Citing a slowdown in business in North America and too much inventory for current demand in China, Zippo Manufacturing Co. laid off 38 employees Monday.
The layoff is permanent, said Mark Paup, Zippo’s president and chief executive officer, giving some background on Zippo’s China — “our number one international market” — operations to further clarify the reason for the layoff.
“We used to have an importer in Hong Kong who used to buy the product and ship it into China,” he said.
The contract expired, and Zippo officials decided to take it over themselves.
“We had so many problems with black market and gray market product,” he said. Gray market refers to genuine products that are smuggled into the country, rather than imported legally through the proper channels.
Paup said Zippo officials learned of the problem, and “we felt as a brand owner we needed to take control of the distribution, the logistics and set up operations over there so we could control the channels and how the product was being sold.”
He continued, “When we took it over we weren’t sure how much inventory we should send over there, but we knew we had to take control and service those dealers. We couldn’t service them if we were out of stock.
“And if we weren’t servicing them it would really hurt our operation,” Paup said. “We were very aggressive with our load-in on inventory.”
Creating those products in Bradford proved for excellent numbers in early 2016, but the estimates on how much inventory was needed in China proved to be too high.
“Now the pendulum has swung the other way,” Paup said. “We realize we have way too much inventory over there. We can’t afford to carry all that inventory. Right now we’re readjusting — slowly — that inventory.”
That, coupled with a slowdown in North America, created a situation where Zippo felt it necessary to “right-size” staffing levels, Paup said.
“With some major key accounts ... the sales have softened,” he added. “We’re working diligently to put new designs in those accounts and refresh the program, but some things are outside of our control … like how many shelves they put us on. We’re competing (for shelf space) with everything from Chapstick to toothpaste to bubble gum.”
These challenges, combined with continued anti-smoking campaigns, have caused a dent in business as well.
Adjusting staffing levels is never easy, Paup said, knowing that 38 families are being impacted by the decision.
“It’s the hardest decision anyone has to make sitting in this seat, that’s for sure,” Paup said. He’s been in the position of president and CEO for a little under a year, taking over April 1 for retiring president and CEO Greg Booth.
Paup explained company officials go to great lengths to try to find other ways to deal with downturns.
“What we tried to do last year when we knew we had to adjust the inventories, we had a leave. We called it a cold-weather leave where employees could voluntarily sign up,” he explained. More than 30 people took the voluntary leave last year, and Zippo offered it again this year as well. All those off on voluntary leave were called back before the layoff, Paup explained.
“The reason we brought everybody back was they were from all over the plant” and of differing levels of seniority, he said. The layoff went by seniority, “but we do have to keep some critical areas at least staffed enough that we can run.”
Paup said last year, Zippo offered early retirement packages to several employees, and 19 accepted.
“It was all voluntary,” he said. “We had 19 people take that early incentive retirement, which saved 19 jobs.”
And a few days extra were added to the holiday shutdown, too, in an effort to keep costs down.
While there are no big programs or big orders on the immediate horizon, Paup said he’s hopeful that things will turn around soon.
Reached late Monday, Bradford Mayor Tom Riel said he has every confidence that Zippo will quickly recover.
“It’s unfortunate when anybody gets laid off or loses their job,” Riel said. “Zippo is a resilient company; it has long stood the test of time. I’m sure it will bounce back quickly.”
Paup did have some positive news. He added that things are looking up at W.R. Case & Sons Cutlery Co. after hitting a rough patch last year.
“Our Case business is rebounding,” he said. “Starting in February, we’ve brought back 12 people. Our bookings are coming back, and we’ve had very strong bookings compared to last year. At W.R. Case & Sons, we’re optimistic business is coming back in a nice way.”