Per the U.S. Bureau of Labor Statistics, inflation rose to a 40-year high in 2022, with a consumer inflation rate of 9.1 percent. It was the largest 12-month increase since the 12 months ending November 1981.
This is not good news for manufacturers and distributors whose industries are often dependent on raw materials but as materials costs rise, so too do those of the manufacturer. On top of this are other economic challenges in the areas of labor and supply chain.
The National Association of Manufacturers Q4 2022 Manufacturers’ Outlook Survey found 75.7% of responding manufacturers are concerned with attracting and retaining a quality workforce, 65.7% with supply chain challenges and 60.7% with increased raw material costs.
How are manufacturers and distributors in Western New York handling these challenges? We talked to three local business leaders to find out.
Bob Confer – Confer Plastics, Inc.
“We’re getting really hurt by inflation and interest rates when it comes to customer demand,” says, Bob Confer president of Confer Plastics, Inc., a third-generation large-part blow molding company in Niagara County that specializes in proprietary durable home leisure products.
Confer Plastics, which has 165 employees, is the largest U.S. manufacturer of consumer products in their niche — helping people get in and out of their pools and spas with plastic ladders, step systems, and entry systems.
“Swimming pools and hot tubs are lower on the list right now” Confer said about consumer purchasing habits amid high inflation and interest rates that are driving up costs of more pressing needs, like groceries, fuel and electricity.
Due to this decreased demand (which he saw start around April 2022) — as well as decreased inquiries and demand for industrial products the company can make for private clients — Confer made the decision last week to decrease the company’s production from five days a week to three or four days a week for the immediate future.
During this time, Confer Plastics will utilize the state’s Shared Work program, which allows employers to retain trained employees and avoid layoffs by permitting employees to receive partial Unemployment Insurance benefits while working reduced hours.
“I don’t see a return to normal until, hopefully, next year,” said Confer, a graduate of SUNY Brockport who sits on the School of Business & Management’s Dean’s Advisory Board. “My gut feeling for the economy is that we’re heading into a recession.”
Confer is not alone in that thinking. The National Association of Manufacturers survey referenced above found that more than 62% of U.S. manufacturing leaders believe the U.S. economy will slip officially into a recession this year.
Confer Plastics — which celebrates its 50th anniversary this year — is getting creative ahead of the possible recession. They are currently expanding their product line to bring back a discontinued line of patio furniture they shelved five years ago. The revamped line, which is made right on-site, is consumer direct, making it more affordable for consumers.
“You get to a point after a half-century of business that you think you’ve been through everything,” said Confer, about the current challenging economy. “We got through fifty years quite well and we can weather this storm.”
Ken Johnson – Leonard’s Express
Leonard’s Express is a family-owned asset-based transportation provider headquartered in Ontario County with facilities located throughout the country. With its primary business focus on transporting food and beverages, they also offer refrigerated trucking, dry van, warehousing and freight brokerage services.
As a fourth-generation leader in the company, CEO Ken Johnson has been around trucking “since the dinner table” as a child and says the industry currently faces very tight margins due to ramped-up inflation and interest rates.
The inflation impacts everything in the trucking industry from the price of gas (though Johnson notes fuel costs have gotten a little better over the past few months) to new trucks. The trade cycle of Leonard’s Express trucks is typically 4-5 years and under 500K miles, which means they are purchasing and selling trucks regularly.
“One of the places it’s tougher to recoup costs is in trucks and trailers,” Johnson said. “The costs of trucks have gone up. So far, we haven’t changed our buying plans for new trucks. If the economy stays manageable our plans will continue, but if not we will need to look further at our costs and how to offset them.”
A growth area Johnson is seeing is in warehousing. The company has 60,000 square feet of warehousing in their Wilmington, Delaware facility and 300,000 square feet in the Rochester region, including at their new, large warehouse in Manchester, Ontario County, close to the New York State Thruway.
David Scalen – Regional Distributors
David Scalen, executive vice president and co-founder of Regional Distributors with his wife Tracy Scalen, likens the past few years in the distribution industry as “rough seas,” which, he says have now kicked up a wage-price spiral.
A wage-price spiral, per the non-partisan Congressional Research Service, happens when “expectations of inflation become embedded in decision-making on the part of workers who demand higher wages to compensate themselves for perceived future price increases in a way that creates more inflation, creating a cycle that results in persistently increasing inflation.”
Scalen is also concerned with rising interest rates and other inflationary pressures, as well as deflationary prices potentially causing excess inventory that goes down in value. The good news is he’s seen a general improvement in the past year in terms of labor; Regional Distributors, which distributes paper and packing supplies to restaurants, schools, healthcare systems, and other businesses, is almost fully staffed at 85 employees.
Caurie Putnam is a Rochester-area freelance writer.-