PRICHARD, W.Va. – Whenever the Sogefi plant here runs out of resin or computer chips or cardboard boxes or wooden pallets or really anything at all, it’s Randy Simpkins’s problem. And whenever one of Sogefi’s customers howls about a late shipment, that’s Simpkins’s problem, too.
These days, Simpkins has plenty of problems.
The 42-year-old logistics manager is smack in the middle of a global supply chain crisis that reaches from factories in Europe to giant cargo ships anchored off the Atlantic coast, all the way to this rural hamlet of fewer than 300 residents.
The waves of economic disruption unleashed by the pandemic – including an unexpected shortage of workers – have made supply issues a constant preoccupation for the entire management team at this auto parts plant. But Simpkins seems to get the worst of it.
“No issue is ever solved these days, just managed,” he said. “It’s an exercise in how flexible you can be in an inflexible world.”
When Sogefi’s production managers needed springs, it was Simpkins who scoured the warehouse in a fruitless 4 a.m. search. And when a lack of parts delayed a shipment of one of the 80 products manufactured here, he quickly heard about it.
“Randy is on calls every day getting yelled at: ‘Where is my shipment?'” said Danny Samples, 60, a production manager. “The pressure is incredible.”
The scene inside this plant illustrates the deepening production challenges roiling American industry as it shakes off the pandemic. Parts shortages, price spikes, port delays, labor trouble – all are complicating the economy’s rebound and threatening to ignite an inflationary spiral that could derail President Joe Biden’s hopes for a smooth recovery.
The supply headaches also are forcing routine-addicted manufacturers to improvise. On the factory floor each day, production managers call audibles like a quarterback staring down a blitz.
“We had to become agile to survive,” said Samples. “It puts more pressure on the individual. Our training needs have skyrocketed.”
An Italian multinational, Sogefi has 40 manufacturing sites in 23 countries. Its sole U.S. unit, located along the Big Sandy River here, produces engine manifolds and oil filters for just about every major global automaker.
Sogefi is the sole source for an oil filtration module used on every six-cylinder Fiat Chrysler engine. This month, the plant begins round-the-clock production of a key part for Ford’s F150 pickup. Overall, orders are at or above pre-pandemic levels.
With products in nearly 10% of the cars and trucks produced in North America, any interruption in the plant’s output reverberates throughout the industry. In April, GM’s assembly of a diesel engine for the Silverado pickup truck was stalled for one day when a supplier issue kept Sogefi from delivering a vital part.
“We can’t miss a shipment,” said Troy Thomas, 51, the veteran plant manager. “Or we shut down big companies that are producing billions of dollars of metal a day.”
Sogefi’s travails are mirrored across industrial America. Manufacturers complain of “record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products,” the Institute of Supply Management said earlier this week.
Federal Reserve Chair Jerome Powell told reporters in late April that supply chain “bottlenecks” are slowing goods production and will likely contribute to a temporary rise in inflation.
“The supply of various inputs into the goods part of the economy will have to be brought back up to speed,” he said.
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At 9:30 a.m. each day, the Sogefi team holds a video call with their North American purchasing managers in Montreal and Monterrey, Mexico. The agenda can usually be divided into questions of “too much” and “not enough.”
The company’s freight bill for April was twice the budgeted figure, reflecting the shift of some desperately needed raw materials from sea to more costly air transport.
Meanwhile, a shortage of 26-cent cardboard boxes recently delayed a shipment of modules worth $33 apiece.
Earlier this year, the absence of one 12-cent part – one of 20 components in another product – halted an assembly line for two weeks, Simpkins said. But even with the line idled, he had to find storage space for the other $30 worth of components that continued arriving.
The warehouse now holds $2 million in excess inventory, about half of that tied to a GM plant that is temporarily shut because of an industry-wide semiconductor shortage.
Stockpiling all of the 420 different items Sogefi uses would cost too much and violate the just-in-time strategy that dominates American manufacturing.
But when supplies don’t show up, it costs workers as well as the company. One Sogefi production line stopped when the plant ran out of springs and then stopped again when a cargo vessel carrying a shipment of gaskets was stranded for several days off the coast off Norfolk.
“If we don’t have any supplies, they’ll send us home early,” said Nicole Madison, 31, who assembles Volkswagen manifolds. “I’ll have reduced hours and a short paycheck.”
State unemployment benefits would not be approved in time to cover her missing wages. So like many of the plant’s 400 workers, Madison, a single mother of a 5-year-old boy, covered the down time by exhausting her paid vacation.
That means she’s had to cancel two summer trips, including a reunion with a brother in Houston whom she hasn’t seen for 25 years.
“It’s going to be a tough seven months for a single mom with no child support,” she said.
Sogefi relies on about 100 suppliers, spread across North America, Europe and Asia. About a dozen appear on Simpkins’s “crisis management list.” Before the pandemic upended global commerce, perhaps one or two suppliers would typically have been struggling.
“You had time to react,” said Todd Gregory, the plant’s purchasing manager. “Now you’re told you’re going to miss shipments two days from now.”
On one recent day, Gregory, 48, was surprised to learn that a shipment of plastic resin due to arrive at the beginning of May would be delayed four weeks. A brutal Texas cold snap that ravaged the petrochemical industry in February, forcing the abrupt shutdown of resin plants, was still disrupting deliveries.
The resin shortage is a problem for Sogefi, which uses almost 4 tons of the substance each week in its injection molding operations, and for several of its suppliers. As the pandemic upheaval has continued, Sogefi has grown more involved in its suppliers’ affairs, including their sourcing decisions and hiring.
That’s ironic, given Sogefi’s own difficulties filling open positions. A recent job fair in Kentucky drew only two applicants, said Jeremy Dalton, the plant’s human resources manager. Before the pandemic, a job posting on Indeed.com might draw 100 resumes. Today, it’s lucky to get five.
Thomas worries that extra federal unemployment benefits are discouraging people from returning to factory jobs. By his calculation, Sogefi would need to pay an hourly wage of $23.50 to rival what some West Virginians can earn without working. At the height of the pandemic, he increased hourly pay by $5 to reward workers who stayed on the line.
Now, along with paid family and medical leave, the pandemic jobless aid makes his $12.75 starting wage unattractive.
“These two things will destroy manufacturing in the United States,” he said.
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As the U.S. economy accelerates, the plant finds itself pinned between unforgiving automakers that say a year is long enough to have worked out any supply chain kinks and Sogefi’s suppliers, who have their own headaches.
Sogefi’s contracts with customers such as GM, Ford or Toyota often require annual price cuts of 1% to 3% over a five-year deal. Automakers assume that manufacturers like Sogefi will continually get more efficient and thus be able to produce needed parts for less.
That is usually true, but it doesn’t leave Thomas much breathing room. And his current supply scramble has all but eliminated the spare hours used to develop less expensive production methods.
Likewise, when one of his suppliers stumbles, he can’t easily switch to a new source. His automaker customers require a lengthy process to demonstrate that any potential part maker or material provider can meet rigorous quality standards.
“You can’t change the brand of coffee you drink in the morning without six months’ notice,” he said.
Steady supplier price increases have convinced Simpkins that inflation will be more lasting than official Washington expects. Thanks to record-high lumber prices, standard 48″x42″ wooden shipping pallets have jumped to $18.50 apiece from $10.82. The plant uses more than 7,000 of them each year.
Even supply problems that are beyond Sogefi’s control can end up costing the company. A lack of copper from a German raw material provider recently interrupted Sogefi’s production of an electric actuator, forcing a one-day shutdown of an engine assembly line at GM’s Flint, Mich., facility.
To catch up with scheduled deliveries, Thomas began expediting shipments of the actuator in twice-daily truck runs. The added cost of the 800-mile round trips comes out of Sogefi’s pocket.
The supply upheaval rattles production schedules as the workers responsible for implementing them. The constant demand to manage unexpected shortfalls – and adjust production accordingly – has dented efficiency, said Samples.
A few months ago, the plant exhausted its supply of 30-pound fishing line, which Sogefi uses to hold together the accordion-pleated paper inside each filter. Gregory tried everywhere he could think of to find more of the shimmering filament, including retail outlets.
“We cleared out Cabela, Bass Pro – even Amazon,” he said.
The inability to obtain enough of the right parts at the right time acts means production runs are shorter. Instead of the usual 8,000-yard spools of industrial fishing line that Sogefi normally uses, the retail version came in smaller 400-yard versions. Instead of one spool lasting an entire shift, they must be replaced every 15 or 20 minutes.
Workers must stop the line more often to swap out the tooling used to make one part for the equipment needed to make something different. Production of diesel oil filters stopped one day when the plant ran out of the plastic caps that cover one end.
“We had to stop and make something we didn’t want to make. We’re bouncing like crazy,” said Samples. “The schedule is not based on demand. It’s based on what we can do.”