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WITH
Scott Griggs PRESIDENT AND CEO, MJB WOOD
STRATEGIC AND BLENDED SOURCING STRATEGIES WILL CONTINUE THROUGHOUT 2022 AS COMPANIES GRAPPLE WITH SUPPLY PROBLEMS AND HIGHER COSTS
Q.
and capacity with little disruption and reliable delivery dates. Not these days. Our industry has been very challenged balancing economic boom against equipment acquisition to support the influx. Machine supply chain is suffering from the very same logistic issues we are all experiencing in everyday life. It's been almost impossible to accurately time equipment arrival and machine set up since COVID started. Lead time for new equipment has been extended by months over historical norms, and even when machines do arrive, we may find that a key component of the equipment might still be delayed for weeks. From routine maintenance to major equipment installation, everything is just plagued with long delays tangled with issues like incomplete site prep, lack of required materials, or critical technicians delayed from previous projects. I fully expect that pent-up demand for equipment and maintenance in U.S. manufacturing will extend well into 2023; even if market demand were to soften, there's just so much backlog.
What are some industry trends you are currently seeing?
The market seems to have a new willingness to support the manufacturer's need to rationalize SKU variety. In prior years, market demand included differentiation from customers, which led to a wide collection of "like" items in the production environment. These broader product offerings force manufacturers to increase changeovers which causes redundancy in finished goods inventory. Our customers' willingness to accept SKU consolidation allows our facilities to address labor and material shortages, eliminate lost time from changeovers, maximizing output, and ultimately provide our customers with a more consistent reliable supply. This understanding and partnership has occurred up and down the supply chain. We've worked with our suppliers as well and asked the question, "How can we buy differently in a way that will allow you to produce more?" It seems simple, but we had never really asked this of supply partners. I’m glad we did!
Q.
COVID has created some supply problems. How are companies such as MJB Wood overcoming these problems? What are some other challenges the industry is currently facing? COVID has been very disruptive to almost every business I know in the industry. Regardless of whether they're dependent on domestic supply or material from abroad, no one has been immune to the challenges of COVID. But, COVID has been particularly challenging for businesses that depend on imported product via container shipment. Having such a large portion of our customer base relying on products from our global basket, MJB pivoted early on, reducing the impact of the container shortage problem on our supply chain. We effectively moved everything we could to break-bulk vessel. This created a far more reliable transit service and sheltered us from the escalating costs that others were paying in shipping containers. Avoiding U.S. West Coast ports, which have been heavily impacted by the surge in vessel arrival, has also been an important part of our success. The second challenge is I'd say timely execution of capital investments over pretty much the last 18 months. Historically, when demand increased, manufacturers could just add lines
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Q.
What types of products are clients leaning more towards due to cost increases? Availability and reliability primarily drove product sourcing decision-making in 2021, sometimes even more than product cost. New customers and program prospects started asking us how much capacity we had first, then inquired about prices. At MJB we started prioritizing more domestic supply chain solutions as imported products became less reliable … even when those components exceeded historically low import prices. We worked with many customers to substitute domestic alternatives. These customers were mainly attracted to MJB's supply chain reliability, short lead times, and less overall dependency on import goods. We anticipate that these strategic sourcing preferences will remain in place even when supply chains stabilize. Before COVID, we were already experiencing a great deal of headwind in importing products with 301 tariff escalation and Chinese anti-dumping duty. The painful cost of product outage and manufacturing disruption exceeded the savings from "import only" sourcing positions, making domestic alternatives not only viable but more profitable. Companies operating with blended sourcing strategies will continue for some time, at least until the painful memories of 2021 shortages are forgotten. s p
