Following an initial supply chain slowdown when its Chinese partners dealt with the novel coronavirus impact, LED lighting company Energy Focus is seeing its supplies from Chinese factories ramp back up, the company’s CFO said this week.
The outbreak "has been more of a deferral, a timing impact," CFO Tod Nestor said in a CFO Thought Leader podcast. "It hasn’t ceased shipments, or any of that. We did contingency planning, and moved some production to other countries. We’ve found [China was] able to get their factories back up and running through a very robust certification process. [There was] nothing permanent or long-term on the supply side."
Nestor joined Solon, Ohio-based Energy Focus last summer after heading up finance operations at New Hampshire-based Alumni Ventures Group and, before that, Merchants Automotive Group.
The company, which released its 2019 year-end results Thursday, had net sales of $12.7 million. The company supplies LED lighting products to the U.S. Navy and other clients, including health care companies and universities.
Nestor said he expects to face more timing issues with suppliers in other countries, and he's not sure how the outbreak will impact the company’s manufacturing operations at its U.S. facility.
"Clearly, we don’t understand the impact of that yet," he said. "Each area of the U.S. is dealing with this differently and it’s real-time."
Impact on demand
The bigger concern right now, he said, is the psychology of the company’s customer base. "What does this do to the psyche of the buyer?" he said.
In its year-end report, the company says it’s starting to see customers pull back slightly. "We have not seen opportunities lost due to COVID-19, but have started to see some customer lighting retrofit projects being put on hold or postponed," the report said. "Our near-term sales, mainly those from commercial sectors, could be adversely affected if the current, dramatic slowdown of economic activities continues over an extended period."
In addition, potential government regulation mandates "could temporarily cause logistics bottlenecks or cease our production operation, and increase the cost of or prevent us from making or shipping products to customers," the company said.
Operationally, Nestor said he and the company’s other executives have developed a plan to let employees who can work from home do so. Those who work on the manufacturing side at the company’s Ohio facility will continue to work on site, with protective measures in place, but those who are uncomfortable with coming onsite will not be required to do so.
"We have [employees] who have to be here, because we manufacture and we ship," he said. "If we keep the business open, we have to do that. While we can, we will, unless there’s a mandate by the government that everything needs to shut down and people are locked down. If employees are uncomfortable with coming in, we’ll give them the option not to. I don’t want to place our colleagues in a position where they feel really uncomfortable."
In its year-end report, the company says it has implemented strict sanitary and disinfection measures for its production facility.
Nestor said he and the company’s other leaders have made it a point to base all of their decisions on a carefully thought-through contingency plan and are leaving gut-level reactions out of it.
"For us, we’re going to remain calm. We’re going to be leaders. We’re going to be thoughtful about our associates and our colleagues," he said. "We want to make sure it works for everybody."