CEO Roundtable: Northern Colorado manufacturers take a mixed bag during initial shutdowns

The coronavirus pandemic shut down large swaths of the economy, including some of the most critical customers for some manufacturing companies in Northern Colorado. However, the shift in consumer attitudes proved to be of benefit to others, particularly for household products.

That’s the verdict from 11 local executives who met for the virtual BizWest CEO Roundtable Tuesday morning

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Plenty of homeowners spent the initial period of stay-at-home orders killing some time by doing a remodel. For a few nearby manufacturers that make home products, that has proved to be a buffer against the larger economic forces of the virus.

Garth Rummery, president of Loveland-based custom carpentry firm Tharp Cabinets, expected that sales would drop in the beginning stages of the stay-at-home orders after a heavy period in March where customers were trying to get their orders fulfilled in case the business was deemed non-essential.

However, thanks to a heavy marketing effort, Rummery said an initial dip in sales was outweighed by several orders in the past several weeks.

“There are a lot of people sitting at home, bored, looking at their kitchens, bathrooms, living rooms is a big one,” he said. “We’re doing just a ton of built-ins right now where people want hearths in bookshelves, all that good stuff.”

Water Pik Inc. CEO Bart Prins said the company usually sees sales of its shower heads in brick-and-mortar home-improvement stores because consumers want to compare their options in person rather than buying and returning shower equipment.

However, with consumers less encouraged to take multiple trips to a store for fear of exposure, Prins said online sales spiked and are now starting to retreat as large portions of the U.S. begin to emerge from stringent lockdowns.

“With more people at home, people might be doing it on a Thursday, and they’re willing to take the risk of ordering one online and installing it because they don’t have to go into the store,” he said.

Forney Industries Inc. CEO Steve Anderson said his company’s sales of individual welding equipment gear on Amazon, other e-commerce sites and some physical retailers have picked up considerably, offsetting losses from when its industrial customers slowed down on purchases.

Forney is now looking toward setting up a second shift to deal with the demand for delivery.

“So our orders literally went from, let’s say 150 orders a day to about 650 to 700 orders a day,” he said. “How we had to adjust to that has been challenging.”

… Outside of the house, not so much

For manufacturers whose client bases are mainly industrial, the COVID-19 pandemic has been far more difficult to weather. Wellington’s Advance Tank and Construction Co., which counts oil producers among its largest customer segment, was hit by a “double-whammy,” President and Chief Operating Officer Jim Clay said.

As much of the U.S., China and Europe have gone through bouts of lockdowns over the past several months, global oil prices have sunk as fewer people needed to drive cars, fly on airplanes or power factories. That led several American oil producers to plug wells and conserve cash wherever they can, including by stopping orders to equipment manufacturers.

Clay estimates that his company lost about half of its sales and had to lay off about 200 people, and he doesn’t expect a resurgence in oil demand to come and revitalize the business soon.

“Our plants have been open, but we’ve had multiple jobs that are delayed,” he said. “As a guy from Exxon said, when you don’t know what to do, you quit spending money.”

Suppliers to universities also took a blow when schools decided to finish the academic year online. Andrew Hendrickson, president and CEO of Loveland’s SurgiReal Products Inc., said several medical students have bought one of the simulated cadavers the company makes so they can practice at home. However, medical schools stopped purchasing bulk orders of his company’s surgery simulator equipment as classes went virtual.

“They’re like, we want this stuff, but we don’t know when,” he said.

Setting up new supply chains

China’s initial lockdowns disrupted the larger supply of goods from the country’s manufacturing hubs and out into the world, including production of critical personal protective equipment supplies that caused shortages for medical staff in the U.S. treating the first major influx of patients. That has led to conversations across the U.S. about bringing some manufacturing activity back to the States, or at least outside of China.

Jay Dokter, CEO of Loveland-based medical device maker Vergent Products Inc., sees an opportunity for high-end medical companies to bring supply chains to the U.S., particularly because of the advantage it provides in maintaining quality compliance with the U.S. Food and Drug Administration.

However, bringing those supply lines out of foreign countries after years of status quo has proved difficult in a few cases.

“You would think that a company would have all the documentation necessary to hand it over to a manufacturer like us, but they don’t. So often, we have to recreate and we have to help them understand what they need from their overseas supplies to try and get information or tooling or test platforms or different things back to the U.S.,” he said.

For less critical parts, the executives were less certain about the financial math of onshoring production. Prins said the U.S. can’t compete on labor costs against other countries on the Pacific Rim for spec parts such as small motors.

“We have looked with all the political risks to diversifying our supply chain, so we’re looking at Malaysia and Vietnam and Thailand, but in that sense, the U.S. is still not competitive,” he said.

Supply chains within the U.S. were also disrupted. Harsh International Inc. CEO Bob Brown said his Eaton-based heavy equipment maker’s biggest challenge was figuring out how to deliver products in states like New York, where extremely stringent shutdowns put many of its customers on hold from being able to take delivery.

“We had a little bit of a manufacturing constipation, I guess it what you might call it,” he said.

Looser labor market

After years of battling other companies for employees amid historically low unemployment, multiple executives said they were able to hire mid-range executives and staff amid the worst unemployment crisis since the Great Depression.

EnviroTech Services Inc. CEO Roger Knoph said his Greeley-based road products producer is hiring for about five or six key management positions, and thinks the economic shake-up could yield some solid hires.

“During these times, we’d like to take the opportunity because I’m sure it’s a shift of the amount of employment out there, to hire great people,” he said.

Bob Walker, president of Fort Collins lawnmower maker Walker Manufacturing Co., said all but a few members of his staff returned to the factory floor within weeks of the company restarting production.

“That first week we reopened, we wondered about how many people would actually come back with all the restrictions and the unemployment picture or reimbursement from unemployment,” he said. “But again, by the end of the second or third week, we were full strength.”

Lynn Vosler, workforce development director at Front Range Community College, said enrollment in manufacturing programs hasn’t declined at all over the summer term despite classes moving online, but there is an ongoing logistical problem in trying to make sure students can get the in-person training they need without exposing them or others to potential coronavirus spread.

“Our challenge is making sure that we get hands-on training done and still follow all of the regulations,” she said. “Trying to stay six feet apart and still train people on how to use a machine is challenging.”

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The CEO Roundtable is sponsored by Flood & Peterson, Plante Moran and Elevations Credit Union.