JOHNSON CITY, Tenn. (WJHL) – LPI Inc. CEO David Hatley probably never envisioned his company buying protective masks and sending them to the hot tub and spa maker’s suppliers in China.
That’s just what the company did recently, though, to keep its 300-plus employees working as the COVID-19 novel coronavirus impacts supply chains and transportation of Chinese-made components.
“The coronavirus has definitely put a strain on our manufacturing capacity, just mainly due to the restraints in our ability to get our goods on time, our raw materials on time from overseas,” Hatley said Thursday. “We actually sent masks over from the US over to China, to our team in China over there just to be able to get one factory back to work because there were no masks in China.”
Whether it’s pumps, jets or subwoofers for the Bluetooth sound systems that come standard with more than half of LPI hot tubs, China is the source for many of the company’s building blocks.
“One component is all it takes,” Hatley said as nine finished tubs an hour moved off the line in LPI’s 320,000-square-foot building. “We have backup suppliers for almost every component we have, but there are certain components that we can’t back up, that are custom-tooled and things like that that are made overseas. Those are the ones that literally can stop the manufacturing process if they’re not here.”
Production, transportation both issues
Several factors are contributing to delays in receiving product, Hatley said. When the virus first struck China, factories closed down. Now, almost all LPI’s suppliers are back up and running, albeit a few weeks behind, but shipping remains a problem.
“The US Coast Guard is calling the ship, they’re saying, ‘do any of your people have fevers,’ — if anyone has a fever they literally have to inspect the entire ship, go container by container. So every container we’ve gotten has probably averaged a three to four week delay in getting here.”
LPI has responded to what Hatley called “a real tight spot on inventory” by adjusting scheduling, moving inventory around, and relying on a surplus of materials built up during the seasonal slowdown in December and January.
He said that inventory is beginning to dry up at this point. With Chinese suppliers up and running, the primary hit to LPI will probably come on the freight side.
“Instead of putting things on the boat we’ll be putting things on the airplane just to keep the production process rolling, which is very expensive.”
Hatley said the leadership team at LPI, which is experiencing very strong business demand, is preparing for the worst while hoping for the best. They’ve got about 10 weeks of raw materials available right now.
“We expect everything hopefully to get back to normal in the next 90 days or so, but we’re preparing that it won’t be back to normal,” Hatley said. “We’re just looking at air freight, we’re looking at additional manufacturers in the US that can supply us – all to make sure our production’s not interrupted.”