Andrea Lara Routzahn says the supply chain chaos caused by fallout from the COVID-19 pandemic is unprecedented – and that’s saying something.

Routzahn has worked in global sourcing for the better part of 30 years. The chief merchant at Top 40 supplier alphabroder (asi/34063) has persisted through sourcing challenges related to wars, natural disasters, political upheaval, terrorism, crop failures, labor strikes and other issues. And yet, none of those disruptions alone compare to the supply network carnage wrought by COVID.

“The pandemic has been something akin to all of these factors occurring simultaneously and for the better part of a year now,” Routzahn relates.

The consequences for the promotional products industry – for all industries – hasn’t been good. In promo, the supply chain mess has led to maddening inventory shortfalls that have made doing business much more challenging. In many instances, the troubles have caused distributors to lose orders with end-clients.

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Higher prices on products, longer times for order production, eroding customer service levels, delays in delivery of finished orders and other headaches are all part of the toxic combo that’s ultimately rooted in COVID. A resurgence of coronavirus cases in China, driven by the delta variant, could complicate matters further, as that nation is where the majority of North American-sold promo products are produced.

Nonetheless, quality suppliers aren’t acquiescing and waiting for better days. They’ve been proactive in taking what steps they can to mitigate the issues that have plagued promo and other industries. And, they’re striving to offer real solutions.

“I can promise that every supplier wants to ship every order they possibly can,” says Jonathan Isaacson, CEO/chairman of Top 40 supplier Gemline (asi/56070) and Counselor’s 2021 Person of the Year. “We’re doing everything in our power to make that happen.”

Custom Direct Importing Services

One solution is offering direct-import programs that focus on custom products.

Before the world had ever heard of COVID-19, Philadelphia-based Pop! Promos (asi/45657) developed a program called Rapid Import. Company President Sterling Wilson says the service is especially suited to overcoming pandemic supply chain challenges.

A top issue is that it’s taking exponentially longer (and getting vastly more expensive) to ship product from overseas factories – mainly in China and other Asian nations – to market in North America. That’s a result of rampant importing demand from the rapid rebound in economic activity following COVID shutdowns. The delays have made it harder for suppliers to replenish inventory, leading to gaps in stock.

“I can promise that every supplier wants to ship every order they possibly can. We’re doing everything in our power to make that happen.” Jonathan Isaacson, Gemline

Still, as Wilson explains, the Rapid Import model bypasses bottlenecks. Instead of importing containers of products in stock colors and printing them in the United States, Pop! Promos custom manufactures each order from scratch at its factories in Asia and then flies the goods directly to the U.S. with a guaranteed delivery time of 30 days or less.

“Rapid Import is a simpler supply chain,” Wilson explains. “We have redundant manufacturers for each of our products, invest in those factories to ensure a consistent access to raw materials and labor, allocate orders based on current capacities, and then have those orders overnight mailed from the factory floor to the USA. Rapid Import literally ‘flies over’ the most disruptive forces in our industry right now: forecasting error, container unavailability, port congestion and U.S. labor shortages.”

The service was a boon to a distributor that recently landed a well-known consumer products company as a client. The end-client is rebranding and expanding over the next six months and needed to place large monthly merch orders for the remainder of 2021 to support the activity.

According to Wilson, the distributor couldn’t find adequate inventory of needed products to service the client’s needs reliably. “We were able to solve this problem by guaranteeing delivery dates of consistent product for six months in a row and locking in a fixed price with our manufacturers for the full order quantity,” he shares.

Counselor State of the Industry 2021 Report

Prime Line (asi/79530), a former Top 40 supplier that in late 2017 became alphabroder’s hard goods division, also offers a custom overseas direct sourcing program, Source Abroad, that company representatives say can help navigate supply chain pitfalls.

With Source Abroad, the supplier carries no inventory, but rather produces orders on demand overseas, including print and decoration. It then ships to a customer’s designated locations in the U.S. and Canada. The model revolves around direct-to-factory manufacturing.

“Source Abroad manufactures to order, so we’re able to guarantee that the goods will be available on time, according to the customer’s specifications,” explains Andrew Brodey, vice president of sourcing. “It requires planning ahead but it’s a very effective solution to the current inventory challenges that the industry is facing.”

Brodey says the service can include taking an existing product and customizing it, such as with more complex and sophisticated logos, custom fabric colors and unique features not available in domestic inventories. There’s also Source Abroad Express, which centers on fast-turn custom overseas items, flown in by air and delivered within 30 days of sample approval.

“We have streamlined our operations to focus on the most cost-efficient ways to deliver the goods,” says Brodey. “We have very efficient logistics, including freight contracts with carriers, and consolidation of our own ocean cargo containers at origin. All of this leads to cost advantages, as well as the ability to control the supply chain and the products for our customers.”

Persisting Through Inventory Issues

Due to required lead times and other factors, direct importing custom products isn’t always a feasible option, industry executives point out. Indeed, the industry’s longstanding supply chain model – suppliers importing stock products from overseas, warehousing them and selling them domestically as they’re ordered – remains overwhelmingly dominant.

It’s that very model, of course, that’s experienced so much disruption from the COVID complications. Nonetheless, suppliers are trying to make lemonade from lemons.

“There’s no silver-bullet solution, no magic answer, but we’re doing the best we can to work through this,” says Randy Chen, president of New Jersey-based Impex International, which provides direct import and warehousing services for promotional products companies.

Counselor State of the Industry 2021 Report

A favored tactic among suppliers has been importing more inventory than normal, farther in advance than normal. “We saw this disruption coming and began ramping up our inventory purchases a while ago so that now we’re carrying a record level of inventory in an effort to provide the breadth and depth of products our distributor customers need,” says Gemline’s Isaacson.

Polyconcept North America (PCNA, asi/78897) has made big inventory investments as well. Earlier this year, the Top 40 supplier invested an incremental $10 million in inventory for top-selling products. To further strengthen its inventory position, PCNA is investing in additional inventory: an incremental $20 million across a variety of top-selling products.

Clearly communicating with distributors about that inventory has been as important a goal as carrying it, says PCNA Chief Revenue Officer Holly Brown. “We’ve implemented a customized replenishment system that reacts daily to dynamic movement and trends on top-selling SKUs,” says Brown. “We also deployed a ‘deep inventory’ button on our website that gives customers real time inventory feedback at their fingertips. Updates to our website happen daily with both in-stock updates and future order information.”

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Meanwhile, alphabroder is collaborating closely with partners on pre-planning and taking bigger forecast positions on the styles, colors and sizes its customers buy day-in and day-out. “We’re getting smarter, leaner and better,” says Routzahn. “We’re making sure we’re investing in the styles and colors that will support this industry, support our customers and provide brand-enhancing value to the many end-users who use the power of promotional products to grow their business and deliver their own brand stories.”

Relatedly, executives at Gemline, PCNA, alphabroder and other suppliers say their sourcing teams have been burning the midnight oil to work through the importing bottlenecks, port congestion and domestic transportation delays to get product here and stocked as expeditiously as possible.

“We’ve been investing all year in freight and freight upgrades to ensure we are able to get the product here when our customers need it,” says PCNA’s Brown. “We have a team overseas who’s in daily contact with our factory partners, along with daily calls with our freight forwarder, to ensure our product arrives in time for our customers. The cost to do this has been over five times pre-COVID rates, which we’re committed to do in order to delight our customers.”

Among industry insiders, a question has been floated regarding whether or not it would be feasible for suppliers to form a kind of importing cooperative that, through increased buying power clout, might help get inventory stateside faster than what’s happening currently. In general, suppliers say the idea isn’t workable. Competitive factors are one issue. Another is that even greater collective buying power might not be enough to appreciably improve the importing timeline, given the spending strength of other importers that are also vying for containers and shipping space.

“We’re competing with Walmart, Lowes – with literally everyone else who’s importing,” says Chen, noting that promo firms are already paying highly exorbitant freight rates to compete and outspending mega retailers and other deeper-pocketed importers for greater pride of place in the shipping priority order probably isn’t likely for the industry.

Adds Isaacson: “Home Depot, which has more buying power than our entire industry, is being hit with the same supply chain problems. They chartered their own container ship.”

“We’re making sure we’re investing in the styles and colors that will support this industry, support our customers and provide brand-enhancing value to the many end-users who use the power of promotional products to grow their business.” Andrea Lara Routzahn, alphabroder

Even so, one thing some suppliers have done to further mitigate issues is to consolidate products sourced from multiple factories into single shipments, a service Chen’s Impex provides help with, for instance. “It’s more streamlined and cost-effective,” he explains.

Despite the challenges of the pandemic, some suppliers have also proactively expanded their product offerings through partnerships with various retail brands, all in an attempt to give distributors and their customers more and better options.

Starting with the launch of its Batch & Bodega kitted food gift line last year and continuing with its HPG Exclusive collection this year, Top 40 firm HPG (asi/61966) has been consistently adding new name-brand options to its mix. So have PCNA through its partnerships with brands like UNTUCKit and tentree, and Gemline through brands like Slowtide and Cuisinart.

“We’re in constant close communication with our brand partners so we can ensure we understand where the best opportunities for us both lie and that there’s product to support that,” says Isaacson.

The Made-in-the-USA Option

Made-in-the-USA products are another option some suppliers offer to help bypass issues associated with importing and inventory replenishment. Top 40 firm Koozie Group (asi/40480), for instance, produces about a third of its products domestically.

“Koozie Group has the largest assortment of promotional products made, assembled or printed in the USA,” says Melissa Ralston, chief revenue officer. “Our 900-plus item selection includes promos suited for any client or market, at a variety of affordable price points and available with quick turn-around times.”

Meanwhile, some suppliers like Chicago-based Lion Circle (asi/67620) focus solely on domestically produced items.

“With our Made-in-the-USA model, our turn times are faster and we can offer stability of pricing – our prices are the same as last year – that you’re not getting with imports,” says Rich Carollo, Lion Circle’s president.

Are those upsides attracting more distributors and their end-buyers to buy USA, though?

For distributors on ESP, ASI’s database of products from across promo, use of the “Made-in-the-USA filter” as a percentage of all searches hovered between 1% and 1.5% in 2019. Starting in 2020, that percentage began to increase – and then spiked in April last year, where Made-in-USA searches accounted for more than 4% of all ESP searches. Since then, ESP’s Made-in-USA searches have been on a steady decline and through July 2021 they had retreated nearly to 2019’s levels of interest.

Nonetheless, some suppliers report that interest in USA-made is on the rise. Carollo says that the importing/inventory issues the industry has dealt with have definitely sent new business his way. “We’re absolutely seeing orders we haven’t seen before because of the importing supply chain pressures,” says Carollo. Koozie Group has also experienced increased inquiries about its domestic-made items. “USA-made is back in a big way,” says Ralston.

Working Through Labor Issues

Amid the economic bounce back from COVID lows, achieving adequate staffing levels to produce orders and provide expected customer service has proven an uphill climb for many suppliers.

Companies across industries are facing similar challenges with hiring and retention: Open positions abound in the U.S. as organizations strive to staff up following the mass layoffs that occurred during COVID-19 in 2020. “Hiring has been a challenge in this marketplace,” confesses Carollo.

“PCNA has been ramping up our production workforce since late Q1 in anticipation of increased demand.” Holly Brown, PCNA

Some executives proclaim the search for workers will become easier if augmented federal unemployment benefits expire in September as currently scheduled. However, proactive firms haven’t been sitting around waiting for that day to come; they’ve been recruiting aggressively and offering more competitive compensation and benefits. While that contributes to driving up costs, it has, at least in some instances, helped beef up staff levels, which helps suppliers better meet expectations on production and customer service.

“PCNA has been ramping up our production workforce since late Q1 in anticipation of increased demand,” Brown. “We have implemented further training and a graduated pay scale for higher skill roles to retain top production talent in areas like embroidery. Hiring continues in all production facilities, ahead of demand in all areas except our Bullet division where we do have some extended lead times for certain decoration methods.”

Even with the intensified recruiting and retention efforts, the reality is staffing does remain an issue for many suppliers. “The current labor market is one of the most significant challenges at the moment and is not expected to change measurably until the fall,” says Ralston.

As suppliers navigate the issues, they say distributors can help by getting out ahead of orders.

“We’re encouraging all customers to place orders as early as possible to secure inventory and best position for production capacity,” says Brown in a sentiment near universally expressed among suppliers. “Attention to this now will help us to help our distribution partners ensure continuity of supply and on-time deliveries.”