Demand is strong, but North Bay manufacturers still wrestle with hiring, supply lines
Machinery whirs and products roll off production lines, but despite continued demand, North Bay manufacturers say hiring and rising business costs remain threats to their sector.
“Primary costs — compensation, property, utilities, taxes and interest rates — in the U.S. are on average 16% higher than in the other markets,” said a report titled “The Cost of Manufacturing Operations Around the Globe” by KPMG and the Manufacturing Institute.
Just in hiring alone, companies say the bright spot of having recovered job losses due to the pandemic, is clouded by having more openings than people.
“For lower wage workers, the laborer types, we have had to significantly increase pay for those types of workers to get people,” said Dustin Mowe, CEO of Portocork in Napa.
The cork producer would not reveal the current or previous wage scales, but he did lament that it’s hard to compete when coffee and burger joints are paying $20 an hour.
His company's experiences reflect an industry dilemma — more jobs than people to fill them.
Increasing production
This comes even as companies like Loring Smart Roast in Santa Rosa are seeing strong demand. The manufacturer of specialty commercial coffee roasters has a customer base located mostly outside of the United States.
“A lot of our customers saw an increase in their business as people sheltered in place and were working from home buying better coffee,” Gordon Tredger, president, told the Business Journal.
The company saw its record revenues in 2019 (it would not disclose exact figures) plummet by 25% in 2020. Profits quickly rebounded, with 2021 surpassing 2019 numbers and 2022 on target to be another record year, according to Tredger.
Orders are coming in so fast that Loring is expanding its footprint as well as output.
While Tredger declined to reveal the exact square footage of the Sonoma County plant, he said the physical space has increased 40% since the pandemic hit.
Tredger has yet to gauge how hiring will go when he proceeds with setting up a second shift so production capacity can essentially be doubled.
Mill Valley Pasta Co. owner Tony Adams was out of work as a chef when the state shut down business for the pandemic in the spring 2020. He began making pasta as a “COVID project” for family and friends. Then they started placing orders, and he started charging them. Thus began the Mill Valley Pasta Co.
Unable to sustain the production out of his home kitchen, Adams found commercial space in San Rafael.
“I went from making four pounds of pasta an hour on a machine from the 1970s in my apartment to making between 1,000 and 1,200 pounds of pasta on four commercial machines. The latest machine makes 100 pounds an hour,” Adams said.
In 2021 he was producing and selling between 200 and 300 pounds of pasta a week. This year he is selling 1,200 pounds a week.
While he is still working seven days a week, it’s no longer 100-hour weeks. Helping with the production are three full-time employees and two part-timers. Adams expects to hire another person soon. He did not report any trouble finding people to work at his start-up.
He did not provide his payroll figures.
New factory added
Expansion at Portocork was planned long before anyone had heard of COVID.
“We built a new factory at the end of 2019. We expanded our footprint in Napa by 35%. We’ve never been close to filling that facility until this year,” CEO Mowe said. The cork-making company has about 50 employees. “The product comes 65% of the way done, and then we have to finish it. That includes packaging and shipping to clients.”
In addition to having a hard time finding workers and needing to pay them more, the cork maker has seen a spike in the price of containers needed for shipping.
This year a container going from the U.S. to Portugal costs about $5,000. That same container was $3,000 in 2020, according to Mowe. Portocork has paid as much as $17,000 for a container from Portugal, where the cork originates, to the States.
“What we need is for things to open up a bit more in China. These guys play a very big part in the global supply chain because so many containers come out of China,” Mowe said.
For now the company is absorbing much of the added costs of doing business. Partly, this has to do with pre-existing contracts.
“The cold hard fact is if we were to pass 100% (of added expenses) to customers, I think there would be catastrophic consequences,” Mowe said. “We are buying product in Europe and the dollar has gained strength, which has helped offset costs, but it’s a fraction.”
The big picture
Nearly 13 million people work in the manufacturing sector in the United States. According to federal data, employment in factory jobs has been growing at a 4% annual rate since April.