Virtual Town Hall # 2 - Conducting Business in Uncertain Times

Edginton also said that All-Fill is working a little differently with some customers, and that they see a lot of parts activity right now. March parts orders were up, and Edginton said, “I do think that people are going to start trending towards rebuilding, making sure that the machines that they already have are very stable, and that they can be supported should they go down. I do believe that we are going to expect a slower than normal April. That's why we're trying to get ahead of it by utilizing all of our employee skillsets in order to build stock machinery for quick deliveries, as people are going to eventually be looking for that.”

Pawlick said Blue Bunny is trying to manage a reasonable parts inventory while also maintaining a relationship with OEM partners.  “Our part usage is about standard to where it's been in the past several years. We are taking a look and trying to understand from a cash basis, how many of those parts are critical…We're working with our OEMs and saying, ‘If I've got 15 of these on shelves, do I really need 15 of these, or can I bleed my inventory down to five?’ and how do we make sure that works out fair to the OEMs as well. We're trying not to leave our partners high and dry. We're also trying to just be prudent with our cash management.”

Production gaps, worker absenteeism warn of future supply chain disruption
According to CPG panelists on the call, the current supply chain environment is mixed, but so far is generally holding up. A Packaging World survey reveals the biggest questions to come may lie in the ongoing shift from foodservice to retail production, but people are still eating--that won't change.

Still, lags in production that are happening now may take some time to make their way downstream to manufacturers, requiring advanced supply chain planning.

“We feel the real impacts may be further out,” says Flickinger. “We’ve tried to set ourselves up so we have two to three months of materials—packaging and raw materials—in-house and on-shore. We’re working on a four to five-month time horizon to project and figure out how we’re going to manage our way through.” 

According to week-over-week data reflecting PMMI members' survey responses, more OEMs/machine builders are experiencing supply disruptions now than in the previous week.

That’s because ingredient and raw material production in locked down countries—India and China especially—has in cases been completely shut off. While inventories here in the states are holding out, that stretch of zero production will eventually catch up to American manufacturers, after some lag. Even as places like China appear to ramp back up, and hopefully India will before long, a lot of thirsty manufacturers will be waiting when those faucets are turned back on. COVID-19 response teams at CPGs are thus planning for that eventuality, and communication among teams seems to be the primary method of problem-solving.  

“We have weekly calls with all of our site operations general managers and other stake holders,” Flickinger says. “We're constantly looking at the current inventory position of materials, how much is available within a day or on-shore, and then looking at the projection looking forward. We're now working and projecting out into the four-month-plus segments.”

Pawlick at Wells Enterprises relies on close and frequent communication as well, with daily pandemic response team calls across roughly 26 critical areas. Supply chain stabilization is one of those 26.

Says Pawlick, “100% of this team’s time is now dedicated to ensuring that ingredients are showing up, packaging is showing up, people are showing up, and trucks are showing up. We've put a laser like focus on making sure we've had minimal interruptions here.”

It’s interesting that Pawlick listed “people showing up” in a supply chain discussion. The panel revealed that workforce attendance/absenteeism and supply chain interruption are closely linked, and this is particularly visible just upstream of manufactures at the machine builder or OEM level.

According to both Ivy and Edington, both coming from an OEM perspective, worker absenteeism is a danger for future supply chains. Ivy, for one, believes that there was enough in the distribution pipeline that would his supply needs for at least a month. Companies had enough inventory warehouses that up to now, they could ship, and to a certain extent, maintain regular production.

“But I think you're going to see, and what we're starting to see now, is interruptions to the supply chain and overall supply do worker absenteeism is going up at the [parts] factories. As this goes on longer, and workers get more worried, you get more absenteeism,” he says. “That will definitely affect OEMs. I think you're going to see a drastic change in the next three weeks, as to disruptions in supply chain. That’s because now the warehouses are depleted, all inventory stock is gone, and everything we had in our plant is depleted.”

Ivy is taking a similar tact to his CPG and food manufacturer panelist counterparts in doing a daily supply chain health check call with his team but goes a step further in including their own upstream suppliers, particular mission critical suppliers.

That’s because many of Ivy’s suppliers also work on other essential or critical businesses, healthcare for instance. Some prioritization is given to medical facilities in need of personal protection equipment (PPE), “over supermarkets wanting ham steaks,” he says.

“We're doing calls with our own suppliers daily, and we're finding it changes daily,” Ivy adds. “It's getting pretty dynamic out there.”

While simply avoiding COVID-19 is causing the absenteeism that stands to disrupt supply chains, Greg Flickinger reminds us not to forget the disruptive capability of COVID-19 positive test cases, either in your own facility or in that of a direct, primary supplier. 

He had a supplier, one with a single point of distribution in the U.S., that had two people test positive for COVID-19. Being a distribution location, it was warehouse. GTI had an essential, time-sensitive construction shipments that needed to come out that warehouse. But the warehouse had to shut down, quarantine, and clean. It was down for three or four days.

That forced Flickinger to reposition materials from another state into that project until the affected supplier could get the warehouse back up and running.

This case study brings several supply chain considerations. Are you coming from a single point of reference? Is there a sub-supplier that is the only source of what your direct supplier needs? If a sub-supplier is coming from a single sourcing point, that becomes another danger area, another critical potential choking between a CPG and the equipment and materials it needs.

“The fact is we’re also going to see internal disruptions that could be a couple of days here and there, or they could be very impactful in the supply chain when all of our local inventories are depleted,” Flickinger says. “It's not a question of if COVID-19 infections are going to affect us. We have to think that all of our suppliers, even us, we're going to get hit with a positive. The question is, are we prepared, and how do we react, to keep the rest of our people safe from risk? Secondly, how do we try to keep our operations flowing under those circumstances?”

The people factor: Worker welfare, hazard pay and cleanliness

While states still differ on lockdown levels and what is deemed as an essential worker or business, most CGP companies and their suppliers are meeting production demands—for the time being.

According to a recent COVID-19 survey from ProFood World, 70% of food and beverage industry respondents are not offering hazard pay to their plant-floor employees.

In the recent PMMI Town Hall, Greg Flickinger of Green Thumb Industries (GTI) said his company is not offering hazard pay at this point. “We are managing people on a case by case basis,” he stated.

Just like many other companies, GTI is asking employees to use paid time off (PTO), but has also been very attentive to those that have underlying health conditions. “We're addressing each site and each market the way their market needs to be addressed. We're finding that if we have an operation in Massachusetts, that scenario may be very different than our operation in Nevada,” he added.

On the retail side of its business, GTI is offering hazard pay to employees. “That's primarily because they're customer facing, and they're seeing 500 to 1000 people rolling in and out of their doors every day,” Flickinger explained.

Adam Pawlick of Wells Enterprises also says his company is not offering hazard pay to plant-floor employees. “Our standard policy is if you want to self-quarantine because you don't feel comfortable, that's a 14-day away from work with PTO first followed by unpaid leave,” he stated during the Town Hall. “If somebody tests positive, we are doing a full map of who they had close contact with and forcing a quarantine for all those people that might be first-level exposure, to stop the spread of it throughout the plant.”

On the equipment supplier side, again many are not providing hazard pay, but are following strict social distancing, temperature testing and other measures to keep personnel safe.

“We're trying to keep everybody gainfully employed,” said Tom Ivy of F.R. Drake, CV-TEK and RapidPak. “If employees have virus concerns, they are free to take PTO.”

According to Ryan Edginton of All-Fill, the machinery supplier gave all employees a matrix that explained their options. “It went from everything from like a voluntary layoff to a furlough, to using paid time off,” he explained.

Heavy cleaning and sanitation of facilities was also mentioned as top priority of the Town Hall participants, who said their companies were very focused on taking care of people very sensitive to their needs.

While most in the industry say supply chains are not greatly disrupted now, employee absenteeism could be in factor in the coming month if more people get infected with COVID-19

Flickinger also says GTI is taking an abundance of caution. “We're doing things such as many other companies you've seen—taking temperatures of people coming in and asking questions about who they've been around.”

In the end, it’s all about taking care of people, Flickinger says. GTI has instituted split shifts, staggered work times and more intense cleaning to keep not only its people feeling safe, but also its vendors.

“We have a contractor coming out of the New York City area that does flooring work. We're going to have them come in overnight when no one else is on the site, and we'll clean on their way out,” Flickinger says. “That way we're not hindering the work, but yet we're protecting everyone.”

As the number of positive COVID-19 cases rise, Edginton thinks the industry must start thinking about what to do if they get infected employees. “I think that's going to be one of the challenges moving forward for the OEMs,” he stated.

Remote access becomes essential 
To reduce the spread of Coronavirus, keep production firing on all cylinders, and keep employees safe, most CPG companies are not allowing visitors into their facilities, which presents a big problem when a machine goes down or needs to be installed. Egan says remote access of equipment has been a topic of discussion between PMMI members and end users.

For Ivy at F.R. Drake, a lot of his customers were already calling in and using cell phone videos to communicate problems with equipment prior to the COVID-19 pandemic. But because of bandwidth restrictions, it wasn’t always the easiest to get compliance or live footage of the equipment. F.R. Drake has continued to take this approach with some of its customers, as Ivy says he hasn’t seen CPGs relax data restriction during this time to allow OEMs to have remote access to their equipment.

“The majority of our customers are running very hard and strong right now,” Ivy says. “We anticipate more service calls probably after the next four weeks when things start to break, because they've been running seven days a week, 20 hours a day, and haven't had a chance to do their preventative maintenance like they normally do. There are going to be more emergency calls from failures.”

Aside from servicing machines, FATs still need to be conducted for equipment orders that need to go out the door. Edgington has been conducting video FATs at All-Fill, sharing downloadable links with customers through services such as Dropbox. 

GTI is having its first virtual FAT, but Flickinger is well prepared having conducted these tests at previous companies. 

“In this case, we're using Zoom,” Flickinger says. “One thing that we all need to think about is glasses. [Wearable augmented reality] glasses allow you to be hands free, but you can accomplish the same task with a phone and FaceTime, Zoom, or any other type of software platform. You're just not hands-free.” 

An obstacle that comes with virtual FATs and remote access is that it can take time to set up and get acquainted with.  

“You have to have the person on the other end pay attention,” Flickinger says. “They've got to move the camera and they've got to communicate. There's a little bit of thinking up between the person viewing and the person on the site, to make sure that they're seeing what they want to see. It can be a little cumbersome at first but really, it forces everyone to pay even more attention to make sure that things are being covered.”

However, once the learning curve is conquered, this type of service provides the same value as having a service technician or an FAT in person, Flickinger says.

Blue Bunny Ice Cream’s Pawlick has been conducting remote access and service through FaceTime and Skype with its customers and has found it to be effective. But the end-user says it experienced a hiccup when trying to find the right people to be on the service call.  

“As our maintenance department is looking at it, sometimes we get caught up with our maintenance guys not having the ability to do a certain thing now.” Pawlick says. “You've got to make sure you're using your right internal people to do the remote service as well as the right OEM partner and their tech services, too.”

PMMI’s Egan says it’s clear there will be a little bit of a learning curve on both the OEM and CPG sides, but remote maintenance and service seems to be an ideal option for keeping equipment running and preventing the unnecessary exposure and spread of COVID-19 to employees.