Area manufacturers reevaluate their standing after six months of COVID-19

C.L. Sturkey, a Lebanon-based surgical blade manufacturer, was poised to pass through the COVID-19 pandemic without a drastic loss in sales since health care providers still needed the parts it made for operations such as biopsies and mole removals.

So when Pennsylvania chose to pause all “non-emergent” operations, many of which used C.L. Sturkey’s blades, the company found itself taking the loss in sales alongside many of its contemporaries in the industry.

“We thought we dodged a bullet. We didn’t see the challenge ahead of us until we realized that the state was locking down everything and elective surgeries were put on hold,” said Chris Tarsa, president at C.L. Sturkey. “We got caught flat-footed when everything started to shut down.”

Manufacturers in Pennsylvania on average lost 40% in sales in the first six months of the Coronavirus pandemic, according to a recent survey of 95 southcentral Pennsylvania manufacturers conducted by York-based business management firm Mantec.

The report detailed how sales, staffing levels, supply chains and safety affected companies throughout seven counties in the six months since the pandemic began.

Mantec, a business management firm specialized in advising manufacturers in the region, set out to create the report while it was working to help its clients acquire personal protective equipment, work with the state to remain open and keep employees on the job.

“We quickly learned of these issues and we’ve been aggressive to help companies work through this challenging time,” said John Lloyd, president and CEO of Mantec. “We saw an opportunity to quantify that through surveying our companies.”

C.L. Sturkey was forced to pause much of its production and saw a 50% decline in revenues in April and a 70% decline in May. However, the company’s sales began to bounce back as hospitals started to schedule elective surgeries into June and by August, the company was back to normal.

Staying alive

According to Mantec’s report, 37% of companies had to move into new product lines to continue operations, many resorting to making personal protective equipment.

Lloyd said the data point that surprised him the most after publishing the report was that 80% of manufacturers in the region remained open during the pandemic. They did that by being deemed life sustaining, shifting to a life-sustaining product or convincing the commonwealth to allow them remain open.

For Lancaster-based Merchandising Solutions, remaining open meant foregoing the company’s manufacture of branded point-of-purchase displays and shifting to production of free standing sneeze guards and custom fabricated partitions.

Tom Burns, president of Merchandising Solutions, said the initial drop in sales from the pandemic caused the company to drop from four employees to two and completely shifted the company’s output, which was previously dominated by the company’s work in branded displays.

“It went from 70% to 80% of what we did to pretty much nothing and now we are shifting to sneeze guards and safety barriers,” said Burns, who now does a majority of the manufacturing on his own. “We are probably running at about 40% of what we did in 2019. The biggest volume of our production through the displays may not recover anytime soon.”

Burns started the year at Merchandising Solutions with four employees and currently only has two including himself. At C.L. Sturkey, Tarsa said he had 17 employees at the start of the year and had to send half of them home because they were in their late 60’s and 70’s and more susceptible to the virus.

Staffing levels down

Mantec’s report found that in the past six months, 51% of the respondents were unable to maintain their staffing levels with 25% having to resort to layoffs and 15% needing to furlough their employees.

Both manufacturers were recipients of the U.S Small Business Administration’s Paycheck Protection Program, which provided loans to businesses that could be forgiven if the employers met a series of employee retention requirements. Burns said it was the first time that he had seen either the federal or state governments provide that kind of help to small businesses.

“In all prior recessions, the big industries got bailouts,” he said. “Small businesses get the brunt of the damage by losing the volume of their businesses. It’s inadequate that they don’t have a second round but at least there was a first round and I’m sure that helped prop up businesses in the first few months.”

Sixty percent of manufacturers in the report said that they were struck by disruptions in the supply chain. In the report, Mantec points to shortages in raw materials including adhesives, food and packaging supplies as a cause. The report also notes that shortages in PPE, something that Mantec helped many of its clients acquire, were a great concern for companies.

Tarsa said that C.L. Sturkey was lucky when it came to preserving its supply chain. One of the company’s suppliers is located outside of Mulan, Italy, and the others are in rural Virginia and Ohio, but the company did not see any significant impact to its supply. In regards to the rural suppliers, Tarsa thinks the lower infection rates on average in rural regions was a positive outcome for the supply chain.

Localizing supply chains

If there was any positive result from the pandemic, Lloyd said it would be the pandemic’s impact on the Chinese supply chain, which caused many US companies to reevaluate what they get from outside the country.

“Companies are looking at bringing more manufacturing into the US so that they have greater control over their supply chains,” he said. “In some cases that includes vertical integration or companies making their own components so they aren’t relying on a supplier.”

Lloyd said that if there is anything that concerns him about how Mantec’s clients and other manufacturers handled the past six months, it is that many companies have yet to look at the pandemic’s long-term effects. In addition to the short-term issues related to keeping a business open, he said, manufacturers need to be sure that they are keeping up with the quickly changing industry.

“The nature of running manufacturing has become very short term,” Lloyd said. “Long term, that’s an issue. Companies need to be thinking about where manufacturing is going, how new products are being developed and the changing competitive atmosphere.”