Jennifer Lau:
There was times where you wake up in the middle of the night and you check the inventory to see if it was restocked.
Sonari Glinton:
In the spring of 2020, Jennifer Lau was on one end of a supply chain breakdown. Jay Perkins was on the other.
Jay Perkins:
It was wild. I mean, it crashed our website.
Jennifer Lau:
And you have all your email alerts on, so that when companies did restock, you were the first to know that.
Jay Perkins:
We sold out in a matter of like five, 10 minutes.
Jennifer Lau:
And you could try and buy as many as you could.
Jay Perkins:
That's when we were like, "Oh, my gosh, this is going to be nuts."
Sonari Glinton:
Jay Perkins runs a fitness equipment company. Jennifer Lau is a personal trainer, and co-owns the gym. And that spring something Jay sells, and Jennifer uses, was next to impossible to get, just when people wanted it the most.
Jennifer Lau:
It felt like everyone was looking for kettlebells.
Sonari Glinton:
Kettlebells, yes. Those are the weights that folks swing at the gym. They look something like a bowling ball with a handle at the top. Well, when gyms closed at the start of the pandemic, people were looking for all kinds of ways to work out at home. And soon, kettlebells were nowhere to be found.
Sonari Glinton:
I'm Sonari Glinton. On this episode of Now, What's Next? An original podcast from Morgan Stanley, why offshoring and long supply chains meant we couldn't get the weights we wanted when we wanted them. And why making them closer to home is a heavier task than you might think.
Jennifer Lau:
Two arms on the kettlebell, so grabbing the kettlebell with two hands, you're going to engage your lats by pulling the bell down towards you. So it's at a [crosstalk 00:01:37]-
Sonari Glinton:
Jennifer Lau was one of the co-owners of Fit Squad studio in Toronto. She's demonstrating the two arms swing, a fundamental kettlebell move she teaches to her many clients.
Jennifer Lau:
So it's at a 45 degree angle here. You're loading your hips and your hamstrings, and you're going to swing and exhale as you pop through the extension of your hips.
Sonari Glinton:
She says it's a great move for desk jockeys who might be feet a little bit more hefty these days.
Jennifer Lau:
And if you're doing this for a long period of time, it works conditioning. If you're doing it for shorter reps, and the heavier weight, it works power.
Sonari Glinton:
Kettlebells might sound like another fitness trend. Thigh Master, anyone? Jazzercize, Deal-A-Meal. I could keep going on and on, but they've been a regular part of weight training for well over a decade.
Jennifer Lau:
If anything, it's gotten more popular, and you'll see it more in training today than you did 10 years ago.
Sonari Glinton:
And, they're perfectly suited for working out at home.
Jennifer Lau:
The kettlebell can mimic a barbell, and can mimic a dumbbell, quite easily. You can work everything from power and strength, to conditioning and mobility, just with one piece of equipment. No one can fit a barbell in their apartment, or their condo, at least not downtown.
Sonari Glinton:
In the spring of 2020, internet searches for home fitness equipment jumped by 500%. Weight training, as a category, grew faster than hand sanitizer. Kettlebells, in particular, were in high demand, but almost all of them were made in China. What was available was swiftly bought up, while the next orders and shipments were caught up in pandemic shutdowns and delays. Jennifer and her team started lending out their gym stocks to their clients, and quickly saw how hot a commodity the weights had become.
Jennifer Lau:
So, as we're crossing the street to the car, we would get stopped by people just walking on the sidewalk, asking where did we get the kettlebells? How could we get them? I mean, there was definitely a consideration that maybe we should just sell all the equipment, and make money coming out of the pandemic.
Sonari Glinton:
In normal times, kettlebells sell for between 20 and 100 dollars. They were going for four times that amount. Now, when companies did get a shipment in, they sold more in a day than they usually would sell in a whole month. And people who wanted them, but couldn't get their hands on any, well, those folks improvised.
Jennifer Lau:
We were seeing people build their own weights out of concrete, and all sorts of stuff. I mean, I saw clients swinging bleach bottles, heavy suitcases, and stuff, in lieu of kettlebells.
Sonari Glinton:
That's all so folks could keep training with something like a kettlebell, or participate in Jennifer's popular kettlebell class.
Jennifer Lau:
That group was the longest lasting class that we had, because it was something that gave them a sense of community, accountability. We can definitely say that the kettlebell was what brought them together.
Sonari Glinton:
Meanwhile, Jay Perkins has built a business around that idea of community. He and two friends started Kettlebell Kings back in 2013. It's based in Austin. The company suddenly found itself with an unprecedented demand for its main product, but none in stock, nor on the horizon. In a word, it was frustrating.
Jay Perkins:
Absolutely, it's frustrating to not have the product to sell.
Sonari Glinton:
Like the great majority of kettlebells, Jay's are made in China, from start to finish. His supply chain takes about four to six months. They started to get wind of problems in early 2020.
Jay Perkins:
Our suppliers in January were telling us that they were having to shut down for this virus that they were dealing with in their country. And honestly, it didn't occur to us that like, "Oh, this is going to have major effects."
Sonari Glinton:
But it did. When the pandemic shut down factories in China, it shut down kettlebell production. And when the Chinese port shut down, as well, what could be shipped wasn't. Then the lockdowns came, and gyms shut their doors, and people wanted weights to use at home. They wanted kettlebells. In late April of last year, Kettlebell Kings was finally able to get a small shipment.
Jay Perkins:
In retrospect, we made this embarrassing post on social media. It's this meme of like Leonardo DiCaprio looking really happy. It said something like, "When you find out Kettlebell Kings is getting a restock today." So, we posted that, and it was wild. I mean, we made probably two containers worth of items available. We sold out in 10 minutes or less on our website. It crashed.
Sonari Glinton:
A true nightmare scenario, since Jay and his team had built their business around customer service.
Jay Perkins:
So, people were going on that post and just commenting about how we should have been more prepared. We should have anticipated this is what demand was going to be like. And, we were just like, "I don't think we could have. We've never experienced anything like this before."
Sonari Glinton:
Letting customers down what hard, and Kettlebell Kings wouldn't do presales. They didn't feel right about having people pay upfront for something that they'd have to wait four to six months, or even longer, to get. So, they let, would-be customers sign up for notifications, instead.
Jay Perkins:
Ninety hundred thousand people had signed up for stock notifications, and we were trying to do the math on, okay, how many containers would this be if we were to order them? How many of this can we realistically serve? We were just like, "There's just no way." I mean, that's almost two, three years worth of orders. There's just no way we're going to be able to do this.
Jay Perkins:
There's a sick part of me that would look at that list every single day, just to see where we're at on the stock notification. And, you had this mixed range of emotions.
Sonari Glinton:
Mixed because he had this huge potential client base, but no way to serve them.
Jay Perkins:
One of the things about not being able to sell to customers is, you're not only sacrificing short term sales, but you're sacrificing long term sales, as well, because that's an opportunity to create a lifelong customer, who is going to come back and buy more products from you. And, you try to quantify that of like, "What is this really costing us?" You start getting into some pretty large and upsetting numbers, at some point. So, yeah, that, that was certainly tough to think through.
Sonari Glinton:
So, if getting the made in China was causing the problem, well, why not get them made closer to home? Jay says, he'd love to.
Jay Perkins:
Since the beginning of our business, I've set aside time each year to reach out to foundries, and try to get bids and quotes. It's always been very difficult. Most people have just not even replied. The ones that have quoted us, had quoted us anywhere from $300,000 to a million dollars, just to get a new product line up and running.
Sonari Glinton:
I’m gonna back up a bit. Kettlebells are made in foundries, by pouring iron or steel into molds. The molds cost thousands of dollars to make - for each size of weight. And then the kettlebells need to be ground, coated with powder and packaged.
Jay Perkins:
We have to get these molds made from scratch. That's not something that we could afford, by any means. And then, on a per unit cost, it's going to be three or four times more.
Sonari Glinton:
That's three or four times more than it costs to have them made in China. He breaks it down like this.
Jay Perkins:
Let's say it costs us $50 to get a product made currently. That product is going to cost us $200 to get made here. And again, we would love to. I can't emphasize that enough. That is something we've always wanted to do, but we just have not had the luxury to be able to do that.
Sonari Glinton:
Keeping costs low is the main reasons companies have dealt with the distance, language barriers, and other issues that come with making products in China. For decades, now, it's been hard to turn back.
Sonari Glinton:
It all started in the '70s, when China loosened restrictions, and introduced the free market. Their huge, young, and cheap labor force was suddenly available to the world. In the next 40 years, China became the world's factory, building up an unparalleled manufacturing infrastructure. While it got easier and easier to make things in China, it got harder in the US.
Sonari Glinton:
Some American towns with factories at their heartbeat paid a huge cost. The labor force has shrunk, but headlines lamenting the death of US manufacturing are overblown. America continues to be great at making huge, large, expensive, and complex products like jet engines, cars, and chemical products. But, for lots of companies, making the smaller and mid-range products like kettlebells, well, getting them made in China still makes more economic sense.
Sonari Glinton:
A lot of American foundries produce larger scale items, but they also adhere to higher environmental and labor standards, which translates into higher costs. Some quotes Jay got from US foundries were less expensive, but there was more to the story.
Jay Perkins:
The cheapest quotes that we got for "American made" products, is it's somewhat misleading, in that these are actually large, multinational companies that have bought up American foundries. And so, like any business, the larger company gets the greater economies of scale. They experience, they can get their supplies for less, and that they can then, in turn, pass that onto the buyer.
Sonari Glinton:
In recent years, more and more Chinese companies have bought American manufacturing facilities to take advantage of lower taxes and transportation costs, here, as production costs rise in China.
Sonari Glinton:
As the landscape of manufacturing begins to change, one thing kettlebell and other producers have learned, diversifying supplier locations is important. Jay says they've managed to get US molds made, but haven't been able to get those products to market. In the meantime, they'll continue to look elsewhere.
Jay Perkins:
So, we've tried to engage suppliers in Taiwan, in India, in Mexico, Canada, America. We've tried to engage suppliers all over the world, but we've not been able to find anyone, anywhere else, who can match the current quality that we have, and that our customers expect.
Sonari Glinton:
Dinh Tien Vu hopes to step into that void. He runs Vietnam Cast Iron Foundry in, you guessed it, Vietnam.
Dinh Tien Vu:
[foreign language 00:12:11].
Translator:
Before COVID, the price of Vietnam-made kettlebells couldn't compete with those produced in China.
Sonari Glinton:
Vu saw the demand for new kettlebells suppliers growing, and he started making them for Western buyers. At the beginning of the pandemic, Vietnam wasn't hit nearly as hard by COVID, so their factories imports remained open, while China shut down. But Vu says, there's more behind the growth of Vietnam as a manufacturing hub.
Dinh Tien Vu:
[foreign language 00:12:42].
Translator:
There are two reasons: the US-China trade conflict, and labor costs. If there were no trade war, they would still order from China.
Sonari Glinton:
Vietnam has seen a bump in manufacturing in recent years. And, as Vu points out, the Chinese-US trade standoff during the Trump administration had something to do with it. But, China has also put its manufacturing heft behind higher end, high tech goods, and its labor force is being paid more than ever. It's cheaper to make things in Vietnam, and Vu is seeing more companies set up shop there, especially after learning hard lessons during this pandemic.
Dinh Tien Vu:
[foreign language 00:13:22].
Translator:
So, it is inevitable that they would have to diversify their supply chain to three, four, or even five more supporting factories. If one factory is unable to produce, the four others will make up for it. Whether it's a pandemic, natural disasters, or trade conflict, a wise manager should diversify their supply chain.
Sonari Glinton:
Of course, diversifying to manufacturers across Asia will only get you so far. You're still shipping goods a long way, and fighting for space on ships. That's why entrepreneur Joe Franklin knew Asia wasn't an option. He saw a window of opportunity in the intense kettlebell demand, and short supply, and he knew he had to get them made in the United States. Joe also knew it was a very brief window of opportunity.
Joe Franklin:
If you're going to do it, you have to do it quickly. That's what we found out.
Sonari Glinton:
Originally from in the United Kingdom, Joe is a scientist and entrepreneur who did his postdoc work at Berkeley. He's now based in California. Joe and his wife, Jenica, started USA Iron, a kettlebell and fitness equipment company, in May of 2020. And because time was of the essence, he got his kettlebells made in the USA.
Sonari Glinton:
Why you, what makes you think you can do this?
Joe Franklin:
I have a background in material science, and we also have our own e-commerce businesses. So, we have a little bit of a background in how this works on a manufacturing level. And, we figured that, if nobody was starting right now, then we would've had as good a shot as anybody.
Sonari Glinton:
Joe and his wife had started other companies, and had products manufactured in China, but they hadn't planned on getting into the kettlebell business. Not until he got a call from his brother, a search optimization specialist, who had the hard numbers that quantified demand right in front of him.
Joe Franklin:
All of 2019, there was probably 150,000 to 200,000 people per month searching the word kettlebells.
Sonari Glinton:
And then in May, 2020.
Joe Franklin:
We were up at 800,000 searches per month.
Sonari Glinton:
That's a 400% jump, and no supply. As you heard from Jay Perkins of Kettlebell Kings, one reason no one was making them in the US was because it's expensive. But, Joe didn't have the same parameters and customer expectations that made it hard for Kettlebell Kings to find us foundries that they could afford. And Joe had no qualms of about selling his kettlebells before they were made.
Joe Franklin:
We ran pre-sales for about a month before we had our first kettlebell out the door. So, we made sure that we were going to make sales. And, we told people, "You're going to have to wait four to six weeks, but we'll get kettlebells to you."
Sonari Glinton:
What was the demand like then?
Joe Franklin:
Oh, it was-
Sonari Glinton:
When you first started.
Joe Franklin:
It was great. So, for first month, we probably sold a good few hundred thousand dollars of kettlebells in pre-orders. Obviously, we knew, at that point, we were going to cover our costs for the molds, and get everybody paid on time.
Sonari Glinton:
Joe and Jenica were able to locate a foundry that was looking for work. One that used iron that came from US scrap metal, as opposed to other kettlebell manufacturers, who source their iron from mines in places like Russia or Brazil.
Joe Franklin:
It can be I-beams, engine blocks, rebar, or anything like that, can be melted back down. It needs weight, and it needs to hold together. And so, you can use recycled materials for that.
Sonari Glinton:
Kettlebells seem like they're really easy to make.
Joe Franklin:
Right.
Sonari Glinton:
It seems like you pour some hot steel, or whatever it is, into a mold. You cool them down, you pop them out, you're done.
Joe Franklin:
Right.
Sonari Glinton:
Now, usually my third grade version of everything is kind of wrong. How wrong am I?
Joe Franklin:
You have made kettlebells before. That was also their feeling. And they use terms like, "This is like making boat anchors. We do this all day, every day. Don't worry about it." Then a month down the line, they're like, "Okay, we've got some stuff to worry about."
Sonari Glinton:
As Joe soon learned, the expense is only one reason why manufacturing in America is not a simple antidote to the headaches of long supply chains. As far as kettlebells are concerned, lots can go wrong with the product itself. And that's because...
Joe Franklin:
When you get a kettlebell, everything is on display.
Sonari Glinton:
Any defects, weight issues, holes in the iron. You can make hundreds in a run before the problem is even noticed. The process kind of goes like this.
Joe Franklin:
So, you have a pattern, the pattern presses a mold in sand. You bring these two halves of the mold together. You fill it with molten metal. You split them apart. They then need to be ground, they're powder coated, and whatever issues happen during that first part of that process, if that goes wrong, you have to go back to the beginning.
Sonari Glinton:
Joe says that happened a lot, and that was even before the weight goes to the powder coater, packaging, or any of the other steps. It's not a straight-up easy business, and his team has had to manage all the steps, a very different experience than he's had when manufacturing goods in say, China.
Joe Franklin:
One of the big differences is there's an understanding when you're going to China that you're not going to be there. You're not going to be able to see every part of the process. There's a very high degree of quality control that comes with that. One of the difficulties, I guess, that we've had in America, a lot of that QC, the quality control, is passed on to us at each stage.
Sonari Glinton:
Even now, a year and a half later, he says, they're still managing a lot of those steps on their own.
Joe Franklin:
We still see stuff coming through now, which we still need to go back and work through. And, you know, just so we can make sure that the items which are coming through to the customer at the end are really top quality.
Joe Franklin:
There's a barrier to entry, coming as a new person, who hasn't got a massive experience in this. If you've got a brilliant idea, and you want somebody to manufacture it here in the US, or anywhere, there are more services and people that you can talk to in China about that, than there are here. You can get a whole list of manufacturers, contact details, sales people, support. You'll get an individualized person who's going to look after your account, follow up with you every other day, and kind of keep things moving forward. Those things make a difference when you're trying to get something off the ground.
Sonari Glinton:
Put it this way: many companies are fine to navigate the language barriers, the distance, the shipping delays that come with manufacturing on the other side of the globe, because it's not only cheaper, but easier than doing it a few miles away. This is a big part of the reason more businesses are not turning to reshoring as a solution to long supply chain delays.
Sonari Glinton:
Despite the issues, Joe's been able to make it work. He was able to get quality kettlebells into the hands of customers four weeks after he started his business, while demand was still high and the domestic supply was low. But would he have done it, if it hadn't been for the shortage?
Joe Franklin:
You wouldn't probably start a new kettlebell business, because margins are quite low. So, we're an American-made product. Our margins have to be kept quite low to be competitive. And, there isn't a lot of room for maneuver. A lot of e-commerce products will have a 40, 50, 60% margin. We're dealing in like a 10 or 20% margin on our products.
Sonari Glinton:
That means there is not a lot of profit to be made. Now, USA Iron is going to keep making kettlebells and weight plates, but they likely won't be manufacturing other exercise products in the US. Instead, Joe plans to expand into training and other digital services related to their products. But, his entrepreneurial spirit is constantly taking him in new directions.
Joe Franklin:
The amount of work that needs to go in at the beginning, that's the bit that gets me out of bed in the morning. So, that's what keeps me up at night, I should probably say. It's great. I love it. I love it.
Sonari Glinton:
But choosing where to get something made, doesn't always come down to the cost. It can be about opportunity. It can be about ease, diversification, personal connections, ethical or environmental concerns. Or, it's likely some combination of all those things.
Sonari Glinton:
Joe Franklin took advantage of a very narrow window of opportunity when kettlebell supply was small, and the demand was high. What he found out was, yes, it is possible to get a mid-range product like kettlebells made, but it's still not nearly as easy, nor as cheap, as getting the made in China.
Sonari Glinton:
But, China will not always be as cheap or profitable. It's going to get more and more expensive to manufacture there. That's as the country moves towards manufacturing higher tech goods, and its workforce becomes more skilled.
Sonari Glinton:
Already manufacturing hubs are growing in places like Vietnam, and in parts of Africa. So, what about here in North America? The answer is, well, it can be a bit complicated, which Jay Perkins knows all too well. For Kettlebell Kings, the cost of Made in America was too high, and the cheapest quotes Jay got were from multinational companies with facilities in the US.
Sonari Glinton:
And still, as my entire career attests, the death of American manufacturing has been greatly exaggerated. When we think of it, the way we got used to doing things, getting many of our products from overseas, that's relatively new. The supply chain breakdowns have at least made us look at the future of manufacturing in the US. And for many countries, fighting for their place on the economic world stage, the future is already here, y'all.
Sonari Glinton:
I'm Sonari Glinton, and this has been Now, What's Next? An original podcast from Morgan Stanley. Coming up, re-imagining the role of the truck driver. Thank you so much for listening.
