Episode 28 – The Impact of COVID-19 on Manufacturers and Supply Chains
Rick Weddle: Welcome to ”Site Selection Matters,” where we take a close look at the art and science of site selection decision-making. I’m your host, Rick Weddle, president of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision makers to provide you with deep insight into the best and next practices in our profession.
In this episode, we have as our guest, Michelle Comerford, industrial and supply chain practice lead for Biggins Lacy Shapiro & Company, a leading site selection firm. Today, Michelle will talk with us about how COVID-19 pandemic has impacted manufacturers and their supply chains. More specifically, we’ll be talking to Michelle about what firms are doing right now to respond to this evolving global crisis. Join me as we welcome Michelle Comerford to ”Site Selection Matters.”
Michelle, before we jump into the COVID-19 discussion, take a minute, if you will, to explain to our listeners exactly what a supply chain is.
Michelle Comerford: Yeah, Rick. So certainly, a term that if you didn’t hear it much before people are hearing a lot of it these days in the news. But a supply chain basically is the sequence of raw materials, parts, supplies that go into manufacturing a product and everything that is kind of in that chain to get it into a manufacturing plant, make that product, and then ship it and deliver it to customers. So, if you can imagine anything around your house kinda what all went into making that product, that is a supply chain. And the interesting thing about supply chains in manufacturing is that over the past couple of decades, many of them have become very complex. As we become a more global society, companies are sourcing parts for their products from all over the world. And they went to that model for a lot of different reasons, but it’s added a lot of complexity to our manufacturing environment today.
Rick: So just because something we think was made in one country or another country, we have to look deeper, could be that the component parts are made in another country. And that makes it more vulnerable, I guess, to some sort of disruption.
Michelle: Absolutely. In fact, most things you see probably have some, one or more parts that have come from a different country than where it was ultimately made in. And so it’s been an interesting time as we have seen a lot of disruption lately.
Rick: Yeah. So that’s very interesting. So obviously the conversation topic of the day is this COVID-19 situation, which has really turned the whole world upside down. Just how has that impacted manufacturers and manufacturing overall?
Michelle: Well, that is a very loaded question, especially these days. COVID-19 has impacted manufacturing and in lots of different ways. In the U.S., you know, a month or more ago now, the impacts were largely on that supply chain as manufacturing companies over in China, where a lot of things and parts and products are made as they had to shut down to prevent the spread of COVID-19, those plants suddenly couldn’t send those parts and supplies to U.S. manufacturers who are depending on them to make their products here. As the inventory that U.S. manufacturers had in stock, as that dwindled, a lot of those companies suddenly weren’t able to fulfill the orders they had for product. So that was, you know, a month or two ago.
Then looking at a couple of weeks ago, as COVID-19 started to infiltrate the U.S., you saw the demand side of that chain, you know, as people went out and bought lots of toilet paper, for example, or lots of household goods, manufacturers were struggling then in the U.S. to keep up with making enough and getting it to those customers in time. And so that was another type of disruption that COVID-19 has caused.
And then now, you know, more recently, we’re seeing a third way that it has impacted, especially in the U.S. in that some manufacturers have had to shut down. You’ve seen the automakers in a lot of cases shut down because no one’s really buying cars right now, so they don’t wanna keep making those. But then you’ve seen others retool their manufacturing processes to make the things that we do need, and that we need right now. So there’s some really great and inspiring stories of companies making healthcare masks, for example, and hand sanitizer, some of the things that we…our healthcare providers are in desperate need of. I heard just in the past couple days, Hanes is retooling some of their lines in the U.S. to make face masks. And alcohol company, Pernod Ricard, is retooling their lines to make hand sanitizer. We heard some of the automotive companies at least getting in position to retool their lines instead of making cars to make ventilators. So, some of those really essential items that we need, some of the U.S. manufacturers are really stepping up to help fulfill those gaps. And so the impacts of COVID-19 are pretty diverse and pretty widespread.
Rick: You know what, it’s really interesting the conversation we’re having. The first chunk of challenge was companies and consumers couldn’t get supplies because China shut down and things [inaudible 00:06:03]. The second chunk was demand increase. And so that put stress on companies. And then now you have companies that just can’t operate because everyone’s in almost a lockdown phase. So it’s disruption at all levels. That’s just pretty amazing. As you dig a little deeper in that, I think we’re getting a bit of an understanding now of what supply chain disruption means and what it means to manufacturing overall. What do you think it means to you and me?
Michelle: Well, I think, you know, especially as consumers, as we’re all sort of locked down at home now, and we’re used to being able to order something on Amazon and get it in two days, you know, we’re seeing where Amazon isn’t able to deliver it cause they don’t…the manufacturers haven’t been able to keep up with supplying them with those products. And so some of those consumer tendencies and expectations that we have come to…have built up over the past few years have had to change because we’re all kind of in this new kind of situation in the meantime. And so we all have to have a little more understanding, have a little more planning of what we need as consumers. As regular retail stores are closing down, we are looking at other kinds of ways to shop online or have delivery services. And I think all of that will be really interesting when we come out of this, of how some of those consumer preferences are changed and shifted, and that will all filter back down through the supply chain to manufacturers of how companies make products and how consumers expect those to look like.
Rick: You know, Michelle, you mentioned face mask, hand sanitizers, things of that sort that are really top of mind right now, but it probably also means that manufacturers are probably going to be doing a lot of different things right now to respond to and address the impacts brought about by the COVID-19 crisis, you know, artificial intelligence, automation. Any other kind of case examples you might be able to share that you think would illustrate how companies are either automated…what they’re doing to respond to this?
Michelle: I saw a really interesting one, an article of out of Minnesota. I think it’s the University of Minnesota. Some of the students there designed, I think they use the word, they MacGyvered a ventilator. So if people are familiar with the show “MacGyver,” he can…he always had a knack for building something he needed, you know, based on the scraps around him at the time. So some students there kind of reinvented the way a ventilator could work and are working with a company out of Minnesota called Protolabs, which does all kinds of digital manufacturing. So they’re taking that initial prototype, turning it into an actual ventilator product, and then they are going to start producing those. So a very unique way to, again, address the immediate needs that the country has related to healthcare essentials. And I think we’re gonna see a lot more stories like that come out of this, which when you look for those silver linings in the optimistic side of this, I think we’ll see a lot of those examples in those stories.
Rick: You know, students sometimes are the most enterprising and entrepreneurial of us all as they’re not constrained by the dogma that those of us in the business have been. And they don’t know how it’s supposed to be done, so they might come up with new ideas. That could be very fascinating.
Michelle: Right. Yeah. Exactly.
Rick: Hey, Michelle, you know, really know that forecast and predictions are very difficult. I think it was Yogi Berra that said forecasts are really difficult, especially about the future. But when you’re in times like these it’s really hard, but if you could just for a minute, maybe take a look into your crystal ball if you had one and tell our listeners what you see ahead. What do you think, if you can, the long-term impact of COVID-19 will be on our manufacturing processes, our manufacturers, and the whole value chain?
Michelle: Yeah, you’re right. I wish I had a crystal ball. That would come in handy in many times, especially now. But that said, I think there are, you know, based on just what has happened, I mean, there have been cases of supply chain disruption in the past that companies have had to overcome and have been thinking about supply chain risk management, how do we plan for those kinds of disruptions in the past? And those tended to be, you know, if this one plant in China can’t supply us, then we can source from another country or we can source from another region. What this particular situation has shown is that sometimes you might not be able to source it from any countries. And so that’s kind of flipped the whole idea of supply chain risk management on its head and furthered, you know, the argument or the idea that many companies need to be able to make their product depend on supplies and parts and ingredients locally and especially for those essential products.
One of the hardest hit industry sectors out of this COVID-19 disruption has been the pharmaceutical industry because a couple decades ago, over the past decade or two, many of them started active pharmaceutical ingredient APIs from China. So, the chemical compound that goes into children’s Motrin, for example, ibuprofen is sourced from China. And so, as those plants were shut down for a period of time and now as even as they start to come back up, China is putting restrictions on the exports for things like that because they need those products themselves in their country. And so, I think the pharmaceutical industry and those companies are really gonna take a hard look at themselves and their product lines and say, what happens if this happens again? How are we gonna be able to make our products that are essential, especially these really critical healthcare products? And so, I think that will be the case looking forward for a lot of companies who don’t wanna be in this position again.
And the really interesting thing behind all of this is that…is the timing, you know, where we are in this point in time in relation to technology. So, the manufacturing technology advancements in automation has been progressing rapidly over the past, say 10 years especially, and is really…has been causing a lot of companies to start to rethink their supply chains and where they make stuff. Because for some products, they no longer have to rely on really low-cost labor say in China or other countries. And so, a lot of them have been looking at if I can automate this, can I make it here locally? And if I can make it here locally, what else can I do that’s new and different? Well, they can respond faster to changing consumer needs and preferences. They can customize products faster and better. And so, there’s a lot of opportunities. So, all of that has been happening before this point in time. Now, that we have this added disruption to think about and deal with, I think that is all going to help really accelerate a lot of these companies in investing in more manufacturing processes in the U.S. and have that better control over their supply chains and their product lines. And so, I think we’re gonna see when we all come out of this craziness right now, I think we’re gonna see a lot of manufacturing investment, particularly in the U.S. for products that are made for the U.S. market.
Rick: Michelle for 30 years plus, we’ve been talking about the relentless inevitable March to globalization, you know, and everything was more…everything was global, everything was global. It probably follows that just the convergence of technology, the need for risk mitigation, the need for resiliency, redundancy, close to market and reliability might mean that we’re a little more local in nature, or certainly national in the future. Do you think that might be a new trend?
Michelle: Yeah. So, I think that the trend of making products closer to the markets where they will be consumed has been on track for a couple years now. And I think this will all accelerate that. So, I do think we’ll see more U.S. companies making products for the U.S. market in the U.S. You’ll see U.S. companies making products for China in China. So, there’s still a globalization in the sense of, you know, companies having a presence in global markets. But I think a lot of the supply chain complexity, I think some of that will shift to be more source local, make local, serve local.
Rick: Wow. That seems like an almost full circle come back around as we look at that. You know, Michelle, you’ve given us a lot to think about today, what a great conversation this has been. I think we could go on and on and on, but that’s all the time we have today. So let me say thanks to Michelle Comerford referred with Biggins Lacy Shapiro & Company for talking with us on this episode of “Site Selection Matters.”
Michelle: Thanks, Rick. It’s been fun.
Rick: Thanks for listening to this episode of ”Site Selection Matters” and a special thanks today to Michelle Comerford for helping us get inside and better understand the impact of COVID-19 on manufacturers and their supply chains. What an informative discussion, and one that leaves us with a lot to think about. Again, I’m Rick Weddle, president of the Site Selectors Guild. This podcast episode presents my views and the views of my guests and they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership. We hope you’ll subscribe to the ”Site Selection Matters” podcast on Apple Podcasts, on Stitcher, on Spotify, or wherever you listen to your podcasts. We look forward to bringing you some great discussions in the year ahead. Until next time, good day.