supply chains: Tired of the grunts, small businesses are building their own supply chains

What’s more stressful than a nightmare you can’t wake up from? For Ken Rosenblood, it’s about watching ships, tiny dots on a radar, stranded at sea, unable to deliver your company’s blood. This is how he remembers the early days of the pandemic.

His company, obVus Solutions, produces ergonomic office equipment, and its laptop stands were stuck on ships just as demand surged for tools to work from home. Unable to get more from its manufacturers in China, it saw its revenue plummet and its main sales channel, Amazon, stop ranking its business in searches.

“If you run out of product, you’re persona non grata on their algorithm,” Rosenblood said. “So our business has just been destroyed. We had to start all over again. »

Rosenblood decided to move the production and supply chain of obVus back to the United States, a process called reshoring. He bought an 18,000 square foot former furniture store in Victor, New York, and spent $4 million to turn it into a factory. Products began rolling out of line last month.

“I have my factory here and I have my engineers – we can make the adjustments and we can control things,” Rosenblood said. “It gives us speed, and it’s a huge advantage over China.”

He is also betting that it will cost the same, if not less, to manufacture his products in the United States. And as he said, “I hate to lose a bet.”

The pandemic has forced businesses to factor in the cost of producing and shipping goods overseas. ObVus joins other small companies following their multinational counterparts, like Ford Motor, First Solar, Intel and Lego, who recently announced new US factories as a solution to global grunts that left them without access to key components and empty shelves. when consumer demand seemed insatiable.

New York Times

Forloh product manager Robert Yturri, center, discusses technical hunting gear designs with Martin Garcia, left, founder of Tough Stitch/Drift Dry, Vernon, Calif.

“I’ve always wondered what would happen if the global supply chain suddenly came to a halt,” said Amy R. Broglin-Peterson, industry consultant and instructor at Michigan’s Department of Supply Chain Management. State University. “We were too spread out to continue working to the extent that we do with our central Southeast Asian sourcing.”

It’s been a difficult experience for small business owners, many of whom found themselves pushed to the back of the supply chain because they didn’t have the order size, capital or connections to have priority over large companies. And even if they could, container shipping costs, which have tripled from pre-pandemic levels, were often prohibitively expensive.

“They’re really left with the brunt of cost and poor service,” Broglin-Peterson said. “And they don’t have a ton of ways to deal with it.”

Supply chain pressures have eased over the summer, but the Federal Reserve Bank of New York’s Global Supply Chain Pressure Index is still near record highs, and a recent Goldman Sachs survey showed that delays and arrears remained a top economic concern for small business owners.

With an end in sight to delays and backlogs, building national supply chains from scratch becomes more attractive and feasible. Small businesses are prioritizing proximity to their customers so they can react in real time to market demands and lean into a resurgent pride in “made in America” products.

“Ten years ago we saw similar interest, and I said it was more of a trickle than a trend,” said Scott N. Paul, president of the Alliance for American Manufacturing, a nonprofit advocacy group. “I think it’s different now. It’s not a torrent, but it’s more than a net.

However, challenges remain for small businesses, including labor availability and costs; an uneven and opaque system of suppliers and manufacturers that depends on word of mouth; and a lack of innovation, automation and sometimes just knowledge.

“I can’t stress how few companies, even large companies, really know where their materials come from, down to the ground,” Broglin-Peterson said. “You need to understand your supply chain. You have to understand your raw materials, your components. Can you even get them locally?

Tired of the grunts, small businesses are building their own supply chainsNew York Times

David Natarelli, chief technology officer of obVus Solutions, works finishing components for laptop computer stands with his wife, Shiela, at the company’s factory in Victor, NY

Rosenblood spent five months researching whether obVus could manufacture products in the United States with domestic supplies like aluminum, nuts and bolts, and even skilled labor.

The answer, he decided, was yes – with some innovation. It switched to recycled aluminum because it could not source enough aluminum domestically and opted to produce nuts and bolts in-house at one-tenth the cost charged by suppliers. The computer-controlled routers, lathes, cutters and milling machines, which are essential for reducing labor costs, would be imported from China, and the company would hire and train about 25 machinists to operate them, in paying at least $52,000 a year.

Rosenblood plans to make a foldable keyboard and a smartwatch, and is still considering whether it will have to return to China to find affordable components — not an uncommon obstacle to relocation.

But there is an incipient shift, he said, resulting from recent federal government policy moves to promote reshoring and growth in U.S. production. The Inflation Reduction Act, for example, encourages investment in the domestic production of batteries for electric vehicles. Days after President Joe Biden signed the bill in August, Honda and LG Energy announced a $4.4 billion battery plant that is expected to be completed by the end of 2025.

“There’s a lot more intent to have economic policy that promotes reshoring, reshoring, growing production in the United States,” Paul said.

It can’t come soon enough for Scott Colosimo. He hopes to use these household batteries in his electric motorcycle startup, Land Energy.

When he launched the company in 2020, his goal was a national supply chain with everything built, assembled and shipped from his 65,000 square foot warehouse in Cleveland. He had the same dream in 2009 when he started a gas-powered motorcycle business, but it wasn’t achievable. Today, he is closer to making it a reality: Colosimo’s 15 employees produce and assemble almost everything on site, with the exception of batteries and some high-volume parts that he cannot find here.

“We look at high IP elements,” he said. “If we can invent a process or shorten the development time or reduce the cost by doing it ourselves, that’s what we bring in-house.”

However, these new processes require capital, and fundraising is Colosimo’s main challenge. This refrain is common for small business owners, especially those looking to expand production capabilities that are no longer in the United States. But they have an unexpected benefit.

Tired of the grunts, small businesses are building their own supply chainsNew York Times

A worker cuts raw material to be used in the assembly of technical hunting gear for Forloh at the Tough Stitch/Drift Dry plant in Vernon, California.

“Most small businesses are family-owned or privately owned, so they don’t cater to shareholders or private capital who are worried about the next quarter rather than investing for the future,” Paul said.

The long-term commitment is what first struck Robert Yturri when in 2019 he met Andy Techmanski, who wanted to start a business to manufacture technical hunting gear in the United States. A lifelong hunter, Techmanski knew exactly what was missing from store shelves, but he needed a supply chain expert to navigate manufacturing.

Yturri warned him: “The type of product we want to make is extremely difficult to make in the United States, almost impossible. It will take money and it will take time.

With capital assurance from Techmanski, Yturri agreed to become the product manager of the new company, Forloh. He called all the manufacturers he had worked with in his career guiding outdoor brands such as North Face, looking for suppliers who could produce the smoothest, quietest, most durable and breathable on the market.

But most couldn’t do what he needed, so Yturri got creative. He found a printable synthetic leather used by car manufacturers that was perfect for knee pads and elbow abrasion. He turned to a commercial HVAC company to manufacture waterproof membranes. And when he couldn’t find a three-ply fabric supplier, he ordered rolls of greige fabric – raw fabric straight from the factory – along with lining fabric and other materials and found a factory to manufacture three-ply fabric exclusively for Forloh.

“You have to have a ‘don’t say no’ attitude to get yourself out of this US-made hurdle,” Yturri said.

Setting up the national supply chain was expensive but worth it for the flexibility, Yturri said. Proximity to their suppliers and customers allows them to prototype an idea, test it, and bring it to market in as little as six weeks. If Yturri were to go abroad, it could take two to three years.

Also, companies making clothes overseas are stuck with whatever they ordered a year earlier, he said, but Forloh can do smaller runs and order quickly if something is wrong. surprisingly popular.

“We need to be able to react quickly to market needs,” Yturri said.

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