survey by MFG.com, an online marketplace for manufacturers.

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