Exclusive report: Supply Channel Update
Retailers all over the country are seeing customer counts and sales skyrocket, especially with all states now in full or partial stages of reopening. However, the COVID-19 pandemic has had a huge impact on the supply channel, as unprecedented demand has led to inevitable shortages of in-demand items such as gloves, masks and cleaning products.
Read on to learn how three industry wholesalers are working to keep the supply channel moving during this challenging period.
Supply Channel Update from Do it Best Corp.
To keep their store owners up-to-date on the rapidly changing supply chain, Do it Best Corp. launched a podcast called “What You Should Know” that is distributed several times a week. Following a recent session, Dent Johnson, vice president of merchandising, and Nick Talarico, vice president of sales and business development, offered their perspective on how the global supply chain has been challenged by the COVID-19 pandemic.
Johnson identified four key factors that have been going on throughout the pandemic that have impacted the supply chain for Do it Best and its member-owners.
“First, when all of this started, China experienced some significant delays in their manufacturing. After the Chinese New Year, which was obviously planned, there was a four- to six-week delay due to the pandemic in getting factories up and running, which created another four- to six-week gap that we’ve all had to deal with. While this only directly impacts a small percentage of our products, it touches on many more in some way or another, even from domestic suppliers,” Johnson said.
He added, “We were actively working to set up a war room all the way back in January to deal with that situation. Many domestic suppliers source products in China or they have raw materials that come from China. Things like nozzle sprayers or others you may not think of have an impact on a wide range of products when either raw materials or component parts from China are unavailable. There are a lot of tentacles that can reach out and impact a number of products.”
Johnson continued, “Two, a bit more recently—we’re working with domestic factories that have been dealing with this pandemic in a couple of ways. We know governments in many states across the country have enacted closures or stay-at-home orders, so we’ve had quite a few factories that have been closed. More than 50 are still closed today. Internationally, there have been different rules. We had quite a large group of factories in Mexico that were recently shut down, on the spot, and we learned about it an hour after it happened. Fortunately, we have a team that’s been extremely agile in finding alternate sources of supply.”
He added, “Three, the capacity of these factories has been heavily impacted either by someone getting sick in the factory and causing an immediate shut down for a couple of days until appropriate cleaning has taken place, or more significantly—a reduced capacity based on social distancing, because factories have to reconfigure their production lines based on guidelines issued by the CDC (Centers for Disease Control and Prevention). We’ve seen some of our major suppliers suffer serious reductions in capacity precisely when demand is up as much as 50 percent.”
Johnson said, “The fourth and final factor is allocation. There are quite a number of vendors, specifically those selling COVID-19 related emergency products that have allocated supply. Basically, the demand far outpaces their capacity and they are trying to be fair to their customers and they’ve put all of their customers on allocation. If we normally have 5 percent of the capacity for hand sanitizer from a given vendor, then they are willing to sell us 5 percent of that capacity but no more. That puts a lot of limits on everyone’s ability to source more products.”
Talarico pointed out, “Across the country, the shelter in place orders have had a big impact on consumer spending, which has been down about 7.5 percent overall. However, we’re seeing more intentionality in consumers’ spending, with one of the biggest benefactors being essential businesses providing home improvement products. Almost every Do it Best member I’ve talked to has seen a positive impact on their business.”
He added, “It’s more than just the COVID-19 products—we’re seeing unbelievably high demand in categories like lawn and garden, outdoor living and paint, just to name a few. Demand for our products is very high across numerous departments. As Dent mentioned, a lot of our members are seeing record sales, which corresponds with record sales for Do it Best Corp. We have the supply side pressures and the demand side pressures—all of this has added complexity to the supply chain. It’s been a heavy responsibility for everyone, but no one would argue when I say our logistics teams, our staff working to keep pace with demand in our warehouses, are some of the biggest heroes.”
Johnson interjected, “We’ve also increased staffing in our warehouses. Well over 100 people have been hired in very short order to react to this pandemic and the increased demand.”
Supply Channel Update from Orgill
Kristyl Lawson, director-communications for Orgill Inc., provided the following overview of supply channel activity at Orgill.
- Sales demand and growth this month have been up significantly over the same time period last year. All departments are experiencing double-digit increases, with especially strong growth in seasonal, paint and housewares categories.
- At the same time, supply issues continue due to decreased product availability and increased vendors’ lead times. Our senior category managers are working closely with manufacturers to overcome these challenges and provide our customers with weekly supply chain updates as well as product alternatives as needed.
- The good news is that we are beginning to see signs of an uptick in domestic production as a whole. The number of factory closings continued to stabilize this week. However, due to social distancing standards, many suppliers are finding it difficult to maximize production. Domestic factories are reopening on schedule and only two U.S. factories remain closed. All factories in Canada have reopened. Some factories in Mexico and elsewhere remain closed, but the number is down from a high of 15 to now nine.
- The availability of PPE, especially face masks, has improved.
- Our most up-to-date COVID-19 information and resources are available to Orgill dealers on a dedicated page on Orgill.com, which includes:
- Weekly supply chain updates for each product department.
- Product alert updates, updated immediately as inventories arrive on COVID-19 related products.
- Pandemic marketing and communication resources for our customers to utilize.
- Financial updates to help our customers understand the CARES Act and Paycheck Protection Program (PPP) loans.
Most of our headquarters staff and any workers at our distribution centers who were able to manage their roles from home continue to work remotely. Our sales representatives and drivers are abiding by strict social distancing guidelines and local regulations while visiting customers’ stores. We are following increased safety protocols in our DCs, which include cleaning and disinfecting work areas, as well as social distancing guidelines that protect both our employees and customers.
Supply Channel Update From House-Hasson Hardware
Don Hasson, president and CEO of House-Hasson Hardware, said, “The warehouse staff and our truck drivers are our frontline workers, and they are doing a terrific job getting products out the door to our retail customers. We abide by all federal guidelines and provide gloves, masks and hand sanitizer to warehouse staff while cleaning the facility continuously. We keep workers apart as much as possible, keep sick people home and stagger breaks. The state of Tennessee reopened on May 1, so we want to give a pat on the back to all those who worked through April during challenging conditions.”
Hasson added, “Our current situation is that business is booming out of our warehouses. It’s hard to describe how good it is, because there are obviously some unusual purchasing trends. Our warehouse team is working as late as midnight filling orders.”
He continued, “Hardware stores were deemed essential and allowed to remain open, and our dealers are viewed as a trusted and reliable source in the communities they serve. If anything, the pandemic has made people more inclined to visit their local hardware store or lumberyard than a big box, which is a trend that should continue in the future. Any disruptions in the supply channel are short term and limited to a few items, and we continue to strive for high fill rates.”
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