With COVID-19 cases dropping and vaccines rolling out, the end of the pandemic seems to be in sight.
But some of the problems it’s created for business are likely to persist a bit longer.
In the manufacturing space, companies are dealing with a host of supply chain challenges, from slower shipments to spiking prices.
The issue is garnering federal attention. President Joe Biden on Feb. 24 called for a comprehensive review of risks in a variety of domestic supply chains like semiconductors, high-capacity batteries and pharmaceuticals. The executive order also mandates that the reports include policy recommendations on how to address the risks found in these supply chains. But for now, companies have to navigate these hurdles on their own.
Overall, supply chain issues have been coming and going throughout the pandemic, creating a bit of a “whack-a-mole” situation for companies, said Guhan Venkatu, group vice president at the Federal Reserve Bank of Cleveland. There’s been everything from postal delays to raw material shortages to a freight system stressed by online orders to workforces out due to COVID. And those challenges have led to higher raw material and freight costs.
For example, David Klotz, president of the Precision Metalforming Association in Independence, said steel prices have “skyrocketed” to a 13- or 14-year high. And lead times have been increasing, too. In a recent news release, Klotz noted that steel lead times “have gone from four to six weeks in October 2020 to 12 to 16 weeks now.” Overall, high demand and low supply means Klotz has seen members with presses ready to run, but no raw material to use.
The supply chain has been a challenge recently for metal stamper Automation Tool & Die Inc. in Valley City, with prices as high as they’re been since the summer of 2008, said vice president Randy Bennett. Spot buys are “non-existent,” he said, and program buys are coming in late. And mills are getting more selective. Bennett said increased demand from sectors like residential projects and automotive has meant mills are being pulled in a lot of different directions.
And this has had tangible impacts for manufacturers. Late orders have meant shifted production schedules at Automation Tool & Die. And Bennett said his shop even had a standing product order canceled at the mill, which meant the company had to scramble to find steel.
Bennett said he’s been working through the pricing hurdles with his customers, but the “fear of shutting somebody down” because of late deliveries has been his biggest concern.
Darrell McNair, president and CEO of MVP Plastics Inc. in Middlefield, said allotment restrictions have put pressure on the amount of product the company can bring in. Basing purchases on previous buys makes it so suppliers can serve all their customers with limited products, but it’s been difficult for anyone to stockpile goods.
The COVID-19 shutdowns depleted everyone’s inventory, said Brian Lennon, CEO and president of General Die Casters Inc. in Twinsburg. And demand came back faster than expected.
“Across the board, I think demand is pretty high on everybody’s part, but I don’t think anybody is able to produce what they want to produce,” Lennon said.
General Die Casters makes aluminum and zinc die castings for industries from automotive to lawn and garden. A problem somewhere along the line for one of its customers can jam up the entire supply chain, causing schedules to change.
In addition to sourcing material, finding and keeping people has been a challenge. General Die Casters has raised wages and offered overtime, but Lennon said it seems like everyone is fighting over the same pool of workers.
The workforce challenges raised by the pandemic have certainly affected the auto industry, said Julie Fream, president and CEO of the Original Equipment Suppliers Association in Michigan. Some workers have been concerned about the safety of the work environment, while others have challenges raised by the pandemic — like children at home — that interfere with work. And the sheer volume of work automakers faced when they ramped back up after shutdowns meant companies had to do a lot of hiring.
These challenges extend to all parts of the supply chain, including transportation. That means ships have been delayed in docking and cargo delayed in sorting and shipping.
Slowed shipping has been a big problem for K-J Fasteners Inc. in Eastlake. While the small company does some manufacturing, the bulk of the business is distribution, with about 30% coming from imports.
President Kirk Stonebrook said there’s been a “perfect storm” around imports: shipments slowed because of the increased shipping pressures and tariffs raising prices on finished products and raw materials.
“Whether you’re big or small, whether you sell a lot of domestic product or not, that whole thing is affecting everybody’s supply chain,” Stonebrook said. “And I’m no different.”
This is the first part in a two-part series looking at the impact COVID-19 has had on the supply chain. Check back next week for a look at some of the ways local manufacturers are managing these challenges.
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