supply chain Archives - Zebulon Solutions

Manufacturing Amid COVID: US vs. China

I have spent the last fifteen years in manufacturing and supply chain, working on and off with companies in China. I’m used to expecting the week off for Labor Day in May and Golden Week in October. I know the time difference by heart. And every year I start planning ahead for Chinese New Year starting in September to ensure we aren’t short on parts or are scheduled to start a product launch when China is essentially closed for a month.

Despite my rigid preparedness, this year was different. Workers left for Chinese New Year but the factories didn’t reopen, and we were told repeatedly for our projects that there was no schedule for reopening. I couldn’t plan for this – no one could.

On one of my projects, the buyer spent their days scouring the planet looking for the specific battery needed in the assembly to keep the US production line going. On another project, we simply waited and waited for the factory to return just to confirm the manufacturability of the proposed design change on the display.

With an early Chinese New Year and Coronavirus sweeping through China, many of our Chinese partners have been out since mid-January. Only now, over three months later, factories are beginning to come back as reports of China’s cases of COVID-19 decrease. Yet, when Coronavirus came to US shores and we sheltered in place, many of our factories remained open.

Ford Motor Company converted its production line from cars to ventilators. Hunter Douglas stopped making blinds and used the raw materials to create face masks. Other factories likewise converted their production lines nearly overnight to begin our combat of the virus causing a global pandemic. Many other factories kept fulling orders to meet demand and, while there has been some drop off in orders, it wasn’t the complete shut down like we saw in China.

All of this made me curious to see how US manufacturing has fared during the COVID crisis in comparison to China. I pulled the US Bureau of Labor and Statics numbers for manufacturing and the slight loss of 18,000 jobs in March is well within a normal monthly variation. The employment numbers out of China are unclear, but practically, I know of well over 50,000 people who were out of work in the factories with whom I have contact.

In my efforts to find a comparable number between China and the United States, I think the Purchasing Managers’ Index (PMI) tells the story. China’s PMI historically hovers around 50, but for March it plummeted to a historic low of nearly 35. In comparison, the U.S. numbers have fluctuated between 47 and 53 in the last 12 months, so 49.1 in March is well within the standard variation, again pointing at a marked difference between US and Chinese manufacturing.

Going back to conversations I had with US manufacturers in 2012, I repeatedly heard how after a decade or more that several of their old customers had grown weary of dealing with China and had brought all of their business back. For nearly eight years, I’ve worked on a handful of projects that I thought were good candidates to move overseas, Asia specifically. Yet, when I’ve run the numbers, US manufacturing has frequently been very competitive, especially once freight and overhead costs are calculated.

With what happened this year with COVID, it has only bolstered my opinion that offshoring may not make the best business sense in every instance. While Chinese manufacturing still might make sense for some projects, the challenges of manufacturing overseas needs to be seriously considered. I’m wondering if it isn’t time to take a long hard look at US manufacturing before looking internationally for new products and emerging industries.

How to virtually qualify a supplier

In my 20+ years working in supply chain, I’ve visited hundreds of suppliers in multiple states and countries. Qualifying suppliers is essential both in building a relationship with the supplier and ensuring that customers’ needs are met. But what happens when global travel restrictions shut down trips to qualify a new supplier? Like many other jobs in the work-from-home era, qualifying a supplier has now become dependent on virtual assessment.

The first step for qualifying a new supplier is to do your research. You’ll want to check the reputation and qualifications of the supplier through both personal references and any online presence. When I am looking for a new supplier, I reach out to my personal contacts for recommendations. From there, I scour the websites of potential suppliers for videos and substantiated information that can prove the supplier’s worth

After researching the company, I’ll send out a request for information (RFI) to the suppliers I’m interested in for a more thorough vetting. Exactly what you put in an RFI depends on the needs of your company and product, but some top priorities to investigate include:

What does their customer base look like? How many customers they have for each facility will give you an idea of whether they have the experience for your project.
Ask what type of industries they primarily focus manufacturing on. Is it similar enough for your products?
How many employees do they have and what will be the make-up of their new product introduction (NPI) team? These NPI employees will be the ones responsible for your product, so you want an idea of what to expect.
Do they offer turnkey solutions? Some companies prefer to have more control over their material and IP. A hybrid option would be to have some material provided by the supplier, some by the company. Or full turnkey, meaning the company would rather have all material purchased and monitored in one place.
Request sample documentation. Ask for quality reports, first article inspection (FAI) reports, and relevant ISO compliance certifications and expiration dates.
Ask for customer references and D&B numbers to check on supplier reliability and financial status, to validate the information the supplier is giving you.

An RFI is standard in any supplier qualification but without being able to do an onsite visit of the facility in person, there are some additional request and questions to consider:

Ask to set up a virtual video tour of the facility. This is most likely new to some suppliers, so they may not have this as protocol but asking to set up some sort of walk around on a video call can aid in seeing what is on their manufacturing floor. Here’s a good example.
If you can’t get a full video tour, ask to see current photos or a quick video of their production floor. You want to get an idea of the size of the facility and how much of that real estate is taken up.

Be specific, both so you can both focus on what’s unique about your products and needs, but also to get past any tendency to just show you their stock marketing photos. For example, don’t just ask for Statistical Process Control (SPC) charts, ask for a photo of where they are posted.
Find out if the supplier has the capabilities to work with customers speaking a different language. If the supplier or customer is in a different country, their first language may not be English. Find out what procedures are in place for translations and translators. If they’re in a different time zone, make sure there is a time that works for both parties for any conference calls or virtual meetings.

Although Zebulon Solutions has worked with suppliers all around the world, it hasn’t always been possible to visit each location in person for other, boring reasons. It can be done. So, while today’s travel restrictions are certainly new and daunting, it isn’t impossible to find ways to work with new suppliers without in-person meetings. Physically seeing a facility is almost always preferable, but we’re fortunate that technology can make any gaps a little smaller.

This is new to all of us so do what you can to get the information you need, ask lots of questions, be patient with suppliers as they navigate their new roles, and maintain your social distancing as best you can.

The Supply Chain of Toilet Paper

Let’s talk toilet paper. We all know there’s a shortage, but where does toilet paper come from? What is its supply chain and how is it made? As a company full of supply chain and engineering professionals with spare time on our hands for a change, we want to know.

Like every product, it starts with raw materials. Toilet paper is made from wood pulp, along with water, chemicals for extracting, fiber and bleach. Yep, it’s that simple, trees. Which are a very renewable resource, so that’s good too. Both softwood and hardwood trees are used primarily from the USA, Canada or Russia. Also good. The pulp is processed, sprayed onto wire mesh to dry and then scraped off, rolled, cut into long strips, squared and finally cut to sized rolls.

Where are these paper manufacturers? There are several giant paper manufacturers in the USA. The majority of our toilet paper manufacturing is right here in the USA, in towns like Clatskanie, OR and Mehoopany, PA. More goodness. Of course there is likely a long string of warehouses and distributors between the factory and your neighborhood grocery store, which is undoubtedly being compressed right now.

Note, contrary to what you might have read on the Internet, this won’t actually lead to clear cutting of forests or similar devastation. Toilet paper doesn’t fluctuate in demand whether it cold or hot outside, or if it’s Christmas or Valentine’s day. It’s a stable product. Remember, the end use of toilet paper hasn’t gone up (hey maybe it’s gone down as people use fewer squares), it’s just that the inventory has shifted from warehouses and stores to people’s closets.

This will, however, lead to the bullwhip effect, where at the end demand will actually drop and there will be a glut. But that’s just how supply chain works.

And hey, maybe even a few of those excess rolls will end up back in trees. Ironic, or what?