Hartford Business Journal

HARTFORDBUSINESS.COM | MARCH 20, 2023 11 ON THE RECORD | Q&A So that's a new problem. Q. What are you seeing with manufacturers? A. I think they have a few different issues and it really depends on their supply chain network. In an effort to reduce their costs, manufacturers over several decades have become much more dependent on trading part- ners outside of their control and outside the country. And obviously those connections got exposed throughout the pandemic and that continues to be a challenge. Manufacturers have muscled their way through the last couple of years trying to find new supply sources. Now that they're coming up for air, I have constant conver- sations around the strategy, and whether or not their network needs to be rethought. Should they rethink their manu- facturing strategy in terms of moving everything to a closer loca- tion? That depends on a company's portfolio of products and the char- acteristics of their customer base. For some companies, the right choice may be to have their manu- facturing onshore because they need to have full control. For other companies it might be rethinking how much inventory they need, or changing their manufac- turing approach like shifting final assembly to the U.S. Q. You mentioned that recent data from brokerage firm Colliers International indicated there are over 200 warehouse facilities currently being built in the U.S. with at least 1 million square feet of space. What does that tell you about how companies might be thinking about their supply chains? A. Demand for commercial real estate for warehousing is massive, which indicates companies will be holding more inventory onshore post pandemic. These facilities are also being designed to be fully automated, to address the talent shortage that we have. As companies hold more inventory they will also be relying more on automation to manage it. Q. We've heard a lot about the reshoring trend — bringing manufacturing back to the U.S. Is it real, or an overhyped concept? A. There's always a question about bringing manufacturing back into the United States. Generally it is hard to create a business case for that without some form of government incentive. The operating costs of a manu- facturing facility in the United States are massive in comparison to many other locations. But there are options for more nearshoring, (or moving parts of the supply chain closer to the U.S.). I have one client that has built a manufacturing facility in Puerto Rico. They typically have always done manufacturing in Asia, but now they're transferring the manu- facturing processes to Puerto Rico. Mexico is an option, but I've seen a lot of recent movement a little bit further into Central America. Places like Honduras are popping up as sources of manufacturing capability. It really boils down to what makes sense for the business at the right cost and right quality. Q. What about developers and construction? A lot of local apartment projects have been delayed and have longer lead times because of various mate- rials shortages. Are those issues getting better? A. A lot of materials for building a home now come in from Asia. Vietnam comes to mind when it comes to some of the wood and products like that, that we need. Those still have very lengthy lead times and I have not seen those come down. Q. When do you expect to see pricing come back in line and inflation easing? A. There will be a lag, a pretty decent lag. We're starting to see some of the costs normalize, but I still hear every CEO talking about how the supply chain continues to be a burden on their financials, which says we're not there yet. We're probably still at least a good year out before we're going to start seeing some of that making its way through. Q. What about technology investment? Where are compa- nies investing in terms of technology to improve supply chain management? A. The greatest challenge compa- nies are facing right now is typically with their forecasts, which really drove a lot of decision making around supply chain. Forecasts are created off of history, but that data isn't great right now and so the forecast accuracy is probably going to be challenged for a period of time. I'm seeing some investment in more advanced analytical capa- bilities that try to predict demand by using different variables besides history. I'm also seeing that companies are bringing in more data scientists. Companies are also investing more in transportation and ware- house management software to reduce costs. New CONNEX website links state's manufacturers and suppliers By Christopher Hoffman Hartford Business Journal Contributor J ill Mayer, CEO of Bead Indus- tries, describes the last several years as "feast or famine" when it comes to securing supplies for her Milford-based manufacturer. "Last year, we couldn't get brass, but now we have more than we need for the next year," said Mayer, who attributed her supply chain woes to the COVID-19 pandemic and its lingering aftermath. "It's frustrating on either end." Now Mayer believes she's found a solution: the recently inaugurated CONNEX Connecticut online service. The site provides state manufac- turers with quick and easy access to in-state suppliers and other manufac- turers as well as a place for them to post and view requests for proposals and qualifications. Membership is free thanks to a partnership between the state of Connecticut and Connecticut Busi- ness & Industry Association (CBIA). Mayer said CONNEX has the potential to solve her supply chain problems. COVID and its fallout revealed that the company had too few suppliers, she said. "The primary reason for CONNEX is to develop long-term relationships with new suppliers," said Mayer, whose company makes electrical and plumbing parts and employs about 50 people. "Finding suppliers was extremely difficult for many of us (local manu- facturers) these last two years. If I can access more (local) suppliers, then I think I'll be less exposed to interruptions. CONNEX will make this easier for us." Mayer added that sourcing more supplies also has the potential to reduce costs and speed up delivery. "Hopefully costs will go down due to competition," she said. "And it's also transportation costs. If I have a supplier in Chicago, it's going to take me longer to get (the item) and it's going to cost more." Public-private partnership That's music to the ears of Paul Lavoie, the state's chief manu- facturing officer, who is urging state manufacturers to sign up for the service. CONNEX Connecticut, which launched on Feb. 5, is part of the state's strategy to support and expand Connecticut manufacturing, which remains the second-largest sector of the state's economy by GDP. The service aims to not only ease manufacturers' supply chain woes but potentially also return supply chains to the state, creating new jobs and companies, Lavoie said. "The purpose is to build an ecosystem in Connecticut where manufacturers can put their capaci- ties and capabilities as well as their certifications and strengths and opportunities into a database so they can use that database to find each other," he said. CONNEX — developed by Utah software company i5 Services — operates in 15 other states, and any Connecticut companies that sign on by March 31 will get free access to those out-of-state databases as well, Lavoie said. Lavoie credited CBIA, the state's largest business organization, with bringing the idea to Connecticut, and the two formed a partnership to make it happen. Lavoie said his office secured $606,000 from the state Manufac- turing Innovation Fund to cover the service's costs for two years, enabling Connecticut to offer free membership. Manufacturing consulting firm CONNSTEP, which is affiliated with CBIA, will administer the program, Lavoie said. CBIA CEO Chris DiPentima praised the state's willingness to partner with his organization to bring the service to Connecticut. "This probably wouldn't have happened without the public-private partnership," DiPentima said. "This is something that we continue to do a good job on in Connecticut: collabo- rate at the public and private level to bring business to our state." CONNEX Connecticut has been up and running for over a month, and signups are exceeding expec- tations, Lavoie and DiPentima said. In the first two weeks, more than 200 companies joined, signifi- cantly more than the state's most optimistic projections. The state initially hoped 750 companies would sign on by year's end, Lavoie said. "I'm highly confident we're going to blow the doors off that 750 number," Lavoie said. Jill Mayer

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