As I mentioned on these pages a few days ago, I am attending a national conference in DC for my company and around 300 of our vendors. As a reminder, I am involved in industrial distribution (actually HVAC distribution, which is a subset of industrial distribution).
I asked the same question of dozens of my top vendors, and it was basically “what issues are you seeing with regards to the production slowdowns in China?”. I left the question open intentionally as I didn’t want to funnel responses.
Almost all of them, as if they rehearsed their responses together, said the following:
We have enough safety stock to get us through the Spring orders and a few months afterward.
We are in constant contact with our Chinese vendors (as if this means anything) and are looking at alternate sources (prices will increase).
There may be shortages on certain items in the future.
I distilled these responses down a bit and thought about it and I think that there will be some supply chain issues, and there may be some opportunities. One vendor remarked that once Chinese production is fully back on line that there is a container logjam anticipated that might put some orders back several months. The vendors could be giving us the “remain calm” routine to try to keep runs on product to a minimum, but the demand in HVAC just isn’t there right now, as we are firmly in “shoulder” season. Shoulder season is Spring and Fall, where there aren’t too many emergencies, unless you live in the commercial world, where everything is an emergency.
Not much more outside of these comments was related to me and I think they are for the most part telling the truth. I guess we will know in a few months. If we start out Spring with some hot weather like in 2018, we could start to see some relationships tested.
The weak link in the heavy commercial unitary/ heavy unitary/ industrial/ process equipment will be the processor boards and related components thereof. The exception might be Daikin from Japan and misc smaller equipment from Korea which may be nonstarters for this event.
Kinda makes one wish they had kept their old 19/17 Carriers, and Trane PCV/benchgrinders/CVHE reliables piped in and added the newer replacements in a supplemental equipment room/powerhouse. York’s have had board problems on and off since the eighties.
Glad I’m too old to be in the fracas…although still have weekly job related dreams/nightmares.
Let’s hope those manufacturers are right about their “safety supplies”, because it takes time for disruptions to move through the supply chains. Fortunately, there are a lot of things where supply interruptions would be disappointments rather than disasters — the current lack of custom-made wedding dresses from China comes to mind.
Another part of the supply chain disruption conundrum is the time delays in establishing alternate sources of supply. It may be an urban legend, but there was a story that after the Japanese tsunami all auto manufacturers found they could not produce red cars for an extended period of time because all the red auto paint used in the world relied ultimately on a single plant in the affected area. And paint seems to be a lot simpler to manufacture than many other products we use. But again, a lack of red cars is a disappointment to some and a nothing-burger to most of us.
The part to worry about is whether there are some essentials whose supply could be compromised — medications, of course, or chemicals and products necessary to preserve the safety of food and water, for example. And yes, AC in a Houston summer probably fits into that kind of essential category. A government whose intelligence agencies failed to foresee the collapse of the Soviet Union is probably going to have difficulty predicting critical supply interruptions before they happen.