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Published in Manufacturing

Manufacturers shift from pandemic shutdowns to supply unpredictability

BY Sunday, May 09, 2021 05:40pm

Laurie Harbour compares life in today’s manufacturing industry to a game of whack-a-mole as company leaders find themselves addressing one problem only to encounter another.

As manufacturers emerge from what’s hoped to be the worst of the COVID-19 pandemic, reverberations from the public health crisis continue to linger in major ways.

In fact, the fallout from the early pandemic is proving to be more difficult than the initial shutdowns themselves.

“2021 is going to be — and already is — more difficult than 2020,” said Harbour, president and CEO of Southfield-based manufacturing consultant Harbour Results Inc. “What the big executives are telling us — the Whirlpools, the GMs, the GEs, the Fords — is it’s more difficult in 2021 because the unpredictability is so much more significant.”

Raw material shortages and pricing surges are among the most prominent of daily headaches for manufacturers as steel, resin and semiconductors are the toughest to source.

Log jams at U.S. shipping ports and major kinks in international container shipping have extended lead times and also led to increased shipping costs.

Meanwhile, consumers never really stopped buying big-ticket items like appliances, automobiles and recreational vehicles. Annualizing vehicle sales for March would put North America on pace to sell 18 million vehicles in 2021, but the industry will fall far short of that mark because of production slowdowns.

As someone who advises manufacturers, Harbour admitted that — in this climate — it’s nearly impossible to be proactive.

“It’s a tough one because it’s really about daily — and sometimes multiple times a day — communication with your staff on what do we have, what do we need, where are we going, what customers are screaming the loudest and what customers drive profitability in our business,” she said. “It’s almost like a daily review of customers and strategy.”

Addressing challenges

As a Tier 1 automotive supplier, Cascade Township-based ADAC Automotive Inc. is feeling the ramifications of one the most prominent material shortages in manufacturing right now.

As a worldwide shortage of semiconductors significantly slows down automotive production, ADAC — which produces vehicle entry systems at its facilities in Muskegon and Saranac — has had to adjust its workforce accordingly while managing its existing inventory.

While the semiconductor shortage has limited ADAC’s output of electronic entry systems, its slower pace has stayed in lockstep with dwindling orders from OEMs.

With signs of potential supply chain relief ahead in the late summer or fall, the industry will need to methodically ramp production back up, said Peter Hungerford, ADAC’s executive vice president and chief strategy officer.

“The challenge going forward is how can we build back up the resources we need to then fill customer orders as they get the microchips they need for their products?” he said. “If one week we get 50 percent of the orders and the next week we get 150 percent of the orders, that’s going to cause an equally problematic whipsaw effect.”

“Our challenge is how, as an industry, do we pragmatically come back to full production managing both the supply side — microchips, resin, chemicals — and then the labor side because labor all through COVID has been another big challenge,” Hungerford added.

With both consistency of orders and the sustainability of its supply chain put in peril, Hungerford admitted that the pandemic and its after-effects have forced his team to work more diligently.

“We would have daily coordination meetings to ensure that whatever orders we do have, we were working with our suppliers and production teams to make sure we could deliver on those orders,” Hungerford said.

Still optimistic

David Klotz, president of the nationwide manufacturing trade group Precision Metalforming Association (PMA), has met with members across the country to see how they’re coping with the disruptions. 

Klotz confirmed that availability and prices for raw materials were among the biggest headaches. He has encountered some manufacturers that had presses ready to run and were just waiting on coils to arrive.

PMA — which represents the $137 billion metalforming industry in North America — polled its members for an April report showing 64 percent of respondents said that lead times have increased compared to the previous three months. The trend is expected to continue.

In many cases, the nearest approximation to being proactive is blindly placing orders for these crucial materials, with some PMA members already placing steel orders for October, November and December.

“If you don’t put your order in now, you’re going to be left behind, so they’re placing their orders way in advance,” Klotz said.

The PMA is pushing hard for the Biden administration to reverse the Section 232 tariffs on steel and aluminum that were put in place by the former Trump administration. The move would open up supply and drive down prices, according to Klotz.

Despite the many causes for concern, PMA members are still quite optimistic for the future. A recent poll of its members showed that 56 percent of metalforming companies forecast an improvement in economic activity in the next three months.

Harbour agreed, saying that she expects most manufacturers to navigate the choppy waters.

“Most industries are very up in terms of revenue projections — except for maybe aerospace — and people are really positive,” she said. “Today, we face the day-to-day challenges. I think 2021 will still be a strained year because of unpredictability. It will affect people’s profit, but it won’t put them out of business.”

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