I reached out to several manufacturers last week to ask about COVID-19-related disruptions and assess -- to the extent we can at this early stage -- any long-term effects on operations or supply chains that support regional manufacturing.
Companies managing global operations have been dealing with COVID-19 fallout for many weeks. A redundant or diverse network of suppliers is serving companies well.
Doug Campbell, CEO at battery innovator Solid Power in Louisville, describes a challenging international landscape. "Our partners in Europe vary in terms of their extent of shutdown: Partners in France and Italy are in total shutdown although still taking telecons from home. In contrast, our partners in Germany are partially operational."
"Asia is quite a bit different," Campbell continues. "Our partners in Korea appear to be getting back to business as usual and the worst seems to be behind them. Japan appeared to be in a similar situation but I learned from a call last night that the number of positive cases is starting to rise again and so the Japanese government is heavily encouraging folks to stay home again although it's questionable how strongly they can enforce it."
The domestic situation is similar. "Partners here in the U.S. are either in partial or complete shutdown. I had a call with one in Detroit earlier today who said things were pretty bad there and the governor announced they are at peak infection next week," Campbell notes. "We're lucky in terms of having such a diverse, international supply chain, as things might be bad in one area but not so bad in another."
Kelly Watters, co-founder of Telluride apparel brand Western Rise, agrees. "We have a very diverse global supply chain, which is more important now than ever, " she says. "One of the other areas we will be focusing on is a factory's ability to respond to a changing environment quickly. For example, we are working with our pants factory in Los Angeles to modify the production lines to make masks, and several of our international factories on new shift policies to allow for more social distancing while keeping production going."
Companies sourcing from China have been managing a raft of issues, some of which existed before COVID-19, including tariffs. Mike Henderson with Colorado-based lean consulting firm FlowVision canceled a trip there in February, but describes chaotic supply-chain logistics. "Through the third week of March, China couldn't produce to meet customer demand due to COVID-19," he says. "They can now produce at capacity and are filling up the shipping containers they have and putting them into transit."
U.S.-bound products run headlong into the crisis here. "The containers in the U.S. are not being unloaded and returned at the rate needed, so there is now a shortage of containers returning to China," notes Henderson. "Since China is building to eliminate the backlog, they will be running out of containers to put the material in and in a month shipments will slow down again. To top it off, in July people will want to start filling their shelves with products for Christmas."
Lakewood-based Encore Electric has some exposure to shipping challenges, says Vice President Jeff Thompson. "I am concerned about light fixtures and fire alarm supplies, which largely come from China," he says.
Logjams are developing in the U.S. as well. "Some U.S. suppliers have reduced their workforces, slowing production and distribution, including the New York docks," Thompson notes. "Others have suspended manufacturing and shipments due to shelter-in-place directives from state governors. However, most manufacturers we deal with are currently on track, but they are issuing warnings to expect potential delivery issues in the future."
It's enough to encourage brands and companies to manufacture or source more locally -- where possible. A supply chain that would support wholesale reshoring here doesn't exist today. Will COVID-19, like tariffs and IP theft before, be a spark?
Mark Inboden, president at control-panel maker UCEC in Arvada, speculates it might. "Businesses will rethink their sourcing strategy. They must assess the delivery risk from each supplier," he says. "This is a great opportunity to rely on strong local and regional partners."
Inboden believes there will be more businesses looking at opportunities to reshore overseas sources. Post-crisis, he forecasts, "Chances are that businesses that survived COVID-19 have been establishing new supply chain resources, and those should be their new "go-to" partners and not forgotten. Businesses need to develop new supply chain partners for worst case scenarios, and local partners will be paramount."
For John Morse and Englewood-based Dubach Tool Company, Colorado's reputation as a manufacturing backwater, deserved or not, remains a barrier. "Colorado is interesting in that in spite of a healthy manufacturing community, I feel we are not perceived as "real" by the rest of the country." he says. "I suppose this is true when you hold us up to regions that have a lot of heavy industry. Still, we serve medical, aerospace, food processing and others, so we are not going away. The economic aspect of this crisis is going to leave some wreckage in its wake, so we will have to wait until it has passed to see what we have left."
But for Morse and Dubach Tool Co., one the region's few tool and die manufacturers, business is still good. "For now, we are still working," he says, modestly.
Few companies have been thrust front and center into the COVID-19-related crisis, with U.S.-made equipment, as Colorado Springs-based dpiX. CEO Frank Caris describes dpiX as "a single point of failure in the U.S. to keep the complete supply of x-ray devices going," the very definition of mission critical in today's crisis.
Caris says that the company is seeing a big spike in demand for its portable X-ray sensors and detectors made by dPix's partners from permanent and temporary hospitals, due in part to the ability to scale to a facility's need.
He is clearly proud of his company's role in battling the pandemic -- and its U.S. roots. "It shows that we can do all of this in the U.S.A. -- and we should keep it that way," he says, alluding to challenges in America's manufacturing ecosystem.
In particular, Caris says he worries about offshore competitors and the lack of industrial policy that would protect, at some level, key American manufacturing industries against unfair competition. "I think as a country we need to continue defining what critical manufacturing and supply chains we demand to be in this country," he says. "There is not a single soul who is actively promoting outsourcing critical military products to non-allied countries. We don't build our aircraft carriers overseas."
He adds, "[T]he current crisis has exposed vulnerabilities underneath the surface. Look upon it like an unexpected X-ray picture that has now been shared with the American people. . . . It's up to all of us to define the best way forward."
For Colorado and the region, the way forward may already be laid out in front of us. As Dubach Tool's Morse points out, the state and region boast a diverse industrial character. As COVID-19 refocuses attention on the manufacturing supply chain, a first step for companies is to redouble efforts to work with more local providers.
Our list of possible new partners is growing. Let's maintain the momentum.
Bart Taylor is publisher of CompanyWeek. Contact him at firstname.lastname@example.org to connect with these manufacturers and others.
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