Indiana manufacturers say the pandemic is no longer threatening their businesses, but many report challenges in the supply chain and surging demand have increased in recent months, according to a new survey. The “2022 Indiana Manufacturing Survey: Back to Work,” was conducted by Indianapolis-based Katz, Sapper & Miller in partnership with the Indiana University Kelley School of Business and the Indiana Manufacturers Association. The survey shows 45% of respondents have seen a surge in demand, while 81% are experiencing supply chain shortages.
The survey targeted nearly 100 Indiana-based manufacturing companies throughout the first quarter of 2022. The companies represented multiple industries, including automotive, industrial equipment, food and beverage, and chemicals.
Mark Frohlich, associate professor of operations management at the Kelley School, says manufacturers are nearly split on the biggest causes of their supply chain issues.
“Essentially half, 47% [of respondents], thought it was due to material shortages, and the other 47% thought it was due to labor shortages,” said Frohlich. “And, it just depends on the industry and the context of your manufacturing operations whether you’re struggling in your supply chain because of your supply base, or perhaps you’re struggling because of labor issues.”
The remaining 6% said their issues are being caused by challenges in the logistics and transportation industry, which has seen its own struggles with driver shortages.
Increasing inflation driving up costs is another looming factor for manufacturers, according to the survey.
Sixty-seven percent of respondents said costs have risen 10% or more in recent months and they expect that to stay even after supply chains recover. Meanwhile, 31% say the increased costs are transitory and will “decrease somewhat” after the supply chains recover.
“That, I think, kind of hangs over the study this year because the generation of Hoosier manufacturers from the 60s and definitely the 70s and the 80s that had to cope with these kinds of issues have essentially retired or moved on and here we are, yet a whole new generation of Hoosier manufacturers who had heard stories about coping with inflation. Now, a solid 2/3rds of them are right in the middle of it and having to figure it out as they go forward,” said Frohlich.
Frohlich adds the conversation surrounding automation has changed over the last several years. In the past, the question surrounded automation replacing existing jobs. Now, 73% say the need to automate is being accelerated by a lack of of workers. But challenges to automation remain with 37% saying there is a lack of skilled employees to work with automation.
“Companies are at quite a crossroads. They see the need to protect their businesses by layering automation into production, yet they don’t want to discourage workers from applying for the jobs that need to be filled as soon as possible,” said Frohlich. “While much of this year’s data reveals numerous challenges, manufacturers are learning they have many tools at their disposal to be more capable and competitive in the coming years.”
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