A new survey suggests the cornoavirus has had a significant impact on the supply chains of a majority U.S. companies, but manufacturers in Connecticut aren’t yet reporting having trouble getting parts and raw materials from overseas as a result.
The Institute for Supply Management is reporting that nearly 75 percent of companies report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions. The Arizona-based group released its findings in a report last week.
And for some of those companies, the disruptions are making a direct impact on their bottom line: One in six of them report adjusting revenue targets downward an average of 5.6 percent due to the coronavirus.
“The story the data tells is that companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak,” Thomas Derry, chief executive officer of ISM, said in a written statement.
“For a majority of U.S. businesses, lead times have doubled, and that shortage is compounded by the shortage of air and ocean freight options to move product to the United States, even if they can get orders filled,” Derry said.
Six out of 10 companies responding to the survey reported their supply chain delays were coming out of China.
That doesn’t come as a surprise to Fred Carstensen, a University of Connecticut economics professor and the director of the state’s Center for Economic Analysis.
“So many things come through China these days,” Carstensen said.
There are small ripples of supply chain anxiety among Connecticut manufacturers.
Jamison Scott, executive director of the New Haven Manufacturers Association, said he recently convened a meeting with members from different regarding coronavirus-related problems.
“There definitely is a concern about the impact it is having on the supply chain,” Scott said. While none of his members are currently reporting parts or raw material shortages, if that were to happen, the resulting shortages would drive up costs.
One shortage that is occurring which has an indirect impact on manufacturers is a shortage of the large metal shipping containers used to hold goods carried on cargo ships, according to Scott.
“All of the containers seem to piling up on the docks in China,” he said.
Officials with larger manufacturers in the state say supply chain problems related to the coronavirus have yet to hit home.
“There are no specific impacts to the Lockheed Martin supply chain at this time,” a spokeswoman for the company, which is the corporate parent of Stratford-based Sikorsky Aircraft, said. “We will continue to monitor our supply base and will coordinate any potential impacts to our international supply chain should they arise.”
Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners, said he is not convinced that any of the state’s aerospace or defense manufacturers would admit if they were experiencing supply chain problems.
“They like to keep all those details close to the vest,” Klepper-Smith said.
But so many products run on semi-conductors these days that it is hard to believe high tech manufacturers operating in the state wouldn’t be feeling the pinch, he said.
Many Connecticut manufacturers operate on a “just-in-time” basis, he said.
Companies operating in the that fashion don’t have a lot of inventory in terms of parts, only ordering them right before they are about to run out. If the coronavirus pandemic were to continue for too long, these types of manufacturers may have to rethink how they operate or risk having to shutdown their plants until new parts arrive, according to Klepper-Smith.
The real impact for some manufacturers may not come until after the virus runs its course, Carstensen said.
He noted that the coronoavirus has already resulted in reduced airline travel. That may ultimate result in commercial aircraft builders like Boeing having less of a need for jet engines made by East Hartford-based Pratt & Whitney, according to Carstensen.