COVID 19 has impacted every industry. Its emergence has resulted in faltering supply chains that fail to keep pace with demand, stoking inflation. To cope with the effects of the pandemic, metal fabricators have increased social distancing in the workplace, sought to enhance supply chain transparency, and embraced nearshoring and reshoring.
Social Distancing in the Workplace
Transportation bottlenecks are one of the causes of supply chain disruptions, such as the closed ports and time-consuming screening procedures that have become a feature of the COVID era. Another trouble spot has been when a manufacturer within the chain has been forced offline or into reduced capacity. For example, automakers have been forced to halt production because their supply chain partners were unable to deliver key engine components.
Forced production shutdowns have impacted many OEMs and metal fabricators since the COVID crisis due to the inability to comply with social distancing standards. Government mandates and company policies required workplaces stagger employees in ways impractical on the factory floor. As a result, they were forced to temporarily close, halting the completion of orders.
However, now that manufacturers have had time to adjust to the pandemic, many have adapted workplaces to remain online while providing social distancing adequate to tamp down virus transmission. In addition, businesses have been willing to share plans and methods for creating COVID safe workplaces, allowing more links in supply chains to return to normal output.
Full Transparency & Supply Chain Networks
Metal fabrication supply chains have always been complex, consisting of multiple suppliers for each finished product. For instance, many car manufacturers order engine components from an array of fabricators. Though they know where their component pieces are made, transparency has largely ended there, limiting transparency. OEM manufacturers would not know where the raw materials of these engine components are sourced.
Before COVID, the length of supply chains posed a risk for OEMs. In addition, complex networks were opaque, making it difficult to prevent bottlenecks. To counter this, many OEMs demonstrated a preference for a few large suppliers, feeling that relying on known quantities reduced supply chain risk and enhanced transparency.
But when the pandemic struck, many of the stalwart suppliers were unable to remain at full capacity, resulting in delayed deliveries. As a result, the need for more diverse supply chains was identified. Metal fabricators have responded by expanding their base of suppliers and providing OEMs with more visibility into their links to material supplies.
Reshoring and Nearshoring
Despite the increasing calls for transparency, many observers note that supply chain visibility has been neglected in reshoring and nearshoring considerations. Overseas metal fabrication projects have been returning stateside since before COVID struck. For example, the 2018 steel tariffs already incentivized increased domestic metal fabrication.
By some estimates, 64% of manufacturing and industrial companies are considering increased nearshoring or reshoring because of COVID-19 concerns. Moreover, with China imposing ever-stricter lockdown measures, companies realize that supply chain breakdowns may continue into the foreseeable future if they rely on Asian supplies. These concerns are justified by recent surveys, which indicate that 53% of businesses had trouble with COVID-related delays from Chinese manufacturers.
The change in geography lessens risk, but it must be coupled with enhanced transparency. Opaqueness in domestic supply chains can still wreak havoc on production schedules because manufacturers are caught off guard when delays happen. Transparency provides the visibility needed for accurate planning.
The Inflation Problem
As of spring 2020, the Federal Reserve has shifted from a focus on bolstering the economy to taming inflation. March indicators revealed inflation running above 8%, a disastrous rate for most households. Loose monetary policy may have contributed, but the Fed has no power to unblock supply chains. The COVID-induced reduction in supply chain efficiency has left the economy with the supply of goods falling behind demand. As a result, too many dollars are chasing too few goods, resulting in inflation not seen since the 1980s.
Metal fabricators and other economic actors are working to increase production capacity. As more offshoring and nearshoring reduce China dependence, supply should continue recovering, provided future COVID outbreaks remain relatively small. Combined with tighter monetary policy, inflation should fall, allowing the economy, and metal fabrication, to function a pre-COVID levels and prices. By adjusting workspaces to reduce virus transmission, enhancing supply chain transparency, and nearshoring and reshoring, metal fabricators are preparing for success in the post-pandemic world.
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