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March 2022

Market Update: Consumer Goods & Contract Manufacturing Q1 2022


Consumer Goods Overview

The consumer goods industry heavily relies on the economy and consumers’ willingness to purchase goods. The Market update combines consumer goods into two categories: durables (longer lifespan) vs. non-durables (shorter lifespan). Over the past two years, large amounts of capital were poured into the economy to fuel consumer demand, the demand, in conjunction with covid implications, created instability within the supply chain. The net-net is that this proved very difficult to understand consumer businesses. The underlying variables are that investors could not get comfortable with the macro variables within the consumer industry. According to a survey done by Grant Thornton, 57% of respondents indicated that supply chain constraints have delayed or halted M&A plans.

Contract Manufacturing Overview

COVID-19 continues to expedite the push for contract manufacturers as companies look to maximize the increased need for consumer products, medical devices, and pharmaceutical drugs. Two main industry headwinds are supply chain shortages leading to unreliable logistics and cybersecurity attacks. Supply chain shortages and unreliable logistics force contract manufacturers to deviate from their manufacturing plans, causing a shift in production to match available materials. Many contract manufacturers have initiated policies refusing to schedule production until the necessary materials are on-site, thus causing months of backlogged orders. In addition to supply chain bottlenecks, Cyberattacks on critical infrastructure such as financial services, governments, and utilities have increased following the Russian invasion of Ukraine, with the risk of spillover cyber attacks within the manufacturing industry becoming much more widespread. A prime example of increased manufacturing cyber attacks is Kojima Industries. In early March 2022, Kohima Industries, Toyota’s main plastic auto parts supplier, faced a ransomware attack that forced Toyota Motors to halt operations at all 14 of its Japanese plants. As large organizations continue to make a push toward digital transformation, the high level of interconnectivity within these fortune 500 companies and the overall global economy makes it imperative that these companies recognize their blind spots in cyberspace and take measures to address them. To read more about 7MA cybersecurity research, click here.

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