Before COVID-19 came to the U.S., its effects were felt in the global supply chain, particularly for products coming out of China in the early months of 2020. A number of the suppliers builders partner with have found themselves short on product, and now face the evolving U.S. situation just as Chinese manufacturing has started to recover.
We spoke to Aaron Emigh, CEO of San Mateo, Calif.-based smart home tech provider Brilliant, about the events of the past two months, from the first disruptions to the current situation in the United States. The manufacturer’s smart home controllers, dimmers, and accessory products are all made in China, and many of their components are also sourced in China.
BUILDER: When did you start noticing supply chain disruptions, and how did that manifest?
Emigh: With global supply chains today, if you get a regional disruption, [it will] affect the entire world, and products across the board. And that’s what we saw. It was really over Chinese New Year [mid-to-late January] that it intensified.
Things had already happened in Wuhan, and the COVID-19 virus had already emerged. But during the Chinese New Year, all the businesses shut down and everyone [in China] goes home. It was during that time when the initial extent of the problem became clear, and they instituted lockdowns when everyone was away from their work to start with. So there were a lot of people who were in Wuhan and couldn’t get out – there are still a lot of people who are in Wuhan and can’t get out.
So what happened was, the Chinese New Year was extended for another month-plus. A lot of companies were in a position where, you build up a little extra inventory to be able to compensate for the week of Chinese New Year… but when businesses weren’t allowed to reopen, that caused enormous disruptions that are still there to this day.
Businesses have generally reopened, although not all of them. And some small businesses were driven out of business because they’re operating without a lot of capital or ability to pay salaries when they’re not producing. There was also some pent-up demand. For example, the company that we work with that manufactures circuit boards is operating at several hundred percent of its normal rate just trying to catch up from all the work that was delayed. So they’re slower to deliver things than they usually are.
BUILDER: How did you handle these delays as they occurred, as well as pent-up demand?
Emigh: It was a matter of staying in close communication with everybody, and understanding what the impact on the supply chain would be. We made sure that we could fulfill all of the contractual commitments that we had, the relationships with the builders and the operators of multifamily housing, where they have a schedule and they need products on that schedule. So we need to be able to maintain that availability there. What that meant was cutting back on sales to consumers, so we stopped selling units online until we could get more of them.
Obviously, as a business, you want to sell all the units that you can. But we have long-term commitments with some people, and we needed to make sure we are meeting the commitments to our builders, to our multifamily operators. Whereas for consumers, we haven’t promised to sell them one yet. So we decided, let’s not make that promise just now. And that way we’re not disappointing them.
BUILDER: When COVID-19 started entering the U.S., did you take any measures to prepare for that? And how are you handling the current situation?
Emigh: I think we’re in there with all the other businesses, just trying to understand what it means as far as what we’re doing right now. The main thing is to try to support peoples’ ability to do social distancing. We’re doing a lot of meetings virtually, a lot of people are choosing to work from home. And we very much offered and encouraged that. And that is probably quickly transitioning to everybody. It’s a fluid situation, and we’re not epidemiologists so we’re just trying to understand it best we can, what the right thing to do is from a public health perspective, from an employee needs perspective.
A lot of schools are closed, and then people have children that are home and they need to adjust their work schedules to accommodate that they have childcare responsibilities that they wouldn’t normally have. Some people may have relatives that are either in a home or who they’re in frequent contact with, and they want to take extra precautions to protect people that are at risk. So as a business, you just try to support your employees however you can, and helping them preserve their health and the well being of their families.
BUILDER: As China recovers, do you think that Brilliant’s manufacturing will bounce back? What effect do you believe the situation in the U.S. will have on your distribution?
Emigh: Manufacturing has already bounced back. We’re back in stock on all of our products now, and we’re getting a good flow of products out of China.
Looking at the landscape in the United States, clearly there’s going to be an impact, and it’s very hard to gauge how extensive that impact will be. A lot of our meetings are now virtual, but there’s a reason you have meetings in person. You want to build a relationship and you want to give demonstrations of a product.
And then you look at the builders. If they’re told, “No, you can’t have a crew working on a house,” then obviously that’s going to impact construction. There’s also just economic impact, as you see the stock market declining. That could have a negative impact on home buying. On the other hand, we’re seeing interest rates grind to zero, or to near-zero. Europe’s even gone into negative territory. That could stimulate borrowing for home mortgages.
It’s a fluid situation, and for everybody in our supply chain, everybody downstream and upstream, there’s just a great deal of uncertainty right now, because it’s still a new situation. China seems to have it under control now, but we can’t really be sure until it’s been more time.
It’s hard for me to make a pronouncement about what it ultimately means. I’m sure as a country we will overcome it, but I think that the impact of it, both in public health and in economic impact, are still to be understood. [But I think] video will play an even more significant role in showing units to potential home buyers who aren't traveling during this time. The logistics of our current situation will force larger adoption of these remote applications.