Time for my “every so often” update on the always exciting world of industrial distribution. For those interested, you can check it out after the jump.
It has been a year and a half since the Commie Crud (copyright Sgt. Mom) started to mess everything up and I have been blogging on how it has affected industrial distribution as we have moved along. For those who don’t know, I own an HVAC distributor, and we are a subset of industrial distribution.
It looks like we are going to get through the Summer just fine. We only have another month, maybe 45 days of true Summer left in these parts and our inventory levels are good. Note, we have been concentrating our growth on our current customer base, not trying to poach my competitors customers. With the volatility of the supply chain, there isn’t really a way to predict how or when stuff will be coming in (still!) so we restricted equipment sales to “the family” (meaning our existing loyal dealers). I worked very hard all last Winter to make sure we had inventory and it has paid off. Our safety stock is super high and it is really hurting us with turns but it is what it is. Until things are a bit more predictable, that is just the new model. You either have it and win, or you don’t and you lose. There is no middle ground when it comes to HVAC.
Prices are increasing like never before. Raw materials spikes and market shortages are causing our vendors to raise prices like crazy. In the past, everyone would scream and bitch a bit when prices went up, but now everyone just shrugs their shoulders and moves on with their day. The question is “do you have it”, not “how much is it” – especially in the commercial world.
The stuff that we get from overseas, in particular ductless mini splits is completely hosed. They are having chip issues and freight woes (ports and sea shipping are a nightmare, still) and this combination has them with lead times that will put the arrival of their cooling units well into Fall and early Winter. There isn’t really anything we can do. I don’t feel too bad about this one – usually I kick myself a bit when we are out of stuff but nobody else has anything either so that makes me sleep a little better.
Chips – I am hearing that there may be chip issues coming with the manufacture of the boards that control furnaces. If this materializes, it is going to be a rough Winter. I heard one of the major manufacturers of furnaces (that we don’t sell) is already bracing their dealers for shortages.
Parts – in general, parts are available and plentiful. There are issues here and there but for the most part this has been a pleasant surprise the whole time. One of the things that I definitely got wrong when the commie crud started.
Accounts – there is the usual bad debt write off, but nothing unusual. I am very happy about this as I thought for sure when this all started that we would see a lot of guys going out of business and burning us along the way. But it simply didn’t happen and proves that HVAC is a business that everyone needs and is resilient in all sorts of economic turmoil.
Freight – LTL is still moving super slow and the level of damage and loss is still high. This is a tough situation and one that I don’t think will improve for some time.
In general, things are OK in the new normal. The hours are long but we are being rewarded for being very proactive and making the right investments in inventory.