The Supply Chain Strain Is Changing the Way Manufacturers Do Business

As growing demand boosts production in the second half of 2010, some companies will fail to meet output due to struggles in the supply chain. Earnings season has shown industrial companies' surging profits in the first half of the year and increased optimism for the months to come. Emerging market strength and stable raw material prices have helped the manufacturing boost. Industry giants like Caterpillar Inc. (NYSE: CAT ) and Siemens AG (NYSE ADR: SI ) all raised their outlooks and posted higher-than-expected earnings. Siemens' second-quarter orders increased by 22% from a year ago and income rose 40% to a record high of $3 billion (2.3 billion euros). The demand increase Siemens is predicting for the rest of 2010 allowed the company to end the reduced working-hour arrangements it had set up with about 19,000 employees.