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Local manufacturers may have escaped coronavirus supply-chain disruptions but the future is less clear
The good news first.
Corridor manufacturers so far have been relatively unharmed by COVID-19-related supply chain interruptions. But some fear what could happen in the coming months, as stockpiles run out.
At Timberline Manufacturing in Marion, President and CEO Tom Pientok said his management team took steps with suppliers early on to get out ahead of the pandemic's potential impact.
'When we started hearing what was going on in Asia, we sent out emails and letters to our suppliers in February asking them to notify us of any issues,” Pientok recalled when speaking with The Gazette in late June.
'While we are not supplied directly by anyone in Asia, some of our suppliers use components supplied by Asian companies.
'When COVID-19 began showing up in the United States, we followed up with another letter and emails. We stayed in constant communication with our supply base to monitor any challenges we might have.”
Pientok said Timberline, which manufactures wiring harnesses, control panels and electronic assemblies for a variety of industries, also extended its planning horizon by 30 days.
'We were buying supplies 30 days sooner than what we normally would have so we could get purchase orders in front of them,” Pientok said. 'It required us to carry a little bit of extra inventory to try to minimize any risk of schedule delays.”
Pientok said Timberline also has been working with its customer base to create longer lead times, determine what will be needed in the future well in advance of receiving a purchase order. In addition, it also coordinated with its suppliers to have them stock additional inventory, which will reduce lead times needed to get product to its customers.
Timberline has continued to operate, worked to preserve cash and has remained 'busy,” according to Pientok. Moreover, the manufacturer has been able to pick up some short term business due to global supply-chain interruptions.
'When Mexico shut down due to the pandemic, we were able to help out a couple of customers,” he said.
Life Line Emergency Vehicles of Sumner, owned by Folience, The Gazette's corporate parent, is one of Timberline's clients.
‘Our biggest worry'
The pandemic's impact on the travel industry, particularly the airlines, has been felt by BeraTek Industries in Cedar Rapids.
'One of our second-largest customers is in the airline industry,” said Gerald Beranek, CEO and owner of the plastic injection-molding company.
'We were finishing up quite a few projects for them over the last three months, but we haven't seen any new orders coming from them,” Beranek said.
'We've had some small quote opportunities, but nothing large or consistent right now.”
But Beranek said his supply chain, which includes domestic and international companies, has not been disrupted due to the coronavirus.
'Everything that we have ordered has come in on time and there has not been any delays,” he said.
'We know that air freight is considerably more expensive right now, but in terms of time it really has not affected us that much.”
BeraTek is primarily a contract manufacturer of injection-molded parts and products for other companies, but it also manufactures its own line of proprietary products primarily sold on Amazon.com.
Beranek said the company even has experienced a revenue spike due to the pandemic.
'With many people sitting at home, they are doing a lot of shopping,” he said.
Supply chain disruptions also have not caused problems for In Tolerance Contract Manufacturing.
'We are about 85 percent government and aerospace defense,” said John Renning, chief operating officer.
The Cedar Rapids company specializes in precision machined parts for the aerospace, communications, food processing and medical industries and the military.
'The government side has been relatively strong, which has allowed us to maintain a pretty healthy workload throughout this entire thing,” Renning said.
'Our material suppliers were open. They saw a number of other companies in California and other states that were impacted by it and shut down.
'Two of our suppliers are really happy with us because we have remained open. A lot of the other manufacturing houses are either 50-50 or heavily commercial side, so they were really impacted.”
Two of In Tolerance's customers are suppliers for Boeing's 737 'and 787 and a little bit of Airbus,” he added, 'so they are really hurting.”
That has led to requests for renegotiated contracts.
'They know they can go to other manufactures and they will do the work at cost just to keep the lights on,” he said. 'So that's our biggest worry right now - requoting all those major packages and getting undercut on everything.”
In Tolerance has the capacity to batch process items, enabling the company to build multiple orders and send them out to customers.
'Our on-time delivery rate across the board is probably the highest it has ever been,” Renning said.
Looking ahead, Timberline's Pientok believes too much complacency has set in among the nation's manufacturers.
'I don't believe we have seen the brunt of the impact yet in the manufacturing sector,” Pientok said.
'A lot of manufacturers have a significant amount of backlog and many are burning off that backlog. I'm concerned about what is out in front of us eight or 10 months down the road.”
Pientok noted that the International Monetary Fund on June 24 predicted a 4.9 percent global retraction of the economy this year.
'That's a big number when we had been anticipating a 2.5 percent or 3 percent expansion. That's almost an eight-point slide.”
Pientok said there is a great degree of uncertainty about what actions are needed 'to get through this storm.”
'As we navigated the early stages of this pandemic, there were multiple paths that we could take,” he said.
'No one knew what would be at the end of any one of those paths.
'There is no prescribed task to work our way out of this crisis.”
Beranek, BeraTek Industries's CEO, also believes more pain is ahead for the nation's manufacturing sector.
'It doesn't feel like the manufacturing sector has been hit yet, but I think we will see it coming over the next three months,” he said.
Renning said revenues already have dropped considerably going into the remainder of 2020.
'March was fine, April were fine and May started to weigh,” he said. 'June was probably the worst month that we have had in five years and July is probably going to be the same.
'We are seeing a lot of delayed purchase orders that are going to impact us. We are going to see fewer purchase orders coming in the front door.”