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News December 13, 2021

Promo Factory Partners Affected by New COVID Shutdowns

The closures raise concern over further inventory shortages in the promo products space, but suppliers say they’re adapting to mitigate the effects.

By  Christopher Ruvo

Here we go again – again.

A cluster of new COVID-19 cases in Zhejiang, a coastal province on China’s East China Sea, is affecting the sourcing networks of North American promotional product suppliers and raising concerns over potential further effects to inventory levels in the promo industry.

red map of china with Coronavirus stamped on top

In Zhejiang, the COVID flare-up has sent hundreds of thousands of people into quarantine and led to suspended business operations, cut flights and canceled events in the region.

Zhejiang is a major manufacturing hub, and promo products companies partner with factories there to have goods produced and then shipped to North America for sale.

Suppliers report that some of their factory partners in Zhejiang have been forced to close temporarily amid the COVID uptick.

Jeffrey Nanus, CEO of Norwood, NJ-based hard-goods supplier AAA Innovations (asi/30023), shared with ASI Media an email from a factory in which the partner said the shutdown of its facility could last 14 to 21 days following a closure on Dec. 9.

The factory is located in the Shangyu district of Shaoxing, which is “known for producing all types of umbrellas, tents and refrigeration items, among many other products,” said Nanus, whose firm sells such products. “The timing could not be worse, as the Chinese Lunar New Year approaches and factories will be closed for two to four weeks for that holiday beginning at some point in January.”

Teresa Fang confirmed that the timing of the shutdowns is especially “unfortunate as this is the window just before Chinese New Year, so everyone is trying to ship their orders prior to the CNY shutdowns.”

Fang is vice president of supply chain for alphabroder | Prime Line (asi/34063), the second-largest supplier in the promo industry. She noted that some of the company’s Zhejiang manufacturing partners have been affected by shutdowns.

“Zhejiang province includes areas like Ningbo, Hangzhou and Shaoxing, which can be heavy production areas for promo goods depending on the product category,” said Fang.

Ningbo is also home to the world’s third-largest container port complex, Ningbo-Zhoushan. Some in the shipping/container business fear the latest COVID upsurge in Ningbo could affect the pricing and availability of cargo containers. Lack of containers – and skyrocketing costs for them – have been among the supply chain problems plaguing promo and other industries throughout 2021.

 “A new pandemic outbreak would probably lead to container terminal and shipping delays and bring more congestion,” freight forwarder Triman Shipping said, according to The Loadstar. “The worst result would be a Ningbo city-wide lockdown, causing paralysis of the logistics industry and the terminals.”

Still, Triman Shipping was optimistic: “However, we believe due to the ability of China to quickly respond to the epidemic and control the local region, it will recover soon.”

In the promo industry, disruption at overseas factories and possible additional container/port problems could exacerbate what’s been a thorn in the side of promo throughout 2021: inventory shortages.

While the promo products industry has grown sales year over year in the second and third quarters of 2021, it’s been a challenge to get clients the products they want amid stock shortages, and orders have been lost as a result.

Firms like Polyconcept North America (PCNA, asi/78897) are doing what they can to mitigate any further effects on inventory as a result of the new clampdown on factory activity in Zhejiang.

“We have several partners being impacted, and we are splitting sizable orders to locations outside of China,” said Liz Haesler, PCNA’s chief merchandising officer.  “If the government in China isn’t able to get this under control, we will utilize other factories to avoid disruptions.”

Fang said alphabroder | Prime Line also has secondary factory partners and has been strategically reviewing and splitting orders to avoid significant problems if some partners are incapacitated due to COVID-driven shutdowns.

Executives sounded another optimistic note as well, saying many suppliers have been stocking up on inventory in advance of Chinese New Year and in anticipation of potential COVID disruption at factories, as is now being experienced.

“The bright side is that most suppliers in the industry were aware of these potential disruptions as this is not the first disruption due to COVID in the past several months in China,” Fang said. “Therefore, efforts were made early on to ‘pull-forward’ inventory to account for such disruptions.”

Promo – and other industries – have faced unprecedented supply chain disruption in 2021, virtually all of it rooted in COVID-19 complications.

Factors like inflated costs for shipping/ocean freight and importing delays (caused by everything from port congestion to lack of space on cargo ships to overseas factory production issues) and many more have led to inventory shortfalls, higher product prices, longer production times, shortages of materials and delays in order delivery.

Inflationary pressures suppliers have been facing are expected to drive price increases on a spectrum of promo products in 2022.