The coronavirus is roiling stock markets—the Dow Jones Industrial Average and the S&P 500 have both fallen more than 10 percent this week, moving them into correction territory—and spreading more substantially beyond China to countries around the world, including the U.S. As the medical community and government agencies work to halt the spread of the disease and develop preventative measures and treatments, the business community, including the promotional products industry, is working to better understand the disease and accommodate a disrupted and slower supply chain.
A clear picture of the threat the coronavirus poses to health and wellbeing is still being developed. A report out today from the Chinese Center for Disease Control and Prevention says of the 44,672 coronavirus cases confirmed in China as of February 11—today the global count exceeds 81,000—81 percent were mild—defined as not involving pneumonia or only mild pneumonia. The report found 14 percent of cases were severe and just under five percent were critical. China’s overall fatality rate from the disease stands at 2.3 percent, but this figure is skewed by the 2.9-percent fatality rate in Hubei Province, the epicenter of the outbreak, and the 0.4-percent rate observed in the rest of the country. To provide context, the U.S. Center for Disease Control lists the seasonal flu’s mortality at approximately 0.1 percent.
While the human suffering brought about by the coronavirus is immense, with more than 760 million people in China under some sort of travel restriction or quarantine, a wider, longer-lasting impact of the outbreak could be its effects on the economy and global supply chain. In a whitepaper released on February 19, Joshua White, senior vice president of strategic partnerships at distributor BAMKO, wrote, “Under-appreciated in media reporting is the fact that it is not the coronavirus itself that has limited factory production. Rather, it has been the measures taken by the Chinese government to try to limit the spread of coronavirus that have caused the reduction in manufacturing capacity. Those restrictions on freedom of movement, rather than people falling ill with coronavirus, has been the cause of the manufacturing slowdown. The longer and more severe the travel restrictions, the greater the harm to both the Chinese economy and to global supply chains as a whole.”
There are signs that factory production in China is resuming this week with some factories coming back online in a reduced capacity. “Staffed by skeleton crews of approximately 10-30 percent of their typical workforce, factories appear intent on returning to work,” White writes. “In general, we are hearing that most factories are expecting to be at or near full capacity by early to mid-March.”
Speaking to PPB Newslink, Vincent Goralczyk, CEO of Clover, South Carolina-based supplier Custom Sock Line, LLC, says, “I am pleased to state that as far as receiving orders for our custom knit socks, we have only lost two weeks of production. All of our factories passed the restrictions and inspections as of one week ago and their employees are back and eager to work. They are diligently working hard to meet all in-hands dates and will succeed in doing so.”
Promotional products industry suppliers and distributors are navigating through this chaotic environment with clear and prompt communication with clients and vendors, and building up inventories, among other tactics.
“I think the supply chain will be disrupted through late June or July,” says Peter Hirsch, MAS, president of Houston, Texas, supplier Hirsch Gift, Inc. “Fortunately, we have built up inventories prior to Chinese New Year and the increased inventories of the retail brands that we sell should see us through this period. Distributors would be well advised to place orders for events in the next three months immediately as there is going to be a major shortage of a wide variety of China-sourced products.”
Shifting production or customer focus to products produced outside of China has played a significant part in many companies’ responses to the outbreak.
“Since a large percentage of our orders are made ‘just in time’ in our China factories, we have had to communicate quickly with our customers, get creative and find solutions,” says Dan Taylor, president and CEO of Manassas, Virginia, supplier BamBams. “When possible, we have directed customers to purchase products which we produce in Turkey, and also suggest purchasing products produced in-house, such as knitted scarves and beanies, with embroidery and screen printing on inventory products. Our great distributors have responded with equanimity. We truly believe active communication and honesty always serve us well.”
Scott Cappel, MAS, president of distributor Sorrento Mesa Promo in San Diego, California, adds, “You just have to realign your supply chains to include more domestic sources. More calls to suppliers, more filtered searches for domestic suppliers via SAGE, more time and effort to reach out to suppliers you may not have worked with previously, but it can be done. Also, educate and prepare your clients for higher price points during this crisis for the same or similar items since the sourcing may now include higher costs.”
The coronavirus has many promotional products professionals recognizing the benefits of domestic production.
“Osborne Coinage is emphasizing our lead time of two-to-three weeks for custom coins and medallions via direct email to our distributor partners,” says Gibson Olpp, marketing manager at the Cincinnati, Ohio, supplier. “We’re also highlighting our ‘Made in America Since 1835’ tagline.”
Santana Fulp, director of sales and marketing at Sports Solutions, Inc. in Pilot Mountain, North Carolina, adds, “Since the onset of the coronavirus and its impact on supply chain, we have leaned into our domestic roots more than ever to produce socks and sweatbands. It has not been easy to accommodate all the new requests in addition to existing orders. However, we have made it work with help of the additional equipment and increased staff we added over the last year. In a time like this, it is essential that our industry come together to help one another as we get past this.”
Regardless of the approach to dealing with the outbreak, many industry companies recognize that it is a fast-moving situation, with new information becoming available almost hourly, and undoubtedly plans will change and be updated as new details emerge. Brandon Mackay, MAS, president of supplier SnugZ USA, cautions, “Suppliers, distributors and end users need to practice something that is foreign to everyone right now and that is patience. There is no magic bullet for answers. Everyone is on an information delay and I understand it’s stressful. We’re doing all we can to increase capacity, secure inventory and staff with an unexpected 20-percent spike in orders. In short, even though it’s painful, calm heads will help us all succeed as we weather this storm over the next few months.”
Keep up with this ongoing situation and access additional resources at www.ppai.org/coronavirus-information.
