Industry on hold: As coronavirus spreads, vendors and retailers face supply chain disruption

HIGH POINT — The coronavirus outbreak in China is having a big ripple effect for manufacturers not only in China, but throughout Asia.

An extended Lunar New Year holiday forcing delays in resumption of production in China and coronavirus-related travel restrictions could result in immediate delays in many cases of at least a week to 10 days on shipping new goods.

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With many factories in Asian source countries relying on Chinese management, quality control staff and workers, a lot of plants there face delays in getting fully staffed after the annual holiday.

Additionally, postponement of the CIFF show in March and suspensions of air travel to China has U.S. buyers putting travel plans on hold during a typically busy season of sourcing trips.

Many of Kuka’s customers, for example, travel to China to see product at CIFF in Guangzhou or at its Hangzhou factory, and that has the company adjusting its plans for showing new product.

“Because the fair has been postponed, we are putting all of our resources into showing a large amount of new product at the March High Point Premarket,” said Kuka Home North America President Steve Lush. “We are shipping many of the new items that were planned for Guangzhou to High Point, plus other new models that are in development. We expect to have strong attendance during Premarket.”

Long holiday in China

With the Chinese government delaying factories and offices reopening after Chinese New Year until Feb. 10 for now, Kuka’s China factory will be seven to 10 days behind its normal production schedule.

“Our office staff is able to work from home via email, so the disruption to communications will be minimal,” said Lush. “The travel ban from China to Vietnam will also result in production delays in our Vietnam facility. It’s too soon to tell if these delays will be limited to one week, or if they’ll be longer. We’re closely monitoring the situation and are ready to ramp up to full production to make up time as soon as possible.”

Manwah has manufacturing operations in both China and Vietnam. Manwah USA CEO Guy Ray said there’s “no way” to gauge the impact on delivery of goods from its MW Home factory in China until workers are able to return to the plant.

“We are ready and scheduled to begin production and open Feb. 10 if the government lifts the travel restrictions,” Ray said. “Our administrative people are currently working from the office and some from home, so we are able to accomplish most administrative tasks.”

It also helped that MW Home, a new step-up division of Manwah, ramped up in time to get shipments going ahead of Chinese New Year.

Rob Halsten, vice president of marketing and sales for Chromcraft Revington, said that a big concern is the ability to get parts shipped from affected areas of China to Vietnam.

“If this doesn’t get resolved, it will have an effect on anyone that has goods coming out of that area,” he said of items ranging from hardware to fabrics. “Vietnam is so dependent on things coming out of China. It’s all the parts and components. You can’t have finished product if you don’t have access to the components or the parts you are looking for.”

He added if the health situation isn’t resolved soon, it could have a major impact on goods getting shipped in time for the April High Point Market.

“Market could almost be an impossibility,” he said. “This is a worst case scenario, but it’s likely.”

Halsten said that while travel to China is limited, his team hasn’t yet canceled other trips to Asia in the coming weeks.

“They can get to Vietnam, but they can’t get to China,” he said. “We have to do what we do in Vietnam or Malaysia.”

Crystal Nguyen, vice president of merchandising for Coaster Company of America, said that her team canceled all upcoming Asia travel plans.

“We usually go in March, but we postponed it,” she said. “We are in a ‘we’ll see’ basis.”

She did note that buyers should not expect to see any new Coaster product from China for the April High Point Market. Instead the company will show new product from Malaysia, India, Vietnam and Taiwan.

“New samples from China didn’t get shipped out for April,” she said. “The majority of them have moved to July (Las Vegas Market). That is not a big concern because we had a good January (Las Vegas Market).”

Beyond China

A big unknown is how soon Chinese workers will be able to return to work in factories that supply finished goods or parts for other source factories in Asia, whether they are in Vietnam, India or Malaysia.

“Until they come back (to work), we will not know if our Southeast Asia factories can get shipments of raw materials and fabrics,” Nguyen said.

A major area of concern for factories in Vietnam regards limited flights between Vietnam and China. Derrick Ng, president of Lifestyle Enterprise, said that this situation could delay or prevent people from getting back from China to Vietnam.

“The workers are in Vietnam, but management may not be able to come back. That may affect some production,” he said, noting that it took one particular manager two full days to fly from China to Vietnam, as he flew through another country entirely.

“A lot of people will not come back because they cannot find the flights,” he said of all the travelers heading back from China to Vietnam factories. “You are not talking about one or two guys; you are talking about thousands of people.”

Ng said he canceled a trip planned to China scheduled for March 1. This past week, he was still undecided whether to fly to Malaysia to attend shows there and in Vietnam planned during the first week in March. He also is concerned about the potential of the virus to spread in Vietnam.

“If there is an outbreak there, it will spread quickly,” he said.

On the plus side

Several sources for this report relying on Vietnamese production said their operations there are in pretty good shape. Ashley CEO Todd Wanek doesn’t see an immediate supply chain impact for the company’s operations.

“China and other countries seem to be taking the appropriate steps, and we hope these actions make a difference and a vaccine can be found quickly,” he said.

Manwah’s Cheers factory in Vietnam already is up and running after Chinese New Year despite travel restrictions, with production starting Feb. 2 and more than 95% of workers back at the plant.

“The majority of our Chinese management was able to return to the Vietnam factory, as many of them came back from holiday early so we would minimize any delays,” Ray said in a letter to customers. “The factory has maintained a healthy inventory of raw materials, and before the holiday our purchasing department arranged for enough materials, which should enable us to continue production for the foreseeable future with minimal disruption.”

Plans call for enough new hiring this month to expand Cheers’ Vietnam capacity to 3,000 containers per month by the end of April.

Anne Jensen, marketing director for youth and adult bedroom furniture specialist Maxwood Furniture, said that the company’s dedicated source factory in Ho Chi Minh City is not expecting any major interruptions due to the coronavirus.

In addition to its workers being all Vietnamese, the plant is also Vietnamese-owned and -operated, with Vietnamese management on the ground.  That means it has not had to wait for staff to return from China to help man and manage the facility.

“We are unaffected and hope it remains that way,” she said. “It is Vietnamese-owned so there is no connection to China. Product flow remains healthy.”

She added that there have been no reports of delayed shipments of parts from China. That said, she said the plant sources very little from China in terms or parts or raw materials.

“If anything, we have good alternative resources in Vietnam,” Jensen said.

Warehouse stocks are a key

Importers sourcing from China who’ve built inventory stateside find themselves in position to make the best of the coronavirus problem.

Leather Italia USA, for example, already relied heavily on a strong stocking position in its U.S. warehouses, and that will serve well in the current environment, according to President and CEO Michael Campbell.

The company “is extremely well-stocked and had actually forecasted in double-digit increase levels of stock inventories prior to China New Year,” he said. “With the expedited production and physical shipping prior to (Chinese New Year), we have in excess of four months of stocking levels available in our North Carolina and California domestic warehouse facilities.”

He added that its Chinese source factories and office currently anticipate a delay of a week before normal operations resume.

“I feel at this time with measuring the details and data that we have currently been advised of, this virus needs reach its ‘peak’ within the next week or so, and then the measurements of issues will be telling and more known,” Campbell said.

“Leather Italia USA is completely stocked, and we have generated our production schedules and have no current reflections on delays or service issues,” he added. “It remains our hope that this can be a short-term further effect on people, and we hope most of all for the safety and health of all.”

While Coaster is hoping there is not a major interruption in the flow of product from its other source countries, the company also has a few months of stock on inline bestsellers.

“They are top sellers for a reason,” Nguyen said, adding, “We run a few months deep to protect our top sellers.”