During the third quarter, Milwaukee-based
Zurn Water Solutions planned to import around 900 containers from suppliers outside the U.S., including from southeast Asia. As global supply chains struggled in recent months, about 50 of the containers were delayed in arriving to the company, said Todd Adams, chairman, president and CEO of Zurn.
The company saw its core business grow 5% in the quarter. Had just half of the delayed containers made it on time, Adams said that figure could have been 9% or 10%. That amounts to an $8 million to $10 million missed opportunity.
Zurn was known as Rexnord until it completed a deal in early October to spin its process and motion control business off and then merge it into Regal Beloit, which is now known as Regal Rexnord. The remaining Zurn business is now focused exclusively on the water management market.
Despite the delays, Adams said he wouldn’t be pulling a harmonica out to play the supply chain blues, crediting Zurn’s teams with navigating through a difficult environment.
Among the delayed containers, a handful were held up by COVID shutdowns at ports in Asia, around 25 were delayed in being picked up in the U.S. by a shortage of drivers or trailers and the remainder were delayed by issues with a break bulk solution the company used.
“The good news is it’s not a labor shortage at Zurn, it’s not a product supply base performance issue, it’s not a component availability issue … it’s the compounding impact of a whole lot of things colliding,” Adams said.
He described it as a “logistics knot” and said the third quarter seemed to be close to or the actual inflection point. The fourth quarter is off to a good start with goods leaving international ports as needed and items that have arrived making their way to Zurn’s facilities.
Analysts on the company’s earnings call asked if the issues that came up during the quarter meant Zurn would reevaluate its supply chain and look to make it more localized. Adams said a significant portion of Zurn’s cost of goods sold does come from outside the U.S., but the company has already made a lot of changes in recent years.
“We made a conscious decision to eliminate supply chain risk in having too much in China and others,” he said, noting the company had done some onshoring to reduce lead times and deal with tariff issues in recent years.
“It’s not as overweight China … as you might expect,” he said.
Adams said Zurn has worked to create a global network of suppliers that deliver high quality at the best cost and best lead times in a variety of geographies.
“I think we’ve got a relatively disperse supply chain with redundant capabilities,” he said, adding the company wouldn’t be making any massive change in its approach. “I don’t think we’re going to start buying suppliers or anything like that.”
Addressing rising costs also doesn’t come solely from actions in the supply chain but can also be handled in product design. Adams pointed to a product the company developed that weighs 75% less than its competitor.
Less weight means less material, so Zurn is able to price it lower while also saving on freight costs.
“It’s not just about covering all the cost inflations,” Adams said. “It’s about finding ways to work around that and control your destiny a little bit as opposed to just pass price onto the market.”
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