• As companies built up an inventory of personal protective equipment, people learned to live with the new reality, and demand declined, PPE declined as an overall percentage of revenue.
• With COVID-19 and its variants still raging, the industry may be facing a new wave of PPE sales – although it is too early to tell.
• If demand picks up again, businesses are better prepared, but supply chain congestion could surface.
Like many distributors whose core businesses did not include personal protective equipment, Bulbs.com turned to offering these products last year as COVID-19 began to ravage the economy and companies began to scramble to protect employees.
Mike Connors, CEO of the Worcester, Massachusetts-based electrical distributor, said the company has started sourcing and selling masks, gloves and disinfectants to help customers meet their workplace safety needs while continuing to meet their lighting needs. Even though the company’s traditional operations have skyrocketed in 2020 and 2021 due to increased residential and commercial demand, Connors says PPE has been a good boost to Bulbs.com’s revenue.
Now, with the peak of COVID-19 cases and variants across the country, it seems plausible that PPE sales are reflecting these trends. “Have we seen an increase in demand for PPE? Connors said. “The answer is ‘not yet’. I have observed the request … and nothing unusual is happening.
Connors notes that the decline in PPE sales was between 70% and 90% “from the peak demand we had last year. This includes masks and gloves. All the other ancillary things we had – thermometers and disinfectant and a few other things – are more readily available from specialists in this field. But we have yet to see any further increase in any of the COVID-related products. “
As cases increase, Connors is aware that those numbers could rise again. If they do, however, the PPE sales environment will look different than it did last year, when consumers and businesses were clamoring for all kinds of PPE and demand far exceeded supply. . This is because the United States in September 2021 is a very different place than it was in April 2020. Simply put, distributors and customers are better prepared and they can attribute the lessons of the past year and half to the changing landscape.
Public companies and PPE
The variation in PPE sales has been well documented in public companies like WW Grainger Inc. and Fastenal Co., whose executives share their companies’ changing sales mix with analysts during earnings calls.
Take Grainger. In the Chicago-based retail giant’s latest earnings call, CFO Deidra Cheeks Merriwether said the company saw a “drop in demand for PPE products,” but these products still outpaced sales at before the pandemic. … As a result, pandemic sales have declined by approximately 28% from 2020, ”she said. “However, this is an impressive 27% increase from 2019. We estimate that July 2021 will be down around 28% from July 2020, in line with what we saw in the second quarter of This year.”
Fastenal is another company that has seen its PPE fortunes go up and down. At the height of the pandemic, sales of these products have skyrocketed. In the second quarter of 2021, a slowdown in business was accompanied by a slowdown in PPE sales. “The low-margin PPE mix affected by COVID has returned to pre-pandemic levels,” CFO Holden Lewis said on the company’s second quarter earnings call, adding that the company had saw a “drop in PPE buyers sharply over the past year and to traditional buyers”.
Lawson Products is another Chicago-listed MRO and industrial distributor that, like many other companies in this space, monitors the supply of PPE to ensure customers receive their orders for gloves, masks and other protective gear. in right time. Because of this, the company has operated in a slightly different PPE sales cycle than many, notes Shane McCarthy, SVP Supply Chain, Product Management and Marketing. “Nine months ago, our US and Canadian representatives worked closely with customers on the PPE forecasts against the following COVID waves to help them get ahead of a potential peak in demand or limited resources,” he says. . “So our PPE sales were actually higher earlier in the year. The exception is nitrile gloves. We of course continue to supply healthcare customers, but as foodservice, auto collision repairs, janitorial services and the general industry pick up, we also deliver them the nitrile gloves they need. , often at reduced prices for all of these industries.
Reports on the third-quarter results of state-owned enterprises will not be released until the end of October, and some companies have refused to share their sales mix until the quiet period ends and their performance continues. financial statements are made public. In other words, it’s too early to tell if another PPE rush is imminent. But while next month’s list of earnings reports may provide some clues, they are not the only indicator of demand for PPE, which is becoming increasingly difficult to gauge as this country plunges into the pandemic. persistent.
Other issues at stake
Any discussion of PPE supply and demand must include the topic that is blocking all industries: supply chain congestion.
While the supply of PPE was notoriously short in spring 2020, suppliers seem to have caught up with demand in the months that followed. In some ways, PPE is doing better than some products, like computer chips. “Although the global supply chain in general still has many stalled and under-numbered products, the global supply of nitrile gloves has improved a lot,” said McCarthy. “The supply was very tight in 2020 and throughout the first half of 2021, but we now have the glove inventory to easily meet our customers’ demands. “
Another issue that is playing a role in the apparent slowdown in demand for PPE is the labor shortage among end customers across the distribution ecosystem. “One area that’s holding back demand is the labor shortage across all of our customers,” says McCarthy. “We know that if our automotive and industrial customers could find and hire more repair technicians, their production activity and consumption of consumable parts would increase. With the shortage of new car inventory, there is certainly a need for auto technicians to repair vehicles currently on the road. “
These are not the only levers being pulled by macroeconomic trends, making it clear that last summer’s PPE craze may never be repeated. On the one hand, companies are better prepared – on all fronts – when it comes to a resurgence of the pandemic. Take Connors’ company, Bulbs.com. Earlier this year, when a warehouse worker tested positive for COVID-19, all warehouse staff had to go into quarantine. So Connors and his front desk workers took turns moving and loading boxes until the warehouse workers could return. “I said every employee has to work three hours a day in the warehouse until they come back with a negative test,” says Connors. “Many of our employees already spend time in the warehouse, so it wasn’t rocket science. I’ve packed orders before and told our staff, if I can go get and pack orders, you can too.
This type of approach has been shared across distribution, and it shows how businesses have adjusted to the ‘new normal’ of COVID-19. Colleagues are stepping in where they are needed, which may not have been possible before the pandemic.
Moreover, if the mask mandates are reinstated – in businesses, in municipalities, etc. – most people have their own PPE, and many companies have stocks of N95 and KN95 masks, maybe even face shields. In other words, the likelihood of a rush on PPE orders has diminished. If there is one, it probably won’t be so frantic. “There are a few factors here,” says Connors. “First, I think utility closets are probably filled with a lot more masks than a year and a half ago. Second, the stress level and the reactionary spectrum are a little different because people have been dealing with it for a long time. The propensity to overreact, I think, has clearly diminished.
“There is just a lot more knowledge, and this experience helps us all. “