IMF: Variants Can Still Hurt Manufacturing Recovery
After a year of on-and-off manufacturing in the US, UK, and the eurozone, demand for goods surged early last week. Factories set growth records in April and May, suppliers started to recover, and US crude hit its highest price point since pre-COVID. As vaccination efforts immunise much of the US and UK populations, manufacturers are now able to fully ramp up their supply chains. In fact, GDP growth could approach double-digits by 2022.
Now, the ISM productivity measure has surpassed the 50-point mark that separates industry expansion from contraction. Since U.S. president Biden passed his US$1.9tn stimulus package and the UK purchasing managers index (PMI) increased to 65.6, both sides of the Atlantic are facing a much-welcomed manufacturing recovery.
Lingering Concerns Over COVID
Even as Spain, France, Italy, and Germany race to catch up, and mining companies pushed the FTSE 100 index of list shares to a monthly high of 7,129, some say that UK and US markets still suffer from a lack of confidence in raw material supplies. Yes, the Dow Jones has made up its 19,173-point crash of March 2020, and MSCI’s global stock index is at an all-time high.
Yet manufacturers around the world realise that these wins will be short-lived until pandemic supply chain bottlenecks are solved. If we keep the status quo, consumers will pay the price. In April, inflation in Germany reached 2.4%, and across the EU’s 19 member countries, overall prices have increased at an unusual pace. Some ask: Is this true recovery?
IMF: Current Boom Could Falter
Even as Elon Musk tweeted about chip shortages forcing Tesla to raise its prices, UK mining demand skyrocketed; housing markets lifted; and the pound sterling gained value. The International Monetary Fund (IMF), however, cautioned that manufacturing recovery won’t last long if COVID mutates into forms our vaccinations can’t touch. Kristalina Georgieva, Washington’s IMF director, noted that fewer than 1% of African citizens have been vaccinated: “Worldwide access to vaccines offers the best hope for stopping the coronavirus pandemic, saving lives, and securing a broad-based economic recovery”.
Across the globe, manufacturing companies are keeping a watchful eye on new developments in the spread of COVID. Though US FDA officials don’t think we’ll have to “start at square one” with new vaccines, the March 2021 World Economic Outlook states that “high uncertainty” surrounds the projected 6% global growth. Continued manufacturing success will in large part depend on “the path of the pandemic, the effectiveness of policy support, and the evolution of financial conditions”.
Mathias Cormann, secretary-general of the Organisation for Economic Co-Operation and Development (OECD) concurred—without global immunisation, the estimated economic boom expected by 2025 could go kaput. “We need to...pursue an all-out effort to reach the entire world population”, Australia’s finance minister added. US$50bn to end COVID across the world, they imply, is a small investment to restart our economies.
Global Manufacturers Reportedly Mislabel 10% of Goods
New research by label software company NiceLabel revealed that product mislabelling is more widespread than previously thought. Out of a poll of 300 pharmaceutical, medical, automotive, food and beverage, and retail companies, three-quarters (76%) admitted that they saw mislabelling on more than 10% of their goods. The cost? Approximately £65,000 per year.
Across the UK, the US, and France, product mislabelling can also tank brand reputations, cause shipping delays, and force companies to make very public apologies to consumers and regulators. And as factories speed up their processes, these little mistakes that lead to big consequences are growing more and more common.
The Cost of Mistakes
- 26% of manufacturers admit that 25% of their goods are mislabelling every year
- 61% incur losses amounting to more than £50,000 from mislabelling on average in a year
- 35% of respondents cited “minimising errors that lead to a need to relabel products” as the second biggest labelling challenge manufacturers face
As Ken Moir, NiceLabel VP of Marketing noted: “Mislabelling can often lead to issues with products and that can result in a need to quarantine and re-label product or packaging, which is costly, time-consuming and unsustainable”. As ESG and sustainability KPIs grow ever-more important to corporate executives, manufacturing’s mislabelling crisis will face greater scrutiny. “The key will be systems and tools that allow centralised control of label design”, Moir explained.
To mitigate labelling errors, companies that source from multi-tier suppliers should collaborate with them to provide proper label designs and training. After all, it’s best to fight the beast up front: incorrect labels from partners and suppliers cost companies thousands in time and labour. “The solution is to extend labelling to those suppliers...to eliminate the need for costly and time-consuming re-labelling”, Muir said.
Some may shuffle their feet—it’s not our problem!—but one must remember this: if products are mislabelled, it’s the corporation that pays the costs.