CIPS: supply chain disruption raises manufacturing pressures
Recent survey conducted by CIPS between February 11 and February 23, identified that “the upturn of the UK manufacturing sector was constrained by supply chain disruption and rising cost pressures,” as a result this kept “output growth only marginal despite a modest improvement in new order intakes.”
“The UK manufacturing sector was again hit by supply chain issues, COVID-19 restrictions, stalling exports, input shortages and rising cost pressures in February. Look past the headline PMI and the survey reveals near stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period. In fact the biggest contributor to the headline PMI reading was a near-record lengthening of supplier delivery times,” commented Rob Dobson, Director at IHS Markit.
Key survey findings
- Seasonally adjusted, the IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 55.1 in February, which was up from 54.1 in January
- Business optimism rose to a 77-month high in February, 63% of organisations reported expectations that output would be higher in a year’s time, this attitude was linked to the continuous recovery from the pandemic
- For the fourth month in a row work backlogs continue to increase
- For the second month in a row employment rose at its quickest pace since June 2018
“With current constraints likely to continue for the foreseeable future, pressure on prices and output volumes may remain a feature during the coming months. That said, improved domestic demand as lockdown restrictions ease and a further rise in manufacturers' optimism are reasons to hope brighter times are on the horizon, and have already supported a modest rebound in staffing levels since the turn of the year,” added Dobson.
Primary drivers of rising costs in manufacturing
Identified in the survey CIPS discovered that the primary drivers of the rising costs in manufacturing were supply chain disruptions and raw material shortages.
- Average vendor lead times have lengthened to one of the greatest extents in the survey’s 30 year history
- More than 64% of organisations have reported higher purchase prices
- Almost 59% experienced supplier delivery delays
“Only the pincer movement of rising costs and supply chain disruptions in the manufacturing sector prevented higher growth in February as mounting optimism amongst manufacturers raised hopes of an imminent future recovery. Stronger pipelines of work from home and overseas impacted strained supply chains with delivery times rocketing to some of the highest levels since records began. This disorder was primarily created by shipping delays, transportation shortages and customs border commotion. Though it was difficult to see clearly where covid disruption ended and the Brexit muddle began as businesses on both sides of the Channel struggled with additional administrative burdens,” commented Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply (CIPS).
Canoo Awards Manufacturing Contract to VDL Nedcar
Canoo, a trailblazing company in the electric vehicle (EVs) manufacturing industry, has officially announced owned and contract manufacturing plans that will ensure the company manages to deliver on its promise to consumers of production and delivery of vehicles in Q4, 2022.
During the company’s first Investor Relations Day, Chairman & CEO of Canoo, Tony Aquila, named VDL Nedcar as its contract manufacturing partner. VDL Nedcar, which I’m sure many of you will already have heard of, is the only independent Vehicle Contract Manufacturer in the Netherlands and has enjoyed fifty years of growth under owners, including Mitsubishi Motors and Volvo cars. According to the report, Nedcar will manufacture the Lifestyle Vehicle for the United States and European Union markets, while Canoo builds a US-based mega micro-factory.
"We conducted an exhaustive search, invested significant amounts of time and resources that span the globe, in our search for our Phase 1 contract manufacturer. VDL Nedcar is the right partner," said Tony Aquila, Investor, Chairman and CEO of Canoo, Inc. "They are the top trusted European manufacturer building high-quality products for leading OEMs, and they significantly outcompeted the other contenders. VDL is also independently owned by the van der Leegte family of entrepreneurs - which aligns with our commitment to support businesses that form the backbone of communities. This strategic partnership will enable us to deliver vehicles to market while we build our Phase 2 factory in Oklahoma. It also strongly positions us for geographic expansion in Europe and builds a lasting relationship with VDL Groep of companies. Our investment will help us scale quickly and fulfil our mission to bring affordable, purpose-built EVs to Everyone."
Canoo and VDL have already gotten to work on vehicle manufacturability and production planning so that Canoo can successfully lay the groundwork for its upcoming US manufacturing operations expansion, which will be completed in Oklahoma in 2022. The Nedcar facility currently expected to produce around 1000 units for both the US and European markets in 2022, with an additional 15000 targeted for the following year.
"Canoo's bold approach to designing and building electric vehicles makes them an ideal partner as we work together to shape the future of mobility," said John van Soerland, CEO of VDL Nedcar. "This partnership advances our strategic vision to provide a contract manufacturing solution and expand our expertise in the EV arena."
Currently, Canoo is entering its GAMMA phase of development and is on track to start production soon. The company intends and expects to launch its Lifestyle Vehicle in Q4 2022, closely followed by the Multi-Purpose Delivery Vehicle and Pickup Truck.
Watch this space.