NEW YORK (Reuters) - One early victim of the coronavirus at many U.S. manufacturers is their latest innovations.
A factory in Wisconsin pushed back introduction of new, lower-priced concrete pumping machines - crucial to staying competitive with other producers - because it cannot obtain spare parts from China to support the launch. A cosmetics company in California delayed a new beauty line, because it cannot get imported packaging. And a Michigan appliance maker postponed ad campaigns for some new products that will not arrive at retailers on time.
“The result is delays, not cancellations,” said Mark Bissell, chief executive of Bissell Inc, a leading maker of vacuums and other small appliances, describing the delays in getting some new appliances to market in the United States.
These delays hit even before the conoravirus outbreak began closing factories and disrupting supply chains far beyond China, including in the United States. Bissell, for instance, recently learned Malaysia was putting a two-week hold on any goods coming in or going out of that country.
Bissell Inc manufactures in Malaysia, but it relies on parts from China. “We’re scrambling to see what options we have,” Mark Bissell said.
For many companies, delaying new products is a logical first step at a time of shortages and uncertainty about the ability to deliver goods. Some producers are scrambling to find parts and are forced to prioritize which business they can afford to disappoint versus those that must be satisfied.
New products command premium prices, so delays on new goods are especially painful for manufacturers looking to beef up profit margins. Delays also hobble efforts to fight competitors who are pushing their own new goods.
Some delays create glaring problems. Last month, Apple Inc warned investors it was unlikely to hit revenue targets for the first six months of this year and that global iPhone supplies would be limited due to manufacturing disruptions. That raised questions about whether Apple will be able to launch new phones this fall, since the process of gearing up for that production is usually well under way right now, with designers and manufacturing experts flying back and forth between countries.
Similar difficulties are likely to bubble up in everything from clothing - a large share of which comes from China and where styles are constantly updated - to furniture and chemicals.
Some delays will last only weeks, but the uncertainty created by the pandemic is making it hard for planners. At Polaris Industries Inc, the snowmobile and ATV maker based outside Minneapolis, disruptions in China have slowed delivery of axles needed to launch a new model of three-wheeled vehicle called the Slingshot.
“Right now, we’re looking at a couple of weeks,” said Scott Wine, the company’s CEO. The axles had some last-minute design changes, so they were already planning to ship the items by air, which is turning out to be an advantage.
The coronavirus outbreak is now shaping up as a much more widespread and long-lasting problem for importers, according to a report released on Monday by the National Retail Federation and Hackett Associates, a consulting firm. The study found the flow of goods into U.S. ports is recovering slower than expected. The Ports of Los Angeles and Long Beach, California, the top gateway for goods coming from China, said earlier this week that ocean trade dropped sharply in February.
Cargo ships take two to three weeks to cross from China to the U.S. West Coast. U.S.-based shippers and port executives told Reuters the coronavirus-related weakness could stretch into April.
Jonathan Dawley came back from his industry’s “World of Concrete” trade show in January pleased to have sold the display model of a new generation of lower-priced concrete pumping trucks his company has developed. The machines rely on low-cost parts from China, said Dawley, president and CEO of Putzmeister America Inc, based in Sturtevant, Wisconsin.
“We have all the parts we need to launch this new product,” he said, “but we don’t have all the parts we need to support it.” As a result, the machine is back at his factory. Dawley said he has a dedicated team in China working on the problem and the first parts have started to arrive by air freight. Those will sit in quarantine for nine days.
“The first unit will now be to the end user by the first week of April, which is a roughly 45-day delay,” he said.
Oren Ezra has a different problem. His small factory outside Los Angeles mixes and packages cosmetics for other companies. Over the years, the business has remained rooted there - but depends on things like silk-screened packaging and chemicals from China. The cost of packaging is at least 50% cheaper when bought in China and of better quality than from alternative sources, he said.
“We had a client who was launching at one of the high-end skin care stores,” he said. “They finished the development of the product and they were about to place orders.”
But with shipments from China disrupted, that order is now pushed back from a targeted launch in June until August. And the delay might grow substantially, said Ezra. In the past, when there were supply disruptions from China, he saw hard-to-find chemicals and other supplies flowing mainly to the major global companies that hold the clout with Chinese factories.
Reporting by Timothy Aeppel in New York; Editing by Matthew Lewis
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