Businesses adapt to viral disruption
Keeping an eye on supply chain, modifying travel
Of all the things Wisconsin business owners began the year worrying about — soaring health care costs, a tight labor supply, political gridlock — a rampaging virus on the other side of the world wasn’t even on the list.
It now tops that list. Businesses across Wisconsin have been forced by the coronavirus outbreak to deal with potential supply disruptions, travel restrictions and uncertainty as everything from fuel prices to financial markets to interest rates change daily, sometimes swinging wildly as a result of the outbreak.
For some Wisconsin companies, opportunities to pick up new orders have arisen as manufacturers seek to replenish supply chains that have been interrupted as businesses in China remain shut down.
Here are how some businesses in Wisconsin have responded to the outbreak.
No overseas travel, checking recent travel for visitors
Muskego-based Inpro Corp., which makes hand railings, wall guards, window treatments and other parts used in hospitals, stores, hotels and other commercial buildings, hasn’t had its supply chain disrupted, said Chief Executive Officer Phil Ziegler.
That’s because about 95% of Inpro’s suppliers are U.S. companies.
Also, there’s no concern about the virus being transmitted through raw materials shipped to Inpro’s suppliers, he said.
That’s because the U.S. Centers for Disease Control and Prevention has confirmed that the virus cannot live long on a nonhuman source. Materials used to make Inpro’s products are shipped in containers, which take weeks to reach the United States, Ziegler said.
However, Inpro has banned its U.S. employees from traveling overseas and is not allowing any of its overseas employees and distributors to travel to the United States, he said.
“Locally, we are asking any visitors if they have traveled internationally during the past month,” Ziegler said.
“If they have, they need to reschedule their visit after the virus threat has passed,” he said.
Inpro, a privately held company, has 650 employees and $156 million in annual revenue. It has operations in Europe, Asia and the Middle East.
Supply interruption would be ‘a disaster’
Scott Seljan, president and CEO of Seljan Co. Inc. in Lake Mills, said he is watching the situation carefully. That’s because the control boards for the company’s popular C3 Custom Coolers — remote control coolers equipped with wheels, motors and sound connections — come from China.
The remote-control coolers have proven very popular, Seljan said.
“We are getting ready for a lot of orders here and if something were to goof up our supply chain, that would be a disaster for us,” Seljan said. “The control boards on these things, they steer the unit, move it forward and backward, have USB connections.”
For now, the company’s supplier in China has given no indication that it will be facing any sort of disruption.
But to be safe, Seljan and his team have spent time investigating how to handle any potential supply issues.
“It would probably take half a year to get a U.S. supplier on board for that,” Seljan said.
“We looked at a couple U.S. companies to produce an updated version of our control board,” he added. “Yes, they can do it, but at three times the cost.”
Seljan several years ago diversified its product lines so that it wasn’t dependent on a single product to ensure its continued growth.
So, even if there were a supply disruption, it could shift work to other products.
“We certainly would feel it,” Seljan said, “but we wouldn’t have to close our doors. We wouldn’t have to lay anybody off.”
The company’s Rock Lake Robotics subsidiary makes robotic equipment for manufacturers.
The robotic arms are made by a company in Japan.
“We have to make darn sure we can get the robotic arms,” Seljan said.
Seljan Co. has months’ worth of inventory.
Still, “We’re keeping a pretty good eye on everything” related to the virus outbreak, Seljan said.
Ordering a year’s worth of parts, just in case
Roving Blue in Lena makes ozonebased water purification products. The company, about 30 miles north of Green Bay in Oconto County, preordered a year’s worth of AC/DC converters that it imports from China.
Roving Blue’s Chinese supplier has halted production of the converters because of the coronavirus outbreak.
It’s unclear when the supplier will resume production.
If the shutdown lasts longer than a year, Roving Blue Chief Executive Officer Yana DeMyer said the company will switch to an American supplier. DeMyer said the AC/DC converter is the only product Roving Blue orders from China.
“We would be able to make the change if we had to,” DeMyer said. “Even if we’re completely cut off” from China.
Roving Blue has benefited from the increased need for sanitation products created as a result of the virus.
Its “Ozo-Pod,” which costs $199, allows people to clean up to five gallons of water. DeMyer said people are using it to sanitize water and then pouring the water in a spray bottle to use as a cleaning product.
Last week, Roving Blue and an Oklahoma-based manufacturer unveiled an ozone-based decontamination shower, which DeMyer expects to be especially useful for medical workers.
Costs for components are rising
At Strohwig Industries in Richfield, the company is upgrading its computer systems. It handles the upgrades inhouse but has found that prices for components used for the upgrade have increased as the virus has spread, said Mike Retzer, the controller at Strohwig.
Strohwig does not anticipate any supply chain disruptions for the products it makes because the sourcing is almost exclusively from U.S. suppliers.
Meanwhile, a subsidiary company, Tailor Made Products in Elroy, is starting to see its sales calls get a better response from potential customers who in the past have barely even answered the company’s sales calls, Retzer said.
Tailor Made is a diversified manufacturer that makes a variety of products including kitchen utensils.
The potential customers are concerned about having their supply chains in China disrupted.
The Tailor Made sales teams “haven’t sold anything yet, but for once, their call was taken,” Retzer said.
Strohwig is also preparing quotes for businesses seeking manufactured products that were supposed to be made in China but have been delayed — or not made at all — because of the virus.
“There are four or five examples off the top of my head and we’re not even very far into this (virus outbreak),” Retzer said.
The United Nations estimated Wednesday that a shortage of industrial parts from China caused by the coronavirus outbreak has set off a “ripple effect” that caused exports from other countries around the world to drop by $47 billion last month.
Even when this virus runs its course, it will forever change how businesses source the materials for their products or how they source the products themselves, Retzer said.
“It will have a permanent effect on American supply chains for sure,” he said.
There will also be changes that have yet to be seen, Retzer said.
“Everything in the economy is interrelated,” he said.
Briggs & Stratton plants in China operating
Small-engine maker Briggs & Stratton has advised employees to avoid travel in China, South Korea and Japan and to exercise “enhanced precaution” in other areas like Italy, according to Rick Carpenter, vice president of corporate marketing and communications.
“Our main facilities in China (Chongqing and Shanghai) are back to work, including production,” Carpenter said. The facilities had been closed for the Chinese New Year celebration.
“Most, if not all, of our suppliers are also back to work and delivering parts,” Carpenter said.
The company continues to watch the situation closely.
“We have developed contingency plans for our supply chain to ensure that we meet our customers’ demand/forecasts,” Carpenter said.
The company is also carefully watching the situation in the U.S.
Briggs has general action plans and is “updating those more specifically for this potential situation here in the States, things like work from home plans based on certain triggers,” Carpenter said.
Airlines take hit
Southwest Airlines, the passenger market share leader at Milwaukee Mitchell International Airport, said Thursday that it has seen a “significant” decline in customer traffic that’s likely the result of the virus and that its firstquarter revenue will fall short of expectations.
“The company experienced healthy passenger booking and revenue trends for the first two months of 2020, with year-over-year increases in operating revenue per available seat mile,” Southwest said in a regulatory filing on Thursday. “However, in recent days, the company has experienced a significant decline in customer demand, as well as an increase in trip cancellations, which is assumed to be attributable to concerns relating to reported cases of (coronavirus).”
Based on those trends, Southwest expects its first-quarter 2020 operating revenue to take a $200 million to $300 million hit.
The International Air Transport Association says the virus outbreak could cost airlines around the world as much as $113 billion in lost revenue due to the collapse of air travel.
Among other airlines, Delta will reduce its weekly flying schedule to Japan through April 30 and suspend summer seasonal service between Seattle and Osaka for 2020 in response to reduced demand due to coronavirus.
Delta is No. 2 in market share at Mitchell.
This story was written based on reporting by Tom Daykin, Sarah Hauer, John Steppe and Joe Taschler of the Journal Sentinel staff and reporting by the Associated Press.