Strategic Manufacturing for the United States

Lessons Learned from the COVID-19 Pandemic

Roy Y Salisbury, David F. Emery, and Brian Jue

July 2021

The COVID-19 pandemic should have taught us a very valuable lesson when it comes to America’s Personal Protection Equipment (PPE) needs. We have learned that some products just can’t be made without preparation and infrastructure, and nitrile gloves are the perfect example:

“In the first months of the Covid-19 pandemic, doomsday headlines warned of impending shortages of ventilators for severely ill patients. Then states scrambled to source masks and gowns as borders quickly shut, igniting a bidding war for personal protective equipment. Eventually, domestic production kicked in to save the day, churning out everything from respirators to face shields. But one item is still in critical shortage as the pandemic lurches into its second year: medical gloves.” Giacomo Tognini, Forbes.com, 2/11/2021

Small Business Development Group, Inc. (SBDG) and C2C Private Investment Company (C2C) are currently exploring the feasibility of building and developing vertically-integrated manufacturing facilities for nitrile examination gloves here in the United States; these are the gloves used by medical professionals and first responders to protect themselves from pathogens like the Coronavirus. The goal would be to create nitrile examination gloves without any reliance on products or materials sources from outside of the US.

Prices of nitrile gloves have skyrocketed, in some cases by 1000%. Some observers have tried to explain the increase merely as the result of supply chain issues or raw material shortages, but in truth, the real cause has been the lack of domestic manufacturing capability for both the gloves and the material from which they are made, exacerbated by excessive profiteering by offshore manufacturing companies.

“Benefiting the most are the Malaysian glove producers who together control nearly 60% of the North American market. Top Glove, the world’s largest maker of gloves, posted record revenues of $1.8 billion in 2020, up 51% from a year earlier, more than tripling the net worth of its billionaire founder Lim Wee Chai to $4.1 billion.” Tognini, op. cit.

During the height of the pandemic and the economic shutdown, many pivoted to become distributors of PPE. With masks and gloves in strong demand, almost all of it was sourced from Asia. As prices drove skyward, the flaws in the supply chain and management PPE stockpiles became clear as procurement officers for hospitals, first responders, food suppliers and others were frustrated as they tried in vain to find the required products to protect their staff, patients, clients, customers. As we work toward establishing a new normal, prices of PPE have receded along with the immediacy and the price gouging, but the demand is still strong.

“According to U.S. importer AmerCareRoyal and market analysts, the global demand for gloves nearly doubled in a matter of months from 300 billion pieces in 2019 to 585 billion in August 2020. But glove makers can only produce 370 billion a year—and while new capacity installed in 2021 will add about 50 billion more, that still leaves a shortfall of 165 billion gloves as the pandemic rages.” Tognini, op. cit.

In order to meet the growing demand and to protect ourselves from future uncertainties, America needs to increase its domestic manufacturing capacity for the production of PPE and to lessen our reliance on overseas manufacturing. The US national stockpile of nitrile gloves reported in December to be only 72 million out of a target of 4.5 billion. During the pandemic, individual states, municipalities, and private industries were forced to navigate a wild market rife with shadowy middlemen and black-market brokers, some of whom were outright frauds. The surging demand sent prices skyrocketing: at one point a box of 100 nitrile gloves costs as much as $32, up from a pre-pandemic price of about $3 per box, according to Singapore-based Persistence Market Research.

Additionally, quality really matters to US consumers. A box of 100 nitrile gloves, even those cleared for distribution in the US, might contain fewer than the specified 100 gloves, or contain mismatched sizes, manufacturing flaws or damage, or be of general poor quality.

“Thanks to cheap labor and a quirk of geography—natural rubber and the chemicals that make synthetic rubbers like nitrile are mainly produced in Asia—the glove market is dominated by companies in Southeast Asia. That means it is nearly impossible for countries outside the region to make enough gloves domestically, as they did for masks and gowns.” Tognini, op. cit.

The above statement is true. Decades ago, the United States of America determined that it should not try to compete with cheap overseas labor and allowed this type of manufacturing to wither here at home; it was here, and through our economic policies, we actually encouraged it to move offshore. Thanks to the pandemic, we can all see the consequences in action. But every American should understand that if we have the national will to do so, we have everything right here in the United States to manufacture all the nitrile gloves our country needs. Furthermore, every American should understand that for the about the amount of money we were overcharged for nitrile gloves alone during the pandemic, we could have built 20 nitrile glove factories and 10 plants to produce the material from which they are made. And we would have had a better quality product.

The Biden Administration has set a goal to produce more than a billion gloves a month by the end of 2021, but that will only satisfy half of the domestic demand. At the present time, we have nowhere near the capacity to do so, nor enough time to build the facilities to meet that schedule. Moreover, new COVID-19 variants and a general unease regarding the possibility of future pandemics, nitrile glove prices are anticipated to be extremely volatile for the remainder of 2021 and beyond until such time as the United States can bring a sufficient number of facilities online to meet the demand for gloves and other PPE.

America must call upon the determination and resolve it has shown so many times in the past when faced with crises of great proportion: as a nation, we have the manpower, the resources, the intelligence, the science and the money to address these critical shortages and overcome them. Now is the time to bring our manufacturing capacity back home to the United States; this is the best way to create jobs, to grow the economy, and to keep us all safe.

Small Business Development Group, Inc. (Stock Symbol: SBDG), along with two affiliates C2C Private Investment Company, LLC and Progress Works, Inc., a Not for Profit 501(c)3, have teamed up on a feasibility study to determine if sustainable manufacturing of nitrile medical grade gloves is possible in the United States. The study started earlier this year, 2021, and has included an exploratory study of facilities in Southeast Asia, the necessity of meeting higher grade standards in the United States, and will also account for higher labor costs in the U.S. as well as the consideration of glove prices receding closer to pre-pandemic price levels.

The feasibility study also accounts for the strategy to build a combined plant that produces the feedstock material for the production plant for nitrile gloves, acrylonitrile butadiene rubber (NBR). This will remove any reliance on foreign sources for materials, and creating a truly 100% Made in the USA producer of nitrile gloves in volume.

About SBDG:

Small Business Development Group, Inc. (OTC: SBDG) is a holding company publicly traded on OTC Markets. SBDG has an active mandate to identify and acquire operating companies with a preference for those in the small to medium sized enterprise arena (SMBs and SMEs) based in North America, specifically those demonstrating modest but predictable growth and profitability over time. Ideal candidates for acquisition have an enterprise value between $2 million and $50 million with positive cash flows between $500 thousand and $5 million. SBDG's intent for all acquisitions is to affirm or establish sound business fundamentals and to drive revenue and profitability growth. The goal of SBDG is to develop and align portfolio companies into high performance industry verticals and deliver additional value for its stakeholders. The Company is based in North Carolina and has offices in California, Florida, Illinois, Maine, New Jersey, and Kuala Lumpur, Malaysia.

Disclosure

This article contains certain forward-looking statements based on our current expectations, forecasts and assumptions that involve risks and uncertainties. This release does not constitute an offer to sell or a solicitation of offers to buy any securities of any entity. Forward-looking statements in this release are based on information available to us as of the date hereof. Our actual results may differ materially from those stated or implied in such forward-looking statements, due to risks and uncertainties associated with our business.