Manufacturing Supply Chain Woes
Tom Fitzgerald, Tony Fernandez and Curt Asfeld
Howdy from Austin! I am Sarah Scudder, marketing Maven at SourceDay and our show host today. I am joined by Tom, Tony, and Curt. All three of them have extensive manufacturing experience, and I’ve asked them to share some of their train wreck and nightmare stories with us today. I think a lot of times when we hear people speaking on panels, they’re talking about the good stuff, and I think there’s a lot that we can learn from some of the train wrecks or tough things that we go through, so kind of a little twist on typical panels.
Our show sponsor is Rapid Ratings. I normally have Eric come on and do a quick intro. He is actually recovering from surgery and will not be on today, so I want to give them a shout-out. I personally used them at my last company. They have a system that allows you to track and manage the Financial Health of your suppliers within the manufacturing space. For those that are joining us live, go ahead and drop us a note in the comment section. Tell us where in the world you are joining us from and then what you are planning to have for lunch today. It is lunchtime here in Austin, so tell us what you’re eating for lunch or what you’re planning to have.
All right, so with that, we are going to dive into our panel discussion. So I’m going to go ahead and start with Tom. Tom, would like to have you do a quick intro. Tell us a little bit about yourself.
Good morning, good afternoon, everybody. My name is Tom Fitzgerald. I own Access Creative Group. I started in the packaging and printing industry close to 40 years ago, so my background is mostly in paper-related packaging solutions. I’m based in the Greater Boston area. This is a great opportunity for me to be part of the packaging community and the manufacturing community. I look forward to this very much. Thank you.
Thank you, Sarah, for the question. The material aspect has obviously been a problem for the past several years. Consolidation in the industry is the other thing that is kind of problematic. I don’t know if you’re familiar with the most recent announcement, but WestRock and Smurfit are talking about merging. They’re two of the biggest packaging companies in the world, and I don’t think there’ll be an immediate impact as a result of that. But like everything else, when you start eliminating competition and limited supply providers, that creates issues in and of itself. I would say raw material has been the biggest problem for the past four or five years. That started to balance out at this point. But I’ve actually had clients that didn’t anticipate some of the scheduling issues that came up, and as a result, they either had to find alternative materials, alternative vendors, or not procure some of the product that they were using. As a result, it would affect their brands that they had out in retail and wholesale. That’s kind of an example.
And Tom, it looks like you’ve got a fan in the audience, Sharon, who is also joining us from Austin. So, Sharon, you can relate to the crazy heatwave that we’ve had. It’s under 100 degrees today, so it’s a win. She is not eating lunch and thinks Tom knows his stuff. Thanks for being with us, Sharon.
Yeah, Tony, would like to have you introduce yourself. All right, well, first off, Sarah, thank you for having me. My name is Tony Fernandez, and I’m currently the President and CEO of the New Hampshire MEP. I’m coming to you today from Buffalo. We’re actually the MEP is a division of the U.S. Commerce Department, and since Monday, we’ve got till Thursday, we’re going to fail, you figure out every supply chain problem and answer over the next three or four days and hopefully come back to all the manufacturers and be able to give you answers.
So, Tony, you have some experience with something called vertical manufacturing, so I’d like to have you start off the conversation talking about that. I know you have some stories and examples and things you want to share. Sure, well, just explain to people what vertical manufacturing is. It’s, I mean, obviously horizontal is east to west, vertical is north to south. Vertical manufacturing is the process of where you build the component to the sub-assembly to the work in process to the final good. So, in the case that I probably had the most experience is in the fire suppression business. I had the opportunity to run a manufacturing facility in Marinette, Wisconsin. We actually made fire suppression, but in layman’s terms, that’s fire extinguishers. So, we had a sheet metal facility, we had a rolling facility, we had a building facility, we had machining, we had capabilities where we made the chemicals. So, the vertical integration is all the components came out to the point where we actually did the filling operation. So, from that standpoint, it was a sole-source operation. The value or the importance of something like that is basically you have control over your manufacturing process, and particularly in the supply chain itself. The reason that we had to do that in the 2000s is with the manufacturing starting to go overseas, we lost control. A lot of our processes were moving to China, and as a result of that, as a manufacturer, you never want to have a problem with your supply chain. And even though the products were a lot cheaper, the bottom line is the cost that we came about because availability is the most important thing.
Tony, biggest train wreck that you’ve personally experienced as it relates to Vertical Manufacturing?
Well, I think part of it, the train wreck is this company itself. It’s when you basically have a process, and you abandon that process, and you have to put that process back together. We had to do it on the fly because our suppliers were not giving us the material. So what we had to do is we had to reinvent the wheel in a real short time. The problem that we had from a train wreck is we didn’t have the, as well as today, we didn’t have the labor. So what we had to do is basically come up with innovative ways to find manufacturing help, particularly in the Midwest in northern Wisconsin where there aren’t that many people. So from a train wreck standpoint, our solution was we bust people in, and the way we did it from a team aspect is we had to change our manufacturing process from a five-day operation to a seven-day operation where we worked four days manufacturing the work in process, and the other three days we actually, and I want to be politically correct when I say this, well, we actually got Housewives and homemakers who were great at organizing, and we brought them in on Fridays, Saturdays, and Sundays with the capability of doing the final processing. They did the labels; they did the storage because we had a mechanized system. They did a great thing, and in effect what had happened, we went from a train wreck to a point of increasing our sales by about 40 percent over about an 18-month process because we just did what we had to do. I call that getting creative.
Curt, thanks for being with us today. Would like to have you introduce yourself.
Absolutely. I’m Curt Ashfield. I’m currently with Dealer Group Manufacturing Engineering. I focus on basically design for manufacture and making sure that we have everything ready going out to the shop floor and then just expanding our processes. We’re in Minnesota, Minneapolis, just to kind of the Northwest Metro or Northeast Metro. And really, I spent most of my career in design for manufacture, very low mix but higher volume. So that’s created a different perspective for me on a lot of different things that I’ve been able to learn from that.
Curt, my first question for you is what’s been your biggest supply chain train wreck in an engineered-to-order, high mix, low volume manufacturing environment?
Yes, I can think of quite a few. I appreciate you asking me that question. But one of the biggest ones that we’ve encountered quite a few years ago now, but when the company I was previously with had, they were continuing to grow year over year, and we had a really key local supplier that was doing a critical component or assembly for us that was one of our higher volume machines that we were making. It was for a railroad equipment manufacturer. Year over year, as we grew, we didn’t, what I don’t think we realized was that we were making up for about 80% of their business. So five or six years down the road when our demand for them kept growing, they finally hit the point that they could not keep up with us. And we had to start figuring out how to either develop them since we were single-sourced with them. That was not as easy as the phone’s, because we’ve been developing this product with them for a decade. They were, you know, that was really their core competency. And so it was, you know, it’s easier said than done, but we had to start evaluating other suppliers and also taking insurance opportunities in our manufacturing facility. So it was a long process. You know, it was pushed out. Once they kind of hit their threshold of not being able to keep up with us, they were pushing product delays out to six months, seven months on pretty critical high-stick projects. So we learned from that obviously is that we need to continue to evaluate our suppliers, local or not, and making sure that we’re not essentially the ones that are feeding all their business as well so that they can remain healthy and that we can, they can support us long term as well.
So, Tom, you encounter supply chain issues because you are helping companies source and procure print and packaging. Tell me about a train wreck situation where you weren’t able to get product for a customer on time and what you did about it.
Okay, I have a few experiences with that. I can give you a current story. I have a client that’s a branding company. Their responsibility is to coordinate the relationship between ghost kitchens, virtual kitchens, and social media influencers. It’s kind of a strange model, but we had some custom packaging that we needed to produce for them. The quantities were really small, so the way I started that avenue was working with a company that had digital printing and digital finishing technology capabilities. But they didn’t have a strong structural engineer packaging engineer. As a result, we got to a point in production where we had to actually pull the trigger on ordering some of the boxes, but to find out that some of the equipment that was needed to finish this didn’t work with the structural design that this company came up with. So I ended up having to go to another one of my suppliers that had a real strong structural packaging engineering capability. They facilitated fixing that problem, and we ended up making the launch date, but it basically had to do with personnel and capability.
Tom, what are you finding in your specific space around labor challenges? I know it’s been a very hot topic in the manufacturing space this year, in particular, in the printing and packaging industry. Because these industries have been around for so long, there’s been a lot of evolution in equipment, a lot more automation. So although personnel is obviously a problem for anybody that’s in the manufacturing world, more and more of the equipment is being developed to facilitate the processing of whatever that application is. And I think there’ll be more and more evolution in terms of automated solutions, both at the front end from a creative point of view but also through the production process. Obviously, with a pandemic, that was affected personnel tremendously, people being out sick, that kind of thing, not being able to go to work. But I do think my industry will do well because more and more of the solutions require a few more, fewer people in the process. Yeah, it’ll be interesting to see how AI is adapted, in particular in your space. Hopefully, it doesn’t get rid of salespeople. You gotta make yourself a linchpin.
Tom, Tony, you have a story on thinking outside the box, which I think is kind of something those of us who work in manufacturing have to do every single day. So would like to have you share that story today.
Well, it kind of goes back to what I had said before. In manufacturing, every day is a new adventure, and it’s one of the reasons I love to be in manufacturing. It gives you the availability to think on your feet and to collaborate with people. To expand on what I had said before, what we were able to do in thinking outside the box in this situation is we changed our manufacturing philosophy. When we went offshore, we got rid of a lot of people. When we came back on the fly, we didn’t have those people to replace the existing workforce. So we had to come up with innovative ideas. As I said before, what we had done is we changed our mantra. We went from a five-day workweek. We did our work in process. But one of the positive things that we did from that standpoint is it allowed us to do much more PM and to look at to lean things that we needed to do. So that was a real positive from that standpoint. The other side was the ability to, as you say, think outside the box and to come up with solutions in the case of just trying to find people who normally did not have a manufacturing background. And that’s one of the key things you had asked, Tom, before, you know, the solutions or what we’re going to be looking for in the future.
The biggest problems that we have today in manufacturing—I’ve been in manufacturing 47 years, so it’s been a roller coaster, but overall, more important today is the unavailability of labor. So what we have to look at is retention and how do we, from an engineering standpoint, keep the people that we have engaged, enhance their jobs, and work from that standpoint. And a lot of it, what we’re finding in today’s world, is collaboration. Manufacturers for a long period of time did not want to talk to each other, and in the position that I have even in the conference over the past couple of days here at the conference department, what we’re finding is that there are a lot of small manufacturers out there who are now more willing to collaborate and to work together in order to find solutions because they can’t find components, they can’t find things, and if they are not working together, what you’re talking about from a supply chain well woes, it’s going to get even worse if supplier A can’t give supplier B, it’s not going to work. So there are other people out there who are making a concerted effort to aid to keep that chain going and, in actuality, working from the training aspect. So a lot of what we say today of thinking outside the box is really common sense: how can we just keep the best people and how can we keep our ideas moving?
Tony, you mentioned the labor shortage issue, so we have partnered with an economist named Dr. Robert Arlu, who does a lot of work in the manufacturing space, and had him present on data and statistics and what’s happening in the manufacturing space right now. And one of the discussion points was labor. What are you seeing manufacturers do right now that is impactful and is helping with some of those challenges? Because I know we can talk about AI, but what does that actually mean? What are people actually doing?
Well, you could talk about AI. I think it goes back to what we said before: it’s understanding the new manufacturing world itself. I just had a discussion with a colleague just minutes ago where we were talking about automation and robotics in the manufacturing facility. The first process that the first couple of days, there were a lot of scared people because they thought they were going to lose their jobs. The one thing that they found out is that the automation and the robotics actually made their jobs a little bit easier and it made them a lot, let’s say, a lot smarter from the aspect because they learned this new skill, their productivity went up. And as a result of that, the real important thing that I try to educate, because I do consulting, is part of what I do right now, is to educate manufacturers on the importance. Years ago, it was always cost, costs, costs. Now we have to look at profit, profit, profit, profit. And for the, in utilizing those profits, they have to go back into the workforce itself. So if you are now, if you automate and you want people not to be afraid of the AI situation, what you’re going to have to do is you’re gonna have to be innovative from the workforce retention. And that’s a lot of different things that you have, and that’s basically it comes down to common sense of treating people better and giving them some positive worth. And that’s what I’m finding with a lot, particularly here in the Northeast, a lot of the so-called older manufacturers are changing their manufacturing process to include a much more collaborative and an understanding workforce. So they are bringing the employee to the table, they’re letting them go through the process itself. It’s not the ‘us and them’ philosophy, it’s ‘we’re all in it together,’ and that’s probably the most important thing that I’ve seen over the past five or six years.
Curt, what about you? What is your company doing from a workforce retention standpoint? Yeah, I love this topic, focusing on and missing in on the culture and making the right adjustments.
It is easier said than done, but the other group, for example, they’re very family-focused. They’re focused on not only the staff but in the manufacturing in the plant, making sure that we’re considering what works best for them. So there’s about, you know, and I think aside from the people aspect, it’s also just the process aspect. You know, employees don’t like going back and asking the same question over and over. So if we can focus on that, which we’re trying to, and which we have, but trying to make their jobs a little bit cleaner, right, a little bit more transparent, you know, I think it really helps with that tenure. But, you know, just, we’re talking about initiatives for next year, and just simple things like air conditioning in the plant. Right, we’re not in Texas, but it still gets a little warm up here in July, so, you know, so trying to bring intel with the simple things. Yes, it costs a little bit of capital, but we know that it’s difficult to bring in those people.
Curt, have you guys started leveraging any form of AI or robotics at your facility?
Not necessarily. You know, we’re really focused on just trying to integrate our ERP system a lot better with the plant and scheduling and supply demand. That’s kind of our focus right now. And, you know, there are some other initiatives out there, but they’re more corporate-focused and they haven’t made their way to us yet. But yeah, that’s kind of where we’re at, is more systems-based.
Okay, and then Curt, you had to, to kind of change the conversation a little bit off from the workforce back into some supply chain challenges. You’ve had some challenges working with local suppliers and would like to have you talk through and maybe share a story or two about some of the difficulties that you’ve had there and why.
Yeah, so one of the things that sticks out here is just when you’re working on a global landscape, you have a lot of different requirements. And at the company I was with prior, the project cycles, the life cycles, were one to two to three or four years. It could be very long. So when we would go through that design phase or the preparation and finding our supply base and things like that, we may not do it again for another three or four years on key projects. So a lot changes in the environment, especially when it comes to regulations, whether it’s the government or local or for us, it was transportation. So a lot of things would change. So when we would go out to try and get suppliers to bid on certain assemblies of products, they would give their best guess or give it their best shot. And we didn’t realize how critical that was to educate them a little bit more heavily until later on, obviously, throughout the project when we realized that there was major cost overruns on their end and our end, right, because we weren’t preparing, we weren’t prepping for the documentation standards and the things that Europe and the EU or the UN or the URNs would require us to do, whether it’s welding or wiring or parking things like that. And as a company that didn’t necessarily want to just drive our suppliers into the ground because you can’t do that, right? We had to work with them, and in many cases, that was absorbing some of that cost. So, you know, that was kind of a tough thing for us to learn. And I think, you know, now going back to it, there’s a little bit different approach. You know, there’s a global standards manager that handles that kind of thing, so they can communicate out to the right people and prep them for it. But, about that, you know, you just set yourself up for a lot of unknowns, and unfortunately, there were some pretty costly ones for us and our suppliers.
Tony, what about you? What are some of the complications you’ve had in dealing with local suppliers?
Here in the Northeast, particularly in the state of New Hampshire, it’s a lot different compared to where Tom might be in Massachusetts. In New Hampshire, the manufacturing communities, most companies are five to seven people. So from a standpoint of manufacturing and the problems that you would have in the supply chain, it’s almost a family operation across the board. So a lot of what we have to do is break that bond, and I don’t mean it from a political standpoint, but understanding the breaking the bond that you’re a business that you have a certain responsibility, not only to yourself as the family business, but part of that supply chain. And that’s been an important lesson that we’re trying to work with some of the smaller manufacturers out there today. You know, the thought process years ago, there was always something that would come about, and if, you know, what if he was a little, if you were two weeks late or if you’re late, it didn’t matter. No, it matters a hell of a lot today. And one of the things that we have, maybe we’ll talk about this later on, is the implementation of the CHIPS Act and things like that, where we’re trying to bring the manufacturing back here to the United States. So a lot of what we have to do across the board, whether you’re in the Northeast, whether you’re in the Midwest, is working with manufacturers to support their supply chains and engage sustainability. And, you know, that’s what Curt had said before, looking at the processes that you have as well as your, you know, the downstream suppliers, making sure that they have, you know, if you work through a way to do a supplier mapping, and it’s a relatively easy exercise, but when you look at this exercise of the process of both the incoming and the outgoing, and you could show that to the supplier or a manufacturer, the importance that you have in the supply chain, you know, sometimes that graphic means a hell of a lot more than the conversation itself.
It’s catchy. So, Tom, we just talked—Tony and Curt just talked about some of the challenges in working with local suppliers. I know in your space there’s a lot of sourcing that’s actually done overseas, so buying things from China and other countries. What are some of the challenges that you’ve experienced dealing with overseas versus sourcing from companies producing things locally?
Well, it’s a combination of things. First of all, it’s obviously timing because of the cost of air freight. Most people, when they import or go offshore, they’re going to use the ocean as the transportation mechanism to get product from point A to point B. So you’re adding anywhere from 30 to 90 days to the delivery process depending upon the complexity of the product and the size of the order. The other thing is communication. The folks that I deal with are pretty much intermediaries. They may be based in the US but they have people on premise in the offshore facilities. And the other thing is the political aspect, geopolitical aspect of what the world’s all about these days. People are kind of frightened to go offshore more and more, I’m finding. I mean, I’ve been in the printing and packaging industry a very long time, and like Tony, I’ve seen a lot of changes to the attitudes about business. People are less, I won’t say less concerned about price, but they’re much more flexible about sourcing products near shore or here in North America because they know that transportation is an issue, but also geopolitics is an issue. So, and not just from a supply chain point of view, although that was pretty prominent during the pandemic, things got stretched out tremendously because of that. But I find that people looking at North America as a manufacturing Mecca more and more. I’m sure that both Tony and Curt see that the infrastructure is rebuilding again, so to speak. I mean, the semiconductor industry is an example of that. I’m sure the middle to heavy manufacturing is going to take a while to evolve, but I look forward to seeing the United States and North America becoming a manufacturing Mecca again. I mean, I know the printing industry and the packaging industry have always been more of a near-term solution provider, but I’m finding more and more companies are starting to invest in capacity and capabilities in automation, like Tony and Curt said. Transparency and collaboration are hugely important with the vendor base and the clients that I have. A lot of the time, they’ll know who the people are that I’m representing to them, so we can have open dialogue to make sure that every ‘i’ is dotted and ‘t’ is crossed.
Curt, biggest train wreck you’ve had to deal with associated with government sanctions?
Yeah, so we had a pretty large project about five years ago, and it was pretty common in our industry and the rail industry that if we had international customers, they would put certain requirements out there for certain products from their region or certain regions. So, in some cases, it would be pumps and motors or components of a drive system, things like that from Europe. So that was pretty common, and a lot of times we would kind of get backed up into a corner because we had to go to certain suppliers or certain manufacturers. And, you know, when there were issues in Asia, let’s say, or still issues, but we had a very large order that we kept getting the dates pushed back, pushed back, and then all of a sudden, the orders were essentially nonexistent; they were canceled. And so our supply chain actually had to go around and find other customers, other suppliers that had stock on their shelves because we had to fulfill this really. Otherwise, we’re pushing the projects out even farther. So it was a large effort, but the impact of just, you know, 80 pieces and 80 components would have been hugely negative if we weren’t able to go out and find a network of these components available and then put them on our shelves. So it’s just amazing how quick something like that can impact you, and if you’re not thinking outside the box like that, like our group was, you know, you can kind of be left in the dust a little bit. But, yeah, Tony, what about you? How have government sanctions or regulations influenced your supply chain?
Well, I think if we go back to what Tom said, more so than the sanctions itself, we go back probably 15 or 20 years ago when all the government rules made it much more advantageous for American manufacturers to move offshore. And as a manufacturer, there were enough jobs out there. There were a lot of jobs that, rather than be in the dirty manufacturing world, you would go into sales, you would go into other aspects. But what has happened over the past five to ten years with technology, those soft skills that are out there are no longer needed. The days of the 20, 30-person sales force, you have Salesforce, a technology that can streamline it. So now what we have is the government going on the opposite side. They’ve pushed manufacturing out, and what we’re seeing from a positive standpoint is they’re starting to realize in order to have a competitive base as a global leader, manufacturing has to be part of that product itself. The negativity of what you have right now is the government has to understand the whole project, like I said before when you asked me about the supply chain. When we moved product out and brought it back in, we don’t have the components in place to work properly, and that’s a little bit of the hardships that we’re dealing with right now when it comes to manufacturing here in the United States. There’s a lot of programs that we need to look at from a government standpoint to help. One of the things that is really important right now because Tom is probably the same thing and I’m sure Curt, there’s a lot of military manufacturing out there, a lot of component companies want to be involved in the military manufacturing. But in order to do that, you have to have cybersecurity and things like that. So if the components that you have to look at from that aspect in order to be a viable manufacturer, we’re going to need some help from the government down that platform itself. So again, the pendulum spins back and forth, but again, like Tom said, to be a manufacturer right now in 2023, 2024 is a real good position in the United States. It’s a lot different than it was in 1980.
So, another big topic is inflation and how that’s driving where manufacturing is done and how manufacturers are able to stay competitive. So, Curt, would love to have you share what your biggest train wreck that you’ve experienced in keeping your manufacturing operations competitive.
Yeah, I’m actually kind of limited right now, and we’re trying to budget year over year here for a year. But as our costs continue to rise, we’re trying to go from a centralized location that’s making everything for the projects that are in the region to really trying to evaluate and understand what should remain making because at the end of the day, those are extra dollars that could be in the computer’s pocket if we’re making the right decisions. So, trying to get multiple departments on the same page of design for manufacturing but also designed so it can be manufactured outside instead of inside to our standards and our norms. Starting from scratch, which I truly kind of believe that’s where we’re at at our location just because we’re so used to just building everything in-house. It’s definitely going to be a difficult project; we’ll get there. But it’s really systematic, so it’s trying to apply a reason to what should be done here and remove 30 to 40 years worth of emotion from people that like building things or that feel like they have some attachment to certain products. Really start looking at the numbers and what hardcore competencies are and then developing processes around it so you’re not driving employees out and impacting the day-to-day operations. So, I’d say that’s definitely something that’s going on right now and it’s necessary to keep us competitive because we have to be honest with ourselves when we say, well, we may not be the best price on this certain product internally because somebody else can do it a lot better, quicker, cheaper, whatever it may be, but that’s what we’re going through.
Tony, what are you doing with the organizations that you’re working with to combat inflation?
Well, as aside from my day job, I also teach at the college, and part of what I do is economics and supply and demand is the basic components of inflation. You had mentioned before that you had spoken to a noted economist. The problem with the situation that we have in manufacturing today is a lot of the models that people look at inflation have manufacturing going back to the 1980s, which was a big portion of the component. What you have right now in manufacturing is what I talk about is quality and availability. The most important thing that you can have for a customer is the availability of a quality product. That then transcends to profitability. So when we look at it from a manufacturing standpoint, what I’ve been able to talk to most of the smaller manufacturers is they’ve been able to not look at it from the cost aspect but today basically put in the air availability and quality and push that up to the supply chain. In most cases, what is happening, the price of cars, people are not saying that they’re not going to buy a car; they want to have the stampings, the wire forms, the different things that make up the components of the cars, the plastic parts. So if you’re working with Tesla and GM, the most important things that they want are parts, and if it costs a little bit more, guess what, somewhere along the line, it’s going to happen, we’re going to have to pay for it. So when we look at it from the pure manufacturing aspect, it’s a re-education process that I have. You have the hardcore manufacturer who has always been looking at the cost factor. It’s got to be the cheapest possible product. Well, in today’s world, it really doesn’t have to be the cheapest; it has to be the most quality-intense product and the fastest to the market. Because if you have quality and speed, you’re going to make money.
Tom, what about in your space?
I couldn’t agree with Tony anymore. I’ve been in sales primarily; that’s been my role for 40 years. There have been times or cycles where the only thing people cared about was how much something cost. But it’s, I wouldn’t say it’s diametrically opposite, but it’s pretty close to that now. Now it’s, if you can provide the solution at a high-quality capability, you become a partner to a lot of clients. They can rely on you if you can perform, if you can deliver what they need when they need it at a reasonable cost. No longer do you have to be the lowest price provider in a lot of equations. That being said, it’s still a highly competitive marketplace, and I think that we’re at the beginning of kind of a recapitalization of technologies and manufacturing. It’s like every cycle, we’re kind of at the midpoint in the pendulum swing right now, and I think that, you know, human nature, the competitive nature of the world, I think will start to evolve back to where they had been. But right now, like Tony had said, being in the manufacturing world is a good place to be, and I think that will continue for, I don’t know, 5, 10, 15 years probably.
We’re approaching the end of the year, or by end, I mean Q4 for those on a calendar year. So coming up in a couple of weeks, Curt, what is the biggest supply chain challenge you and your team are going to be dealing with through the end of the year? I know some things that happened at the beginning of the year have really changed and pivoted, and there may be some new things that you guys are dealing with now.
I think for us, changing forecasts as we get to the end of the year. We’re seeing a push to, which is just normal, to put as much through the system as we can, whether it’s manufacturing or through supply chain, whatever it may be. And I think we’ve seen on some of our main products, at least, that we cycle through here in Minneapolis, that forecast has changed. And obviously, with that, when we have some of the electrical components, things like that, it just doesn’t make it very easy to change our forecast and what we plan for to push for year-end deliveries. So right now, really trying to work through that, go through all the options on expediting. I think this is pretty common, but it’s that time of year where now we’re just going through that cycle. And I think it’s on the front of everybody’s mind.
Tony, what about for you, Q4 challenges or supply chain issues?
Well, I think the biggest supply chain issue that we’re going to have in the state of New Hampshire is that we have the largest amount of people retiring at the end of the year. So the growing of America is happening, particularly in manufacturing, and that’s one of the concerns that we have. So we have a two-prong solution. Do we convince people to stay on for another year? And if you do that, there’s a cost involved, there’s training. But even more so, the problem that we’re going to have from a supply chain aspect is how do we train the new worker? That’s really the question that you have because the baby boomer who, over the next five years, is not going to be in the manufacturing world anymore. The millennials, and I don’t forget all the acronyms and things like that, but the people that are in their 20s and 30s right now, the generation that grew up with the cell phone and whatever else, their manufacturing concept is going to be so much different than what we have today. So as we look into the end of this year, obviously the manufacturers are going to be real happy and gaining their profitability. But the question that we have is what happens next year when we’re forecasting in the state of New Hampshire that there might be as much as 15% of the workforce that retires. What do you do come January 1st?
What are you seeing, Tony? I know we’re talking about more manufacturing moving here. The other trend I’m seeing is companies moving production out of China completely and going into new international markets, right? What we’re seeing is a lot of manufacturing is still moving to Mexico. That’s probably the hotbed in South America, again, part of what Thomas said is because from a logistics standpoint, the Asian route is a real problem from a geopolitical standpoint. So what you’re starting to see out there are some of the companies and what we’re trying to do here in the United States is hopefully enhance our manufacturing. But the real problem that we have in trying to enhance our manufacture is we don’t have enough people who are trained. So what we have to look at and what, you know, one of the things and responsibilities that we do right now is we’re actually looking into the middle schools to try to get seventh eighth graders to be involved in the STEM programs, to be involved in technology because that’s what manufacturing today is. It’s all about understanding the components. We work with a lot of innovation centers at the colleges that are working here in the United States. A lot of their engineering programs have become a lot more inclusive over the past couple of years or so to take segmented portions. So if you’re a CT scanner, years ago, you had to have a full engineering degree. We don’t really require that. The paper ceiling is becoming much more evident right now that we’re looking for people who have some common sense and some skills who we can train and work within that. I mean, I could go on and on, but I would give some other times there.
Tom, what about you? What are you seeing in print and packaging as regards to transitioning away from China?
It’s accelerating more and more, like Tony said. A lot of the people in the packaging and printing industry are small, closely held businesses, although there are some very large firms as well. But there’s a lot of uniqueness within the industry in terms of the type of applications that the companies are producing. I’m finding that there’s a lot of cross-training. One of my suppliers is a folding carton company based in Montreal, and all of their manufacturing folks know how to operate other pieces of equipment other than their primary responsibilities. Part of that is obviously because of the lack of people that are trained up in the marketplace, but also it’s a way to incentivize those employees to kind of take possession of those responsibilities and to learn, keep them incentivized, and keep the company growing. It is a 40-year-old family company. It’s second generation, but a lot of people see their role in companies like that as an important part of the overall success of the businesses. There is a lot of technology innovation. There’s been a trend over the past 20 years in the printing industry to go from analog solutions like litho offset printing, flexo printing, to more digital solutions. I think that will continue to accelerate. One of my primary flexible packaging suppliers is a strictly digital solution provider, and they grew from basically a Greenfield operation in 2015 to a half-billion-dollar company today, and it’s all digitally produced materials.
Tom, what about in the packaging space?
Probably the biggest challenge is sustainability. You and I have discussed this before. There are a lot of companies out there, especially CPG brands, that are concerned about sustainability, either from a branding point of view or just from being part of the world community. Everybody would like to see more sustainable materials being used in packaging. Packaging, think about it; it’s one of the most ubiquitous commodities out there because everything has to be packaged going from one point to another, and there’s an awful lot of waste generated by our industry. The good thing, though, is that there’s a lot of innovation going on right now, a lot of material development, a lot of it plant-based. I mean, you could put a whole panel discussion on for this, but it’s going to take a while to evolve. A lot of the big brands and big manufacturing companies supplying those brands will need to kind of pull the heavy weight to get it going. But material, it’s not as bad as it had been during the pandemic, but I think sustainability is one of the biggest challenges that is evolving, but it’s not going to happen overnight.
Yeah, when I was in the packaging space, I can’t remember; I think the manufacturer was in New York, but they were doing a trial with Ikea.
To have a hundred percent dissolvable packaging that was made from mushrooms. So you would get your product, you would remove it from the box, you would take your packaging, and you would put it in your backyard, and in theory, it was supposed to completely disintegrate and was made from mushrooms. And I heard there were quite a few challenges around that, but it’s along those lines of sustainability, which is top of mind for people, especially in the CPG and retail space. Already, I encourage you to reach out to Tom, Tony, and Curt on LinkedIn, send them a follow, feel free to shoot them a note if you’d like to continue the conversation that we were having today. Our next show will be on October 10th at noon Central, so look forward to seeing everyone next month. And a big thank you to our panelists for coming on and sharing some of your stories and wisdom with us today.