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How COVID-19 is Impacting Manufacturers, Part II

By Bart Taylor | May 21, 2020

Consumer & Lifestyle Food & Beverage Colorado

In early April, CompanyWeek checked in with several manufacturers about pandemic-related impacts.

A little more than a month later, here's part two of the series. We asked manufacturers for a quick read on how COVID-19 is impacting manufacturing.

Highlights:

  • PPE has provided a bridge for some manufacturers, though suppliers project hospital providers will return to buying from China.

  • Interest in on-demand manufacturing in consumer-related manufacturing is again heightened. Can suppliers deliver?

  • The crisis will only increase interest in 3D printing and other technology.

  • Consumer product manufacturers in sporting goods have taken a significant hit.

  • Natural and organic food brands stand to gain -- at least those with momentum before the crisis.

  • Distillers and brewers face an existential threat after embracing taproom-centric strategies.

Here's a sampling, in their own words:

Contract Manufacturing

Connie Huffa, co-founder, Fabdesigns, Agoura Hills, California
Products: Knitted fabrics

We work with many brands, individuals, and companies that want to make 3D textile products because they save almost all of the production waste that goes into landfills during the production process. What we've been seeing is a movement away from seasonal merchandise development and a flock toward seasonless products.

We've also experienced companies interested in on-demand manufacturing, which is making things when they're ordered and not warehousing literally tons of perishable fabrics.

We've also been hearing rumblings of made-to-measure for years. The issues challenging the marketplace are that of fit, since fit is subjective and each individual is finicky. There are companies trying to make products to measure in virtual reality, but the challenges are vast in making sure that what the customer sees on the screen matches not only their virtual expectations, but their fit expectations. If returns are a problem now, they will likely increase with made-to-measure. Made on-demand is different and that seems more viable.

The entire manufacturing industry, including fashion, is indeed headed to a new world of buying, making, and selling. It's about time; there's so much waste in fashion and manufacturing industries, generally.


Christopher A. Fagnant, president, Qualtek Manufacturing, Colorado Springs
Products: Machining and tooling
We see the continued buildup of medical device and PPE safety stocks driving production demands for a long time. A potential silver lining to the COVID crisis will be the improved speed with which medical device OEMs and tier one suppliers are working to approve and validate IQ, OQ, and PQ. Historically, this has been a slow, arduous process, but the current situation has opened people's eyes to the inefficiencies inherent in "the way we have always done it."

We don't see massive changes from how we operate today, just an imperative to execute on strategies like cross-training employees, implementing flexible machine automation, and upholding quality systems that can be applied across industry sectors. Everyone's favorite buzzword is "pivot." Now is our opportunity to see if we can pivot quickly enough to onboard new work and position ourselves for the 2021-22 resurgence.


Marta Miller, co-founder, Lefty Production Company, Los Angeles
Products: Contract apparel manufacturing
I definitely think we're going to see increased demand for domestic manufacturing. In fact, we're already seeing it from brands that have finally had enough of the heartache of producing overseas. It's really been one problem after another for companies that rely on a Chinese supply chain.

The brands that we've seen perform the best during this time are the ones that have loyal direct-to-consumer businesses. These brands are not relying on brick-and-mortar stores. Brands like these need to be extremely responsive to their customers and they need to order in manageable quantities. Being in Los Angeles, we're able to offer that to them.

And of course, a huge change in fashion is face masks everywhere. The innovation and creativity around face masks, which have suddenly become a necessary accessory, have really just begun.


Industrial & Equipment

Trent Brown, president, Masterbrands, Salt Lake City
Products: Industrial uniforms

We were able to pivot our business very quickly to medical PPE early on in this pandemic. Because we have had manufacturing here in Salt Lake for over 28 years, Masterbrands was uniquely positioned to help fill some of the shortages left by the Chinese manufacturers.

I'm a bit cynical about whether or not the medical industry will actually reshore medical PPE as I've been in business through several of these events and every time it's pretty short-lived. We seem to have very short memories here in the U.S. and I expect everyone will go back to buying their PPE from China.

The hospitals turned their buying decisions over to buying groups many years ago and the buying groups have a lot at stake because buying from China allows them to mark up the goods so they can make a profit when they sell to the hospitals. Truth is that the hospitals could buy direct from U.S. manufacturers and probably pay the same without the buying groups markup.


Marcia Coulson, president, Eldon James, Denver
Products: Medical devices and components

In the last year, we opened a new 93,000-square-foot facility in Fort Collins to answer the call to reshore manufacturing of medical devices. What's been difficult is changing the mindset of hospitals. They are very happy to buy from China if that means the lowest price for the hospital.

The challenge is we cannot manufacture in the U.S. and offer hospitals the same prices they are receiving from China. We would like to think we can automate to become more efficient, but not if we can't get the sales volume to justify the automation.

I fear that hospitals will continue to buy from China because they are under pressure to buy the least expensive product. We need help from the government to level the playing field. Tariffs for medical devices, drugs, and bioscience products must be put into place to make Chinese products the same price as what we can manufacture in the U.S. This will prevent hospitals from falling back into buying the cheapest medical device and drug for their hospitals.

We are prepared at Eldon James and at WilMarc to scale our manufacturing to meet the demand of reshoring. We hope this is the wakeup call needed to source critical products from U.S. manufacturers.

We are very hopeful that we have felt enough pain and uncertainty caused by having our drugs, medical devices, and bioscience products manufactured in China to effect change.


Food & Beverage
Bill Capsalis, CEO, Haystack Mountain Goat Dairy, Boulder, and former president of Naturally Boulder
Products: Goat cheese

The pandemic has created incredible opportunities for natural and organic food brands as the demand for healthy nutritional products has skyrocketed. Most food manufacturers that sell at retail have seen demand for their products double or triple and their online sales have soared from 200 percent to 800 percent over plan.

The biggest challenge facing these brands today now seems to be in the supply chain and distribution network keeping up with demand. Any food brand that is shelf-stable and easily shipped is probably going to see continued sales growth online. Consumers seem to be exploring alternative products as well, including the plant-based meat options already available.


P.T. Wood, mayor of Salida, Colorado, and co-owner of Wood's High Mountain Distillery, Salida, Colorado
Products: Distilled spirits

The biggest issue we have is that our path to market has shifted significantly. In Colorado, we're in need of regulatory reform to enable direct-to-consumer shipping. Other states have dropped barriers to shipping direct. (Editor's note: Five states -- Arizona, Florida, Hawaii, Nebraska, and New Hampshire -- currently authorize the direct shipping of spirits.)

Like craft brewers, our industry also embraced taproom strategies. As a result, with such a young industry -- the majority of companies are under five years -- I suspect there will be casualties. To weather weeks and weeks without that high-margin business is a challenge.

We have been able to sell bottles the whole time, much like a liquor store. Delivery and to-go cocktails are new and we are allowed to sell out of the tasting room or deliver or both as long as it is an employee of the distillery.


Consumer & Lifestyle
Brian Fruit, president, Lizard Skins, American Fork, Utah
Products: Sporting tape and accessories

Lizard Skins has not been immune to the impact of the coronavirus. We had to furlough a large percentage of our team, but were able to bring a huge part of them back with the help of the PPP.

Our cycling division is doing pretty well. We are manufacturing and packaging product for immediate sale as well as gearing up for future business. Our sports divisions are quiet. Our sales team is checking in with all our customers to see how they are doing. Most are closed but they appreciate us making the effort to check on them.

We are hopeful we will start to see some sports start up again soon.

During this time when sales have been so negatively impacted, we have worked really hard on designing and creating new products. Our pipeline of products to sell will be incredible for the second half of 2020 hopefully leading into an amazing 2021.

Lizard Skins is a financially conservative company at its core. We hate watching sales plummet, but we are still in a solid financial situation, paying our vendors and employees on time and preparing for the future.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.