ContiTech adapting for post-COVID business reality

CUYAHOGA FALLS, Ohio—Two years later, and it seems everything has changed.

No matter where you are in the world of manufacturing—at the start of the supply chain, the end of it or somewhere in the middle—the COVID-19 pandemic has changed your business. From the way you source materials to the way you ship them, from the way you hire to the ways your team collaborates, the pandemic has left the industry changed.

That certainly is true for Continental ContiTech. In his keynote presentation during the second day of the Hose & Belt Manufacturers Conference, Jim Hill, CEO of ContiTech's North American operations, broke down some of the ways the rubber products maker has shifted its focus and business approach, having gone through the disruptions brought on by COVID-19.

"We see a lot of different changes from a manufacturing standpoint," Hill told those attending the conference. "It has disrupted almost everything we do in one form or fashion or another."

For ContiTech, those challenges have manifest in a number of areas, but are most prevalent in three key arenas: what it buys, who it hires and how its teams work.

Cost-effectiveness can only go so far. When it comes to supply chains, the money you save doesn't matter if you can't get the materials you need to manufacture parts and meet customer demands.

The pandemic-induced supply chain disruptions that have emerged in recent years, have given ContiTech a different perspective of how to manage and approach supply chains.

"I don't know that we all realized how much we were single-sourced before," Hill said. "That was a big eye-opening for us as we were looking through a lot of our materials, trying to find things as supply chains got extended as availability got tougher, how many items were single-sourced on."

Addressing that supply chain weakness, he said, involves taking a more aggressive approach to ensuring the stability of your supply chain. This means, he said, prioritizing the supply chain's ability to navigate challenges ahead of the most cost-effective solutions.

"We are also getting a lot of materials from certain other parts of the world, and many times we are trying to source boldly for savings, but I think savings has to go on the back burner," Hill said. "Now you are sourcing for stability. Savings is still important, but you can't shop, in my opinion, fully on cost."

ContiTech, like most other businesses in the manufacturing arena, has been hit hard by the labor shortages. And the challenge, Hill said, is two-fold. It's finding good employees and battling other manufacturers to keep the ones who are exceptional.

To this end, ContiTech has raised its starting pay by about 25-30 percent in the last six to eight months, but that isn't always enough.

"We have been finding out that in our operations, if we need 50 people—and we hire 50 people—25 end up leaving within 90 days," Hill said. "Either people move on to other jobs because they found something that pays better or we have not been able to find people who will show up at a regular time and we terminated them."

Turnover, what ContiTech dubs "unforced fluctuation," hovers around 15 percent in North America—significantly higher than it has been historically. It's low, he noted, compared to the Continental tire division for instance, but it's still higher than ContiTech would like to see.

Given that many of the manufacturing facilities Continental ContiTech has are in rural areas—Nebraska, Iowa and Utah—there is a smaller pool of candidates to start, given the populations of those towns and surrounding areas.

"At the end of the day, I think it really comes down to the work-life balance," Hill said. "Because we haven't been able to man the facilities, we have demanding a lot of overtime from people. And that is nice, they like that big paycheck, and it lasts two of three months, maybe four months, but they get tired of it after several months and think 'I don't know if it's worth it. I don't get to see my kids, I don't get to spend weekends at home, I need time off. And if Continental is not going to give me that time off, I am going to have to go somewhere else.' "

Those challenges will be considered even more carefully as ContiTech looks to bring more manufacturing to North America—part of an effort to localize production.

At this point, the company is in the exploratory stages of that onshoring plan, and Hill did not specify what products are being considered for manufacturing in North America, where it is looking to add production or a definitive timeline for doing so. He did, however, indicate that some planning should take shape soon.

"I think you will start to see one or two announcements in the next six months that will show us actually building some facilities here to onshore some products that we make in other parts of the world today," he said. "It is well underway for us to be in the market for the market."

Work-Life balance—a central piece of the puzzle for finding and retaining manufacturing workers—is just as essential for those working in an office setting.

The COVID-19 pandemic shut down ContiTech's North American headquarters offices in Fairlawn, Ohio. The offices were closed for months, Hill said, noting that keycards were deactivated so employees could only get into the building with special permission from human relations.

During the time the offices were closed, they were remodeled—designed to be a more collaborative workspace. Desks are arranged to encourage group projects and nobody is assigned a desk. Those coming into the office have to reserve a workspace for the day.

The outdoor area has been remodeled to allow for employees to work outdoors on nice days with workspaces and wi-fi availability.

It is unlikely that ContiTech will require employees to be in the office five days a week, as was the expectation before the pandemic. But Hill believes there is great value to a collaborative workspace and would like to see at least a part-time return to the office.

"We think that we have got to have a balance of remote work and office work. Everybody worked hard at home. … Nothing fell through the cracks," he said. "At the same time, though, I wonder if we are as good as we could be. Because we are not having those hallway conversations, we are not sitting in the conference room with the white board there and generating ideas and talking.

"Yes, we have all these online tools…but there is nothing better, in my opinion, than being a room together and talking business. Brainstorming, whiteboarding, talking about it, and then taking a break and talking about it out in the hallway there."