There has been an ongoing shortage of N95 respirator masks due to COVID-19. Larson Electronics has masks in stock ranging from 25 packs to 2,500 packs. There are no limitations on how many masks you can order when you buy from Larson.
Their line of masks have a 95% filter efficiency rate, offering protection from COVID-19 and other bacteria. According to the World Health Organization, masks should be applied with clean hands and individuals should not touch the front of the mask or get them wet.
These masks average $12 per mask.
About: Larson Electronics has 100,000 masks in stock and available for immediate shipment and provide Next Day Air shipping services via UPS. Starting last week, it began to air-in 10,000-50,000 masks per day to fulfill the requests from customers. It can do a week turn around on most size orders, with up to a week-and-a-half lead-time on orders exceeding 1-million masks. The company has people working 24/7 to appropriate funds, procurement with international suppliers, and coordinate logistics with domestic and international sides for shipping and clearing customs. This allows Larson Electronics to provide expedited results and fast turnaround for these supplies, the company notes.
Why is Larson selling masks?
LE: We source some components in China for our manufacturing facility here in Kemp, TX. We are a small business and work with some very loyal and trusted small businesses in China. These suppliers have access to KN95 masks, which have FDA approval and have been approved by the CDC for substitution of N95 masks. Once they got back on their feet, they offered masks to us. At the same time, we were promoting our UVC disinfection lighting products to address surface cleanliness for the Corona Virus. Customers interested in the disinfection lighting solutions asked if we had masks, hazmat suits, rapid test kits, and other critical infrastructure needs. We saw the linkage and began to offer masks.
How are the masks sourced in China?
LE: We work with a trusted partner to vet source factories in China. When you do business in China, you send all the money upfront, and then the manufacturer ships the product. Usually, this is done by container, but in this case, we are airing in every shipment. There are several problems here, including:
- Many factories in China are still offline from the outbreak, so production is limited. Plus, many of those that are open are still servicing domestic needs.
- The entire planet is at China's door wanting billions of masks. Thousands of suppliers from more than 200 countries need masks. The line is long. Vendors that had 1-million-unit capacity per day last Wednesday are now backlogged 4-6 weeks. The demand is off the charts.
- The US saw fit to wage a trade war, via 30%+ tariffs, with China over the past 18 months, which has degraded relations and overall capacity in China. So, when they look to see who is in the line, there is only one country waging a trade war with them. We're not the most popular guy in line.
- Because of the conditions above, the price to procure high-quality masks is many multiples above normal pricing, particularly if you wish to move to the front of the line as an American. The only way to lock up mask production is to send someone you trust with an actual "bag of cash" to negotiate and secure future production. So, the funds are transferred in advance, cashed out in Chinese currency, and then hand-delivered to the source factory to secure your order. That is how out of hand the situation is at this time.
- Finally, the masks are prepared, packaged, and air shipped to the US. Because of travel bans, limited passenger flights, etc., the amount of air shipping lanes between China and the US is a small fraction of what it used to be. The cost of airships is increasing every few hours as global demand escalates. While we have quotes for air shipping, we won't know the final price until they ship. We do some via UPS/FEDEX and some via air cargo, depending on availability.
- Customs processing is another cost associated with inbounding these units. With air cargo, we generally send our trucks to the airport to receive the items as well.
How does this benefit Larson?
LE: Larson is a small business employing around 120 people in a town of fewer than 3000 people. We are the largest private employer on this side of the County. While we have been deemed essential by our aerospace and military customers, we believe the overall order volume will fall for approximately 4-6 months. I know people are talking about weeks, but you can't shut down a whole economy and then snap your fingers and reboot it.
We believe it is our responsibility to keep our folks active and receiving reasonable compensation during this time. We believe that the combination of the UVC disinfection lights and other necessities like masks, alcohol wipes, etc. will allow us to take care of the families that rely on us and avoid layoffs. Our pricing model is based on the costs listed out above, including the cost of masks, shipping, customs processing, repackaging, etc. The pricing model also takes into account the fact that we are paying in cash in advance for these masks, while most of our customer base have net30 or net60 terms. So, we are the bank. That means the risk of payment forfeitures or delays, especially in what we expect to be very down-market over the rest of the year. So, we have to price for that as well. Our goal is to keep the people that work here paid and continue to manufacture and source products needed to meet the demands of during this time of crisis. We, of course, have heard about nebulous payments from the government that might go to someone at some point under some process that doesn't exist. That doesn't inspire any confidence. We have also heard about small bridge loans to small businesses, but the size of those loans isn't going to help companies like ours. And we don't see any reason to take on debt when we can work through this.
What has been the feedback?
LE: We have had some negative feedback about the pricing. A month ago, you could get masks for under a dollar. If this is true, why governments and other infrastructure folks didn't stock up is a mystery. We all knew this situation was coming for the better part of 3 months. At this point, there is no way to get even close to that price for the mask itself, let alone air shipping, etc. Our pricing reflects all of those costs as well as the margin needed to keep our people paid so they can source the products this Country desperately needs. The margin percentage for masks is lower than we would generally see on our products. Still, since the cost structures are elevating daily and we have many quotes out there, we are looking at sub-optimal margins for our business.
Why does Larson not donate these masks?
LE: We are bringing masks in to meet the needs of customers. We do not foresee excess capacity. Moreover, we are using the proceeds to keep our people paid so that we can continue to provide essential services to combat the current pandemic that is rapidly spreading. I don't think we can rely on anyone else to care as much about this business and the people that work here as much as we do.
What other products does Larson offer to meet the need?
LE: We are currently providing hazmat suits, safety goggles, face shields, thermometers, and rapid test kits in addition to our standard line of UVC disinfectant products. If you have an urgent need for any other necessity items to fight this war against the virus, we are happy to assist in sourcing products through our established supply chain.
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