For those of you who may not know, I own a HVAC distributor, which is a subset of industrial distribution. I have been writing of the many toils and tribulations of our industry during the Covidian era. What follows is another super exciting update on how it’s going in “my world”, as requested by many (well, actually nobody, but if interested, it is below the fold).
In general, things seem to be getting better. This certainly is not the case for things made “over there” such as ductless mini splits and the like with the never ending shipping delays.
We are hearing that chip availability is still an issue and will be for some time for many manufacturers. The labor situation, however, at some factories is pretty promising.
I have yet to pull my foot off of the accelerator as far as inventory goes, but from talking to many of my largest vendors a few weeks ago at a convention I learned some pretty valuable things.
1) None of them believe that the demand of the last couple of years will keep up. It was almost universally said that the demand for replacement and repair will be back to a more normal status. The vendors fully believe that people will be back to spending money on vacations and other things and leave their HVAC systems for the day they break, as was normal pre-commie crud (tm Sgt. Mom). Most of the sales targets that the higher ups are putting on to my reps are “just cuz” and aren’t really serious.
2) There seems to be a very large “fake demand” bubble right now. The larger and smarter distributors were allocated production during covid and that left the smaller and/or stupider ones to fight for scraps. Those guys never cancelled their orders and they are coming due now. Most of my vendors believe that this fake demand will dry up relatively soon and that they might even see some returns or cancelled orders when people start getting their bills.
3) Many distributors are bursting at the seams with inventory right now (yours truly included) and this will also affect the vendors order books this year, helping get production back to a more normal level. Everyone kept the pedal to the metal and never let up, and now we have to sell all of this stuff. My inventory turns are down well below 4 and pushing 3 at this point. Normally we like to see them well over 4 and pushing 5 (yes, I run it heavy on inventory even in normal times).
4) With all of this in mind, I am planning on winding this thing down at the end of Summer, unless we get another stupid variant, a new war (this current one didn’t really affect my work life too much, at least not at this point) or some other calamity.
It has been a very interesting couple of years, to say the least. Figuring out how to scramble and find new business partners has really shown us what we are made of. I could use some normalcy, however. We are all pretty much out of gas and need a break.