We continue with highlighting the significant industry supply chain news of this week with a reflection of the announcement of the September ISM Manufacturing PMI, which indicates the highest level of overall production and supply chain momentum in more than two years.

The Index, compiled by the Institute of Supply Management, is a representation of manufacturing and supply chain activity across the United States. The September PMI value was reported as a value of 60.8, a significant increase of 2 percentage over the August value, and representing the highest value over the two years that we have tracked for this index within our Quarterly Newsletter.

Other indices that make-up the overall index point to further evidence of momentum moving into the final quarter of this year. The New Orders index increased 4.3 percentage points, Supplier Deliveries increased 7.3 percentage points, while Inventories decreased 3 percentage points. Prices were reported as rising 9.5 percentage points in September which is another clear signal that demand is exceeding supply for various inbound materials.

Of the 18 manufacturing industries that make-up the ISM panels, almost all (17) reported overall growth in September, while 14 reported new order growth and 13 reported employment growth.  They collectively represent extraordinary optimism.

There will surely be added business and general media reporting related to what is fueling the current levels of production and supply chain momentum. The first relates to continued overall global supply chain momentum. The J.P. Morgan Global Manufacturing PMI indices indicated that global manufacturing production rose at the quickest pave in six months, fueled by further increases in new orders and international trade volumes. The Eurozone manufacturing sector reached a 79 month high point in September.

Another factor are the ongoing impacts of two catastrophic hurricanes that impacted large portions of Texas and Florida. Industry supply chains are likely gearing-up for product demand increases for replacement building materials, electrical infrastructure, automobiles. household appliances and goods in the coming quarter. Likewise, Q4 is the traditional holiday surge period for all forms of retail goods.

Within all of this optimism are the increased challenges related to higher inbound prices brought about by certain industry disruption in agricultural commodities, chemicals, pharmaceutical drug and other sectors caused by major storms and earthquakes.

While there is indeed optimism and continued supply chain momentum across the U.S., challenges remain in balancing constrained supply, lack of qualified people, higher inbound prices and continued uncertainty related to the geo-political landscape. Industries remain under attack from more technologically laden disruptors, and supply chain teams need to be able to both manage through near-term optimism and momentum while not taking an eye away from the longer-term needs for digital transformation and added responsiveness.

Bob Ferrari

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