Slow shipments. Not enough employees. Soaring costs. Depleted inventories.
The supply chain is full of knots and holes right now, spots for companies to stumble. And there are ways to mitigate these challenges, from increased automation to higher wages, but they all come with a cost.
To address supply chain and demand challenges, General Die Casters Inc. in Twinsburg has been running overtime and installing automated equipment, said CEO and president Brian Lennon. He has raised wages to attract employees and is starting to work with a temp agency in Puerto Rico to bring in more people.
And the company has been engaging in a lot of communication with its customers, trying to figure out what each actually needs in order to keep running while inventory slowly builds back up.
“The good thing about this is it’s not isolated,” said MVP Plastics president and CEO Darrell McNair. “It’s all the way through.”
MVP Plastics is part of the supply chain for its customers in markets like automotive, consumer and HVAC. McNair said it’s been a matter of being “in sync” on delivery plans all the way through the chain.
At manufacturer and distributor K-J Fasteners, president Kirk Stonebrook has been reminding employees that they’re the link between customers and the market, and they need to educate customers on the factors contributing to cost increases. It’s a matter of building trust, he said.
In the fall, the company’s customers increased inventory because of the ongoing uncertainty. More recently, K-J has been trying to stock up on products that are locked in on older pricing in the hopes of riding out the increases.
Stonebrook said K-J Fasteners also is setting long-term buying options with customers, looking at ways to amortize or absorb the current increases. Based on his research, he expects the supply chain problems — and the subsequent prices — to ease, though it could take months.
Mark Vickers, client executive at Sedlak Supply Chain Consultants in Highland Hills, said companies have been increasing the amount of inventory they keep on hand. Before COVID, Sedlak would have encouraged customers to reduce on-hand inventory to cut the costs associated with storing it, but in this time of disruption, having extra inventory is a must.
Another trend Vickers has seen is more investment in technology.
Companies were adopting technology to meet increased customer demands before the pandemic, Vickers said. But the pandemic encouraged companies to pick up the pace, as social distancing-driven e-commerce increased business at the same time as labor disruptions due to COVID-19 grew. More automation helps companies address both needs.
“If you’re not automating some or most of your labor, you’re getting crushed right now,” Vickers said.
It’s to the point where automated systems aren’t seen as an investment, he said; they’re just a cost of doing business.
Sedlak Supply Chain Consultants offers distribution center design and supply chain optimization services. Locally, one of the companies it has worked with recently is SupplySide Group in Beachwood, a maker of packaging and storage products.
Changes in delivery models and the growth of online ordering caused big changes for the company during the pandemic, said chairman Ansir Junaid.
Orders have increased, but become smaller. And to ship more efficiently, many customers started shipping directly from SupplySide’s sites instead of their own stores, said senior vice president of Supply Side USA Ibrahim Shamsi. That meant SupplySide had to become more efficient, too.
SupplySide worked with Sedlak on automation, as well as ensuring the company had flex space for the future, so it could diversify or take on special projects where it saw fit, Shamsi said.
Bill Koehler, CEO of economic development organization Team NEO, said he has heard larger companies talk about plans to restructure or invest in technologies to tackle supply chain challenges this past year. On the technology side, companies have been seeking more visibility in their supply chains and finding ways to better manage data, he said.
Those trends were underway pre-COVID, but have been accelerated by the pandemic.
Another potential solution to some of the problems in the supply chain could be reshoring products from overseas.
A recent report from Heartland Forward, an Arkansas-based think tank, makes that case. Specifically, it calls for bringing more products back to the middle of the country, noting the “culture, skilled labor pool and training programs, as well as infrastructure to support production facilities” in the region because of its historical dependence on the sector. The report, which was funded in part by a grant from statewide economic development nonprofit JobsOhio, said that reshoring can protect intellectual property and shorten supply chains.
The COVID-19 pandemic created the need for shortened or redundant supply chains, as labor market shortages arose and cargo and travel embargoes were put in place, the report stated.
Reshoring some products from overseas could be an option, Koehler said, but determining what products would be a fit requires visibility of demand across companies.
To make it worthwhile, a product would have common features. Koehler said that has happened with products like personal protective equipment, where the desired features for masks and gowns were common. It’s more difficult to find common components across industries like automotive, where automakers and product lines are more differentiated.
The problems filling today’s supply chain have been building for years. And there are no easy answers. But Northeast Ohio’s manufacturers are staying agile and looking for solutions for both the short term and the long.
This is the second part in a two-part series looking at the impact COVID-19 has had on the supply chain. Click here for a look at some of the challenges local manufacturers are facing.