A startup CEO who relies on factories in China says his business won't be hurt by the coronavirus. Here's how he navigated the crisis.
- As companies restrict business travel, cancel giant conferences and warn of missing their business targets, the economic impact of the coronavirus is expected to be harsh.
- But the founder and CEO of Branch Furniture, a tiny venture-backed startup in New York, tells Business Insider that even though he relies on Chinese manufacturers his business will, miraculously, be untouched.
- Business was just beginning to skyrocket when news of the virus struck and his factories told him they were shutting down indefinitely and would have limited production once they opened.
- The impact could have been devastating on his fledgling company. But it wasn't.
- Within a week, he found manufacturing partners outside of China but didn't have to use them thanks to a stroke of luck.
- Within two weeks, his Chinese factories opened and are now back to 90% production, which made him realize that the impact of the coronavirus, even on tiny manufacturing startups like his own, may be milder than people realize.
- "The headlines nowadays of Chinese factories 'remaining closed for the foreseeable future' is a broad overstatement," he tells Business Insider.
- It's a feel-good story amidst an avalanche of alarming news.
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The global economy is expected to take a beating thanks to the Coronavirus but one startup founder who relies on Chinese manufacturers has a surprisingly sunny story to share.
Greg Hayes is the CEO and co-founder of Branch, a 10-employee venture-backed office furniture startup in New York that's raised $2.5 million. Branch sells affordable, modern-inspired office furniture and has manufacturing facilities in the US and China.
Branch relies heavily on contract Chinese manufacturers in Guangzhou, China, which produces about 70% of Branch's custom furniture parts, Hayes told Business Insider. The remaining parts, along with the assembly work, is done in the US.
At the start of January, Hayes published a jubilant article on Starter Story saying that, even though he and his cofounders had no experience in the furniture industry, since their first products began shipping in Q1 of 2019, the company has done over $1 million in sales, including nearly $400,000 in December.
But just a few days later, on January 29, it looked like that would all come tumbling down.
That's when he learned of the coronavirus and the fact that his factories would be shutting down for a couple of weeks, maybe more, with production expected to be slow for some time after that.
He spent a harrowing month scrambling to make sure his company wouldn't get crushed just as it was starting to succeed.
But his Chinese manufacturers are now back to about 90% capacity, Hayes told Business Insider. And thanks to some fast-acting planning and a stroke of luck, his business won't be hurt in any significant way, he said.
A harrowing month
Guangzhou is 600 miles from the coronavirus epicenter in Wuhan, "But even at that distance, we saw firsthand how the fallout from the virus had the potential to shut down our supply chain," Hayes said.
His Chinese suppliers contacted him on January 29. "That's when we received word that our most crucial factories wouldn't be reopening until February 10 and even that date was tentative," he recalled.
His suppliers were only communicating "in dribs and drabs," so most of what he learned about the situation came from the news.
He learned about travel bans and safety rules, such as employees having to stay several feet apart from one another, which meant the factories would not be fully staffed even if they did reopen on the 10th. This would limit how many parts they could produce.
"Within a week we had new partners identified and were in a position to start production on these new lines if needed," he said.
But he and his cofounders also made a lucky business decision in Q4 of 2019.
They had paid for an extra large order of parts in Q4 in anticipation of the Chinese New Year on January 25. That's a major holiday in China where production slows as everyone goes home to their families. Last year, Branch had inventory shortages during that time.
The extra order was built before the holiday and it miraculously "arrived at our warehouses in the US and Canada in February," he said.
He now had enough parts on hand to make it through a short-to-medium term supply chain disruption.
But he didn't have to.
The factories did open on February 10. He promptly put in another big order, as big as possible without draining his capital too precipitously, as his next concern is that any shipments coming out of China might be delayed thanks to a logjam at the ports, as everyone rushes to obtain their overdue stock.
"The headlines nowadays of Chinese factories 'remaining closed for the foreseeable future' is a broad overstatement," he says. "We're seeing the output ability of our factories increase each week. The next milestone will be successfully getting the products out of the port, because freight forwarding delays persist."
All told, the experience made Hayes more hopeful about the resilience of the global supply chain economy - though it helps that his factories are not in Wuhan, which is still in lockdown.
"Despite the seriousness of this disease, the world can still function, the economy can still operate. There have been scary moments, but at the end of the day, we're OK."
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