By Bart Taylor | Jul 25, 2022
If workforce is manufacturing's certain and persistent challenge, the vagaries of industry supply chains and uncertainty they're causing is today the sector's biggest headache.
As we noted in the first part of this analysis, 170 CompanyWeek interviews in 2022 found supply-chain woes have overtaken workforce as the top challenge cited by manufacturers:
2022 Q1 + Q2 | Top 5 Challenges
One narrative suggests relief may be just around the corner, that interest rate hikes are having the intended effect of lessening demand and already are removing some of the "scarcity and urgency" that has plagued supply chains in recent years.
Manufacturers in our community aren't so sure.
Uncertainty about the future is still a prevalent sentiment. "Just trying to predict what's coming" is Dave Staheli's biggest challenge. "With all of the supply chain issues, it's so hard to ramp production up in a short amount of time, so we've just had to do what we can do," says the CEO of Staheli West, a Cedar City, Utah-based manufacturer of haybaling equipment. "It's kind of like sticking your neck out. You're waiting for it to get chopped off or you might do really well. With inventory costs and all those kinds of things, you do have to be a little wise in the world we're living in right now.
"Things that were a few weeks lead time are now six or eight months," he continues, "things that were three months are a year out now, and things that were six months are two years out now. So we are just really having to look way ahead on our purchasing -- which we're doing. We're actually getting along very well compared to some of the other manufacturers. We've been able to deliver machines in a pretty timely way, a little bit of delay but not too bad."
Tracy Latham, CEO of Phoenix-based Latham Industries, is also taking chances with her namesake printed circuit board manufacturer. "I have customers that we've done business with for a long time. I know what they order, so I will take risks," she says. "I'll watch what items are becoming scarce, and I will buy extra material for them. Or we'll have a conversation and work on alternatives together."
Companies often have to think outside the box to get customers what they need. "I have a smaller customer with a wonderful product," Latham recounts. "I've got components that I ordered for him over a year ago that still haven't been delivered. To keep his business up and running, we've salvaged parts off of old boards he had that never worked. And then we had another customer who needed a microchip part that kept getting delayed. I was looking at another product of his and realized we could take chips off of that board and put it on this one. So, we did it."
In Payson, Utah, Sunstone Welders CEO Jonathan Young echoes the need for agile product development of its mico-welding solutions. "Trying to grow while having a global supply chain crisis is difficult. We've had to redesign some of our boards because of the chip supply," says Young. "Our current chip was running out, so we've had to redesign our boards with newer chips that are more readily available."
More of the same from Ben Ashe, VP of Colorado Springs-based pump manufacturer MDM: "We're seeing materials just completely disappear out of the supply chain," he says. "Pretty unique products disappear out of the supply chain with no information about when they'll come back in. That's a challenge. We've had to bring chemists in and plastic formulators in to try and figure out how to solve this one process with this one material that we've normally used -- which is a good thing. If you can respond well to those things, you give yourself a buffer and you're not reliant on any one thing."
In Fort Worth, Texas, Renfro Foods' co-manufacturing business has enjoyed a steady stream of new customers as food brands adapt to supply-chain disruptions fueled initially by a pandemic. "People have been changing co-packers for one reason or another -- and without being mean-spirited, we've benefitted from that," says CEO Doug Renfro. "We're very honest, we're transparent, we try to avoid surprises, and if we screw up, we'll tell you. Nobody saw the pandemic and supply chain issues coming. With the new machinery that has allowed us to produce faster, I'd love to say that we were brilliant to set ourselves up for these opportunities, but we were just lucky."
Is food a potential bright spot? Naturally Boulder Executive Director Bill Capsalis sees a glimmer of hope. "Sourcing and supply chain are the most pressing challenges facing food manufacturers," says Capsalis. "This has been easing up lately, but it still presents problems. Between the war in Ukraine and fuel costs, brands have to make some difficult choices right now."
Including, says Capsalis, how to navigate inflation-fueled ingredient prices. "It's a related challenge for all the companies -- increasing costs which may necessitate raising prices at a wholesale level, and accordingly at retail. Everything is costing more at the grocery store: Brands are increasing their prices, and so are retailers -- it flows downhill."
Materials costs are up 30 percent since early 2021 for chairlift maker Leitner-Poma of America in Grand Junction, Colorado, and the company is also passing some of that onto customers. "That's a big, big cost to pass on, but I think it's just the way of the world right now," says President Daren Cole. "Even with those cost increases, we're seeing substantial growth in our marketplace. This year, the market will be well over $300 million."
Yet disruptions are still limiting capacity. "We hit a point where we stopped taking orders," says Cole. "It was really just to stay ahead of the supply chain and make sure we could deliver on what we sold."
Rising costs also bedevil Windsor, California-based Solectrace, where CEO Mani Iyer is also dealing with rising costs. "The costs have gone through the roof at about ten times. I used to pay between $2,000 and $3,400 for a container. Now you're talking about $25,000. Labor is also a constraint. It's not easy to recruit people, but we're doing our best. We have gone from two [employees] in July 2021 to 50 as of last month. Our plan is to take it to 100 by the end of the year. So, we are certainly recruiting much faster as there is passion for joining Solectrac."
Demand is also still sky-high for outdoor industry standout Yeti Cycles of Golden, Colorado, even if a normalized supply chain remains wishful thinking. "I think supply chain is going to continue for a couple years being a challenge, whether it's working with manufacturers overseas or it's trying to get the steamship lines to get your stuff to your door at a decent time with a decent rate," says CTO Steve Hoogendoorn. "Currently at the factory in Golden here, it's really tough to find employees. Finding people who can do the job is not that easy right now."
It's fitting that any analysis of supply woes concludes with mentions of its most elusive component.
More soon on both challenges.
Bart Taylor is publisher of CompanyWeek. Email him at email@example.com.