Short- and Long-Term Supplier Trends Resulting from Supply Chain Issues

Between short-term changes like international sourcing and long-lasting adjustments like onshoring, suppliers are taking protective measures against supply chain issues.

Some suppliers are making long-term changes in reaction to the supply chain issues of recent years.
Some suppliers are making long-term changes in reaction to the supply chain issues of recent years.
PMMI Business Intelligence: 2023 State of the Industry

Nearly four years after the onset of the COVID-19 pandemic and the supply chain issues it brought, some machine components are still tough to quickly source, and suppliers are taking note.

In a survey conducted for PMMI Business Intelligence’s “2023 State of the Industry” report, researchers heard an array of strategies when it came to managing supply chain issues. These included short-term trends like customer prioritization and long-lasting changes like onshoring.

The survey’s results highlight how supply chain constraints have shifted the norm substantially for packaging machine builders and their suppliers and how companies might be able to protect themselves from future slowdowns.

Short-Term Trends to Combat Supply Chain Issues

Amid supply chain issues, packaging machine builders struggled to serve every customer in a reasonable timeframe. 

Many machine builders elected to turn down business to serve core customers more effectively. This helped mitigate the risk of core customers jumping to another supplier amid lead time concerns by freeing up resources needed for production.

Among companies fortunate enough to operate internationally, many utilized a greater level of imported supply.

Suppliers often found supply was available in one region when it was unavailable in another. Strategically allocating available supply across regions of operation benefited these international machine builders.

Buying habits changed drastically across 2021 and 2021. Due to significant lead times associated with core components, machine builders invested in larger orders to compensate. 

When orders were placed, often only a small amount of the initial order volume could be delivered. Expecting this, many machine builders increased their order volumes to offset the number they would ultimately not receive from their supplier.

Long-Term Changes to Supply Chain Strategies

Undoubtedly, one of the most impactful long-term changes we will see as a result of constrained supply chains is the emphasis placed on manufacturing more closely to the point of sale.

While this trend is true for machine builders, it will be most pronounced among their suppliers.

For example, many industrial automation component suppliers have already taken steps to increase manufacturing capacity within the Americas.

Siemens, a major player in the industrial automation component market, has acquired a manufacturing facility in Mexico. This move is part of a trend where many manufacturers are investing in facilities closer to the United States, resulting in increased exports from Mexico.

As a result, Mexico’s currency has reached its highest value in relation to the dollar since 2015. Business Intelligence researchers expect Mexico will continue to attract foreign manufacturers over the next decade.

Another major adjustment in the industry is the trend away from just-in-time inventory.

It may be too early to tell whether just-in-time inventory practice will fade in a post-supply chain constrained world. As supply chains continue to heal, it is possible that suppliers will forget the pain of constraints and the tendency to manage inventory as inexpensively as possible will return.

For the next several years, however, Business Intelligence researchers expect inventories of key components will be managed with a more liberal approach.

While it is unlikely a supply chock of this magnitude will occur again anytime soon, many machine builders reported a desire to increase their minimum stock levels of key components to potentially mitigate future supply issues.

Source: PMMI Business Intelligence: 2023 State of the Industry

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