Supply chain problems start to set in in US

Supply chain problems start to set in in US

Coronavirus
could start to empty shelves in some U.S. stores by mid-April














the Detroit News,

12
February, 2020

Target
Corp. and Best Buy Co. Inc. could be among the first U.S. companies
to take a direct hit from the coronavirus outbreak as concerns grow
about disruptions to supply chain networks in China.

Although
current inventories are strong at most of the nation’s big-box
retailers, analysts from Wells Fargo warn that shoppers could start
seeing empty store shelves as early as mid-April.

We
believe the time to start worry about the supply chain risk … is
here,” the report said.

Almost
60 million Chinese workers remain quarantined in their homes and
others are staying away from work, afraid of catching the virus at
crowded factories. So far, there have been more than 40,000 confirmed
cases of the coronavirus and over 1,000 deaths.


As
a result, there have been “dramatic reductions in activity”
across China and operations have been slow to restart following the
Lunar New Year holiday, the Wells Fargo report said. Retailers have
started to express concerns.

Minnesota-based
retailers Target and Best Buy declined to comment on how the outbreak
is affecting their businesses. But Wells Fargo said the two
companies, along with Walmart, Dick’s Sporting Goods and G-III
Apparel Group, are among the 19 retailers considered at high risk of
supply chain disruption.

Target
and Walmart “are more heavily dependent on a shorter lead time
replenishment model,” the report said.

Although
retailers have been looking to shift production to other parts of
Asia, much of the raw materials come from China.

The
next few weeks are key, depending on how quickly people in China go
back to work. American consumers might begin to see out-of-stock
items starting within 60 to 90 days, stretching well into midsummer
if disruptions continue, according to a team of analysts led by
Edward Kelly.

While
there is finished product sitting in factories and distribution
centers in China, our contacts have indicated that almost nothing is
moving over the water or by air at the moment,” the report said.

Scott
MacDonald, who owns the Minnetonka-based manufacturers’ rep firm
Mac & Mac, said one of his patio furniture manufacturers had only
700 of its 7,000 Chinese workers show up for work Monday, the first
day of business following an extended Chinese Lunar New Year holiday.

Mac
& Mac and several other companies that do work with China are now
figuring out how to deal with the work delays.

MacDonald
said his client believes that workers can’t get to the factory
because of continued transportation delays. In other cases, this
client and others could be hamstrung by a lack of raw material
shipments in the coming week.

This
week a client complained that a container ship headed to a dock in
Hangzhou – 10 hours from the epicenter of the outbreak in Hubei
province – couldn’t get to the port. MacDonald said it wasn’t
clear if the Chinese government had shut down the port or if the ship
captain simply refused to dock for fear of the virus.

Either
way, his client’s products “had to be booked on a different
vessel” so it could to get to its final destination, he said.

MacDonald
said his big-box retail customers are concerned, especially as they
hear rumors that planes in China may have been refused permission to
land in some cities and were diverted to other airports.

Everyone
is looking at this because it is definitely going to affect business
and shipping,” MacDonald said.

It
is unclear whether continued government travel bans and lingering
factory shut downs in China will affect supply chains long term.

Arctic
Cat’s factory in Thief River Falls, Minn., uses some Chinese
components in its vehicles, including its new Tracker Off Road four
wheelers, but the impact has been nil so far, said Dave Sylvestre, a
spokesman for Arctic Cat’s parent, Textron.

At
this time, our Minnesota plants are operating normally,” said
Brandon Haddock, spokesman for the Textron Specialty Vehicles.

Shakopee-based
Entrust Datacard, which makes data security products, credit card
printers and automated ad printers for banks around the world, buys
less than 10% of its supplies from vendors in China and is adjusting
to life “after” the outbreak.

During
and after the Chinese New Year, it shut down its sales, service and
IT offices in Shanghai, Shenzhen, Suzhou and Beijing. It asked its
digital associates in China, Singapore and Hong Kong to work from
home until the crisis passes.

The
company has 50 employees in China and 350 more across Asia, and
canceled all unnecessary travel from China to customers around Asia.
It has struggled to get its workers facemasks, which are in short
supply because they are hoarded by hospitals in China.

We
talked to one of our (team members) today who is in Hong Kong, where
there are very small homes. And she is there in the apartment with
both of her parents. It’s tight,” and demoralizing not to have
the freedom to leave, said Chief Human Resources Officer Beth Klehr.
“So keeping everyone’s spirits up is very important to us. What
we are hearing is that it’s very important to them to be able to
keep working.”

Separately
Entrust Datacard is scrambling to replace workers affected by travel
bans workers with others who can still meet with customers outside of
China. And it’s racing to get supplies from Chinese vendors “that
we need to build here” in Shakopee, Klehr said. “That’s our
biggest challenge.”

So
far, alternate suppliers are being found and no production delays are
expected in Shakopee.

At
St. Paul-based Ecolab, which makes hand sanitizers and disinfectants
for hotels, restaurants and factories worldwide, has 3,000 workers
inside China and has shipped “large quantities” of facemasks to
its workers. Now it’s scrambling to keep up with production. “We
are doing all we can to support the country’s efforts to contain
the virus and also help our associates and customers remain safe,”
said spokesman Roman Blahoski.

Ecolab
kept its hand soap factory in Taicang partially operating during the
New Year and in the past week reopened its plants in Nanjing and
Guangzhou.

We
are seeing an increase in demand for our hygiene and infection
prevention solutions, but conversely, China’s economy is
experiencing broad disruption,” Blahoski said. “At this time, we
do not see indications that our production will be disrupted as a
result of this outbreak, but this is an evolving situation. And we
are unable to foresee the full impact it may have on our operations.”

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