Covid-19 Safety Measures, Supply Constraints Crimp Manufacturers

Date: Wednesday, February 3, 2021
Source: Wall Street Journal

Manufacturers including Whirlpool Corp. WHR +0.98% and Polaris Inc. PII -1.59% said their ability to meet increased demand for their products remains hampered by supply constraints and safety measures taken to protect workers amid the coronavirus pandemic.

People are buying long-lasting goods like exercise equipment, boats and camping gear at record levels. Normally, manufacturers would raise production to meet such demand. But doing business during the pandemic remains challenging, companies said during recent quarterly updates.

Many manufacturers continue to suffer from inventory shortages, a remnant from when plants were closed last spring. In addition, measures to prevent the spread of Covid-19, such as adding space between workers, are weighing on production. As a result, manufacturing backlogs hit a two-and-a-half year high in December, according to the Institute for Supply Management.

Slowdowns are compounding along supply chains, from ports to warehouses to factory floors, leading to higher costs. “You are seeing logistic costs going up, trucking costs going up, airfreight going up,” 3M Co. Chief Executive Mike Roman said in an interview.

Whirlpool said Wednesday that adding space between workers had slowed appliance output. Chief Executive Marc Bitzer said Whirlpool’s suppliers were experiencing the same drag. The company said some appliances would be in short supply until at least halfway through 2021.

“As long as Covid is around us, we will have to deal with it,” Mr. Bitzer said in an interview.

Absenteeism among employees who have been exposed to the virus or are caring for family members is also slowing production. Paint maker PPG Industries Inc. said earlier this month that some customers are assembling fewer cars because of labor issues and a semiconductor shortage.

Chief Executive Michael McGarry told analysts that one car maker temporarily closed one painting operation because of staffing constraints related to the pandemic. PPG sent in its own employees to help run the operation, he said.

Some companies that sell largely to other businesses are also dealing with supply chain and output constraints. Boeing Co. , which reported a record annual loss Wednesday, took a $275 million accounting charge in its latest quarter on problems producing its military refueling tanker that it said were related to the pandemic. Caterpillar Inc. said Friday that it is holding parts in surplus to ward off disruptions and prepare for any increases in demand.

Production problems at some companies have created opportunities for others. Corning Inc. said display-glass supplies were already tight when a Japanese competitor experienced a power outage in December. “That tipped everything into shortage,” Chief Executive Wendell Weeks told analysts on Wednesday. Corning said it raised prices and booked additional sales.

Loudon, Tenn.-based Malibu Boats Inc. has added about 200 employees to grab more boat sales, which reached a 13-year high last year industrywide, according to trade group National Marine Manufacturers Association. But shortages of parts for outboard engines and windshields have made building more boats difficult, Chief Executive Jack Springer said.

“The supply chain has struggled,” he said.

Polaris, a maker of boats, motorcycles and snowmobiles, said it added 700,000 new customers last year, including more of the younger, more diverse consumers that it has pursued for years.

But production has fallen behind. Polaris is considering adding a third shift at some factories, and has embedded employees with suppliers to help them overcome production problems.

“We could add more capacity,” said interim CEO Michael Speetzen. “Given what’s going on at our supply base and logistics, I don’t know if we would be able to produce more, efficiently.”

Even where supplies are available, procuring them has become more costly for some. Glissen Chemical Co. ordered a three-year supply of caps to close its one-gallon jugs of liquid detergent after suppliers said orders could take six months or more to arrive.

“A cap could put me out of business,” said Richard Knoop, Glissen’s executive vice president.

The extra caps arrived last fall, tying up capital and space at the company’s factory in Brooklyn. Mr. Knoop said that was better than running out.

“Caps don’t have expiration dates,” he said.


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