Submitted by mmetz@kcma.org on Tue, 01/11/2022 - 19:48
Industry News Update November 11, 2021

The Kitchen Cabinet Manufacturers Association is committed to bringing you the most up-to-date information in the industry. Here’s a look at what’s happening:

KCMA GOVERNMENT OUTREACH PROGRAM WELLBORN CABINETS TOUR

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Stephen Wellborn of Wellborn Cabinets provides a virtual tour of the Ashland, AL facility for senior U.S. government officials from Customs and Border Protection, the Department of Commerce and Homeland Security Investigations (HSI) on November 8, 2021. The tour was part of the KCMA’s outreach program informing government leaders about key trade and enforcement issues. 
 
Over the course of the past year the KCMA has engaged with key government trade agencies and Members of Congress on trade and enforcement issues of importance to the domestic cabinet manufacturing industry.  Earlier this year the KCMA hosted a webinar for Customs officials to outline key fraud, circumvention and evasion practices impacting the industry and its employees. Over 70 staff members from Commerce, Customs and HSI participated in the tour, including management from the Consumer Products and Mass Merchandising Center that monitors imports of cabinets at U.S. ports. Also joining the tour on site were Betsy Natz, KCMA CEO, and Luke Meisner, Counsel and Partner at Schagrin Associates.  A special thank you to Chris Carr at Wellborn for his work as the on-site videographer and Tamara Browne of Schagrin Associates for her work with Customs on organizing the event.
 
We thank Stephen and the entire Wellborn operation for an outstanding tour.

 

HOW TYSON FOODS GOT 60,500 WORKERS TO GET THE CORONAVIRUS VACCINE QUICKLY

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When Tyson, one of the world’s largest meatpacking companies, announced in early August that all of its 120,000 workers would need to be vaccinated against the coronavirus or lose their jobs, Diana Eike was angry. Ms. Eike, an administrative coordinator at the company, had resisted the vaccine, and not for religious or political reasons like many others here in her home state.

“It was just something personal,” she said.

Tyson’s announcement that it would require vaccinations across its corporate offices, packing houses and poultry plants, many of which are situated in the South and Midwest where resistance to the vaccines is high, was arguably the boldest mandate in the corporate world.

“We made the decision to do the mandate, fully understanding that we were putting our business at risk,” Tyson’s chief executive, Donnie King, said in an interview last week. “This was very painful to do.”

But it was also bad for business when Tyson had to shut facilities because of virus outbreaks. Since announcing the policy, roughly 60,500 employees have received the vaccine, and more than 96 percent of its workforce is vaccinated.

 

EXPORTS SLUMP AS TRADE GAP HITS ANOTHER RECORD

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The gap between U.S. exports and imports grew 11.2% last month, according to the latest government data. The U.S. trade deficit hit $80.9 billion in September, up $8.1 billion from August, setting a new all-time high for the second month in a row. Imports increased slightly while exports fell as supply chain concerns continue to hamstring manufacturers.

The data, released by the Census Bureau and the U.S. Department of Commerce, points to intense demand in the U.S. for industrial supplies and materials as well as capital goods like electronic equipment:

  • Goods exports fell by $7.1 billion to $142.7 billion last month, mostly thanks to fewer industrial supplies and materials exports, which fell $5.7 billion
  • Exports of nonmonetary gold fell $1.9 billion
  • Trade of U.S. crude oil, petroleum products, and other precious metals all fell about $1 billion each

At the same time, imports of industrial supplies and materials increased by $1.0 billion, with a notable increase in organic chemicals imports, which rose $0.9 billion by itself.

A similar trend is visible in the capital goods sector. Exports fell $1.6 billion there as the U.S. shipped fewer semiconductors and civilian aircraft engines. Capital goods imports grew by $2.5 billion thanks to U.S. demand for computers, which rose by $1.2 billion, and electrical apparatuses, which rose by half a billion dollars. Read more.

 

JAPAN STARTS LAYING LEGAL GROUNDWORK FOR TSMC SUBSIDY

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The Japanese government will establish a legal framework for subsidizing new domestic plants for advanced semiconductors, starting with Taiwan Semiconductor Manufacturing Co.'s planned facility in Kumamoto Prefecture.

Countries around the world increasingly see chips as a national security concern as a global shortage causes widespread disruptions in the auto sector and beyond. To bolster domestic supplies, the government aims to submit legislative changes to the parliament as early as December and set explicit rules on subsidizing the construction of new facilities.

The government looks to update a law that currently applies to companies developing 5G wireless technology, designating semiconductors a new priority field. It will secure the equivalent of billions of dollars in a supplementary budget for fiscal 2021 to establish a subsidy fund under the New Energy and Industrial Technology Development Organization.

TSMC, which announced the Kumamoto plant this October, is expected to be the first beneficiary of the framework. The government reportedly looks to shoulder up to half of what Prime Minister Fumio Kishida has described as an investment by TSMC on the scale of 1 trillion yen ($8.82 billion). Other chipmakers could also qualify in the future.

Construction on the TSMC plant will begin in 2022, with mass production to start in 2024. The facility will produce chips used in a wide range of products, from cars to appliances.

To promote fair trade, the World Trade Organization considers export-promoting subsidies and subsidies granted in exchange for the use of domestic parts and materials to be automatic violations, or "red box" supports. The TSMC subsidy is widely considered to fall into the "amber box," which denotes supports that are judged on a case-by-case basis. Still, other countries could lodge disputes with the WTO, depending on how the subsidy plays out.

 

PURDUE STUDY FINDS COMMONALITIES IN INDIANA MANUFACTURERS WITH LOW TURNOVER

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The average turnover is 40% a year, but 5% of companies have rates at or below 15%.

For the past three years, DCMME (Dauch Center for the Management of Manufacturing Enterprises) at Purdue University have been surveying human resources managers at manufacturing companies in the 10-county area around Purdue. The majority of those surveys—over 100—have included actual site visits.

Eighty-three percent of more than 100 surveyed companies, in the 10-county area, reported staff turnover as their leading concern. The most common figure for staff turnover is 40% per year, with most in shop-floor, hourly paid jobs.

In great contrast to the many, about 5% of the companies have turnover rates at or below 15%, without paying more than other companies local to them.

Managers often cite pay as the leading reason for employee-leaving. It is not. The costs of staff turnover at 40% levels is not just financial. Indirect costs are significant in high staff turnover environments; working staff are disrupted and disappointed, with possible effects on morale, safety and quality. Without quantifying these “costs,” we cannot adequately fix them.

In the 10-county area, up to nine out of 10 new hires are leaving within the first 90 days, and sometimes on their first day.

So, what are the successful 5% of 10-county companies doing differently? Read more.

 

WHY CHINA’S SUPPLY CHAINS ARE BREAKING DOWN

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Supply Chain Disruptions Aren’t Going Anywhere Soon

Global supply chains are clogged up amid booming consumer demand—and are expected to remain that way through the holidays—and many of the bottlenecks are in China. Smaller companies have reported up to nine-month fulfillment delays on orders from China, while larger ones are struggling to keep shelves filled in the United States.

One reason for the slowdown is the surprising resilience of both U.S. consumption and Chinese production after the coronavirus pandemic began. The U.S. recession that followed was relatively short, and wealthier Americans are now spending wildly. Chinese manufacturing also recovered faster than expected from its crisis period early last year. But shipping companies had already cut their schedules, causing disruptions that are still reverberating through the overstretched global system.

Oh, and many of the shipping containers that circulate worldwide are stuck in North America: For every 100 containers that arrive there, only 40 are sent back to Asia or Europe. Excess containers are piling up in Los Angeles and other U.S. ports while Chinese suppliers fight for them. It will take months before container manufacturers in China ramp up to meet demand.

Another factor is China’s fear of reintroducing the coronavirus. COVID-19 rules, such as the recent lockdowns in Vietnam, have disrupted shipping worldwide. But the issue is particularly acute in China, where most foreign travel remains off-limits, including a lot of outbound travel. Ports are especially sensitive spots, with regular shutdowns for mass testing in the case of infected personnel.

In August, the Port of Ningbo—the world’s third busiest—was closed over a single COVID-19 case, after the Port of Yantian—the world’s fourth busiest—shut down in May. 

Moreover, Chinese manufacturing has struggled in 2021. Power shortages are part of the problem, but growing labor shortages present a more permanent problem. COVID-19 restrictions have made travel harder for many migrant workers who once moved regularly in search of work. China also faces a shrinking working-age population.

In the long term, the demographic challenge is likely to drive diversification of the supply chain away from China.  Read more.