By Ian McCue, commerce and retail reporter
⏰ 8-minute read
- As the coronavirus spread across China in January and February, it disrupted the supply chains of many U.S. businesses that manufacture there.
- That disruption has led to businesses running out of certain products and affected customer demand and buying behavior, though not all negatively.
- Manufacturing operations in China recently started returning to normal, yet U.S. manufacturers are still feeling some effects. Below, we explain how to deal.
Well before the new coronavirus changed the daily routines of Americans and became a central part of the national consciousness, businesses that sell products manufactured in China began seeing the effects of the virus’ spread.
Not long after the coronavirus first appeared in Wuhan, China, in late December, many factories began shutting down for the Chinese New Year, which fell on Jan. 25. Many plants shut down operations for two to four weeks . The Chinese government extended the break by up to 10 days as the country went on lockdown to limit the spread of the virus. Many of China’s factories have just started to get up and running again in the past week, and most are not yet back at full capacity.
American businesses plan for this annual break, and Chinese suppliers make extra goods before employees leave to visit their families for Chinese New Year. That means the true effects of this extended shutdown due to the coronavirus may not surface for a few weeks or months, when products that would have been manufactured during the unexpected break would be arriving in U.S. ports.
Many U.S. businesses that sell products manufactured in China haven't yet felt the full effects of China's coronavirus shutdown.
“The average customer hasn’t noticed a lot of [the shortages] because most companies have been stocked up on goods. You’re used to having a little more inventory on hand to get you over this hump of non-shipping of goods [at this time of year],” said James Bonomo, COO of Detroit-based décor brand Regina Andrew Design.
Grow Wire spoke to several companies that rely on goods manufactured in China to understand how the coronavirus has impacted their businesses and what they’re doing – or not doing – in response.
Some businesses have run out of certain products and have nowhere to turn, carrying on business as usual despite the lack. Colorado-based Becker Safety and Supply, for example, has not had any of the various types of N95 face masks it sells for more than a month. While the distributor of safety-related industrial supplies has outstanding product orders for more masks, multiple suppliers began reporting about two weeks ago that they don’t have any inventory and likely won’t for the foreseeable future. As Becker Safety sees it, there’s not much that can be done to change the situation.
Becker Safety and Supply has run out of N95 respirator masks due to shutdowns of Chinese factories.
Other manufacturers, however, find it suits their business better to take a more active approach to the slowed delivery from China.
A home furnishing company refines its online voice
For example, Regina Andrew Design manufactures 85-90% of its lighting and home furnishing goods in China. The company planned for a six-week stoppage of shipments this year because of the Chinese New Year break. It expected employees at its suppliers to return to work the first week of February. However, due to the coronavirus, employees did not come back until the week of Mar. 9.
That delay has led to Regina Andrew running out of several popular items that probably won’t be restocked for another six weeks, according to Bonomo. As manufacturers in China ramp up now, the home products brand is trying to figure out when new orders will arrive.
“From the purchasing side and the planning side, we’ve had to rebalance our logistics to make sure we’re communicating with our suppliers more often to figure out exactly when product will be here at our distribution centers,” Bonomo said.
Regina Andrew Design sells home furnishings, most of which are manufactured in China.
Better communication with customers is also key in dealing with low stock levels. For example, if an interior designer placed an order six weeks ago for a chandelier needed for an April project, a Regina Andrew sales rep will reach out to provide the latest information on when that item should be back in stock. The rep can also suggest alternative chandeliers as a replacement.
Regina Andrew accepts backorders from business buyers (including designers) but shows an out of stock message for individual consumers who shop online and removes those items from online marketplaces like Zola and Houzz. However, the site prompts consumers to fill out a form so they will be notified when their desired item is back in stock. Regina Andrew’s product pages also have details on how much inventory will be available in five-to-six- and seven-to-eight-week increments.
Regina Andrew currently accepts backorders from business buyers but shows an out of stock message for individual consumers.
The brand may be in a better position than some competitors because it typically keeps several months’ worth of inventory on hand. It moved away from a just-in-time inventory strategy about two years ago as order demand became harder to predict due to fewer large orders from retailers.
Since the coronavirus outbreak, Regina Andrew has also seen a roughly 10-15% increase in orders through its e-commerce site – including both B2B and B2C orders – and marketplaces. That’s likely a result of a large group of people spending more time at home as they take social distancing seriously.
This uptick presents an opportunity for the home goods manufacturer to refine its online customer experience.
“I think it’s going to be more of an opportunity to really sharpen up our marketing message, sharpen up our customer care service and really communicate with our customers in the ways they want to be communicated with,” Bonomo said.
The home furnishing company sees the coronavirus situation as an opportunity to sharpen communication.
Domestically, Regina Andrew has also implemented social distancing measures at its warehouses.
In farming pots, the supply chain feels “back to normal”
Plantlogic manufactures all of its specialty pots, designed for commercial substrate growers, in China. Like Regina Andrew, it didn’t see production grind to a halt until after the Chinese New Year. Founder Israel Holby said the company would have felt the impact of the pandemic sooner if not for that holiday break.
Employees at Plantlogic’s China factory were expected to leave for about 10 days just before the Chinese New Year, but they couldn’t return for two-plus weeks. During the interim, the company relied on office staff and other local workers to get the factory up and running again. Once factory workers came back onsite, the company recovered quickly thanks to an advantage inherent to its operations and a shift in demand from commercial farmers.
Employees at Plantlogic’s China factory were expected to leave for about 10 days just before the Chinese New Year, but they couldn’t return for two-plus weeks.
“Our machines don’t require many people to run, so we were able to catch back up,” Holby said. “We’ve also had a couple of customers delay delivery dates, so that has led to excess capacity.”
Plantlogic faced a shutdown at Chinese factories that manufacture its gardening pots.
The manufacturer has not run out of any products, but inventory is running low on certain items, he added.
Internally, Plantlogic relies on a remote workforce, with operations spread across the U.S., Mexico, Chile and China. That put the business in a better position to deal with social distancing and other challenges that come with centralized workplaces as governments create rules to curb the coronavirus.
“Our offices are primarily outside of the U.S., and our U.S. employees already work at home, so there is no real change [in business operations]. The China office and factory are back to normal except taking precautions such as wearing masks,” Holby said. However, “the Mexico office is just starting to be impacted.”
Tips for manufacturers managing disruptions due to the coronavirus
The circumstances around the coronavirus have constantly evolved over the past week. Here are some of the best tips we’ve read and heard during that time on dealing with the virus’s repercussions for manufacturers.
Executives should think about what they would do if revenue were to begin or continue falling or a key supplier shut down. What are the steps you’d take to offset those issues? Where is there room for additional belt-tightening?
Part of that contingency plan should be how the business would respond to a warehouse employee, for instance, testing positive for the coronavirus. Could production move to another part of the country or world? It’s better to build a plan for these potential outcomes now than make split-second decisions later.
- Prioritize your existing – and most important – customers.
As consumers and business buyers alike struggle to find certain items, an influx of new faces may come knocking on your door. However, companies should consider allocating their inventory to their longstanding customers first rather than on a first-come, first-served basis. Your business may even have to make difficult decisions about which existing customers it should prioritize: Some suggest ranking customers based on their profitability.
- Step up communication with customers.
It’s key to have customer service or sales reps reach out to customers individually with updates on when they can expect to receive an out-of-stock item, like Regina Andrew has done. Reps can also suggest replacements and answer other questions about availability. This is a prime opportunity to deepen relationships with customers. That could mean exploring the effectiveness of communication methods beyond emails and calls, like texts or an online messaging portal.
- Audit your supply chain.
Just like when the tariffs on Chinese imports hit in 2018[NF7] [MI8] , now is the time to look for any inefficiencies in your supply chain that lead to unnecessary costs. Though the coronavirus has had a global impact, you may be able to negotiate more favorable rates or terms with suppliers and partners. Ultimately, everyone is working together to fight a loss of business, and suppliers may do what they can to help during this challenging time.
- Reorganize your staff.
This event has changed how businesses operate on a daily basis, so certain roles are either not as important as they once were or not needed during this time. So, get creative. Reassigning employees to departments that need extra help, like the customer support or supplier management teams, could not only prevent layoffs but also keep your company on stable ground.
- Think beyond the current crisis.
Right now, in the midst of an uncertain and difficult environment, it’s easy to make rash decisions that could have a negative impact on the business later. Don’t lose sight of the organization after the coronavirus.
The coronavirus pandemic presents a rapidly developing situation, and it’s difficult to predict the full repercussions. We’ll continue offering strategies to keep your business on the path to resiliency, for as long as it takes.
Follow us on social media or subscribe to our newsletter to get new advice as it publishes. Got a question for growing businesses dealing with the coronavirus, or an example of creative approaches to related hurdles? Drop us a note.