Empty shelves in stores, car lots with plenty of available spaces for new models, and delays in getting just about anything shipped — these are just some of the trickle-down effects from the on-going global supply chain issues.
The electrical supply and distribution industry is not immune to these concerns. It’s impacting most all facets of business across all markets and industries worldwide.
As we enter into our third year battling COVID-19, the supply chain struggle doesn’t seem to have an end in sight. Spiked consumer demand created during the pandemic lockdowns has left most business markets scrambling to deal with manufacturing and production issues from COVID shutdowns and protocols, a skilled labor shortage, lengthy shipping times, congested ports and increased prices.
Longer lead times and limited inventory is becoming the norm. “Lead times increased for many of our manufacturers as the year went on,” Bryan Ramsey, Kirby Risk Construction Product Manager, said. “A normal lead time of a few days or a week may be several weeks or months for some products. Also, some manufacturers limited the amount of product that could be purchased each month.”
Price increases were also significant for many manufacturers. “On a normal year, we could have one to two increases, in 2021 we saw increases every month for some manufacturers,” Ramsey said. “Commodities were hit the hardest, with increases up to 400 percent.”
Kirby Risk is here to help combat supply chain issues and ensure we are doing the best for our customers. We ramped up inventory as much as possible to help offset the price increases and delays caused by long lead times. Additionally, products were sourced from alternative manufacturers. Unfortunately, some customers are still experiencing project delays.
Kirby Risk is just a small link in the overall supply chain. When there is a break in the chain, it has to be worked out from top to bottom, creating a, pardon the pun, chain reaction until it straightens.
The link above Kirby Risk in the electrical supply and distribution chain is our manufacturer partners, who are also feeling the challenges of the pandemic. A few of our manufacturer partners shared their challenges and experiences during the last two years.
Eaton’s Bussmann Series division, as well as other companies that rely on the use of resins, has encountered supply chain challenges and disruptions primarily because of their use of resins. “We use a number of different recipes of resins with various additives in our products. Since we must undergo stringent UL testing, it can often be difficult and time consuming to change to a different resin,” Nick Offerman, Regional Sales Director for Bussmann said. “In addition, many of the manufacturers that supply the additives, such as a fire retardant or glass fiber reinforcements, have or are still on force majeure and this limits our ability to get more materials.” Many of the resins Bussmann uses are very specific to their products and are not ‘off the shelf,’ making it an additional challenge to move to a new supplier. “We have all of our supply chain teams and engineers working on projects to qualify new materials and suppliers while maintaining the strict UL requirements,” Offerman added.
Another primary challenge has been metal shortages. Offerman said metals have also been difficult to procure as lead times have gone from a couple weeks to many months due to both capacity and raw material shortages. “Numerous causes have led to this situation including natural disasters in parts of the world, labor issues at ports and various plants, as well as logistics issues,” he added.
What Does This Mean for Kirby Risk?
Same story — long lead times and back orders because products that are normally made to stock and ready to ship have become made-to-order. For many manufacturers, lead times have gone from a day to weeks or even months. “To counter this, teams are working tirelessly to identify other materials and components, alternate suppliers and insourcing options. The full engineering staff’s number one priority is working with the plants and supply chain to help evaluate new materials, perform testing and even submit to UL for the changes,” Offerman said. “This has become our number one priority over new products, research and development, and even cost out projects. We are focused on getting through this challenge and coming out stronger on the other side.”
In October, Rockwell Automation sent distributor partners and customers an integrated supply chain update letter. It’s clear Rockwell is feeling the “broad-based challenges in our supply chain due to the pandemic.” The letter said ongoing supply constraints stemming from component shortages and related issues continue to impact Rockwell’s business, resulting in more frequent changes to their sales order promise dates and longer lead times for some product lines. “We are fully aware of the unfortunate inconvenience and frustration this has created for customers. Additionally, we recognize the importance of providing accurate lead times and timely updates as quickly as possible given the dynamic nature of our supply chain challenges,” said Ernest Nicolas, Senior Vice President and Chief Supply Chain Officer for Rockwell Automation. “Therefore, we are adjusting lead times to align with our current reality while implementing an ongoing review cadence to keep you informed going forward.”
Andy Schwegel, Vice President of Industrial and Commercial Sales with Emerson, hosted a Strategic Webinar for Affiliated Distributors’ (AD) March 2021 meeting. AD is North America’s largest marketing/buying group for construction and industrial supplies. In the meeting, Schwegel covered the supply chain issues facing not just Emerson’s Appleton™ and Sola™ divisions, but the electrical supply and distribution industry as a whole.
Schwegel said price increases throughout 2021 were not in the forecast. But, as the market has picked up, prices have gone up simultaneously. The reason for price increases is actually quite simple — supply and demand. “Demand has come back. It has put pressure for commodities on limited inventory and those producers of the commodities are struggling to get the inventory in place because COVID protocols have made it so they can’t produce at the capacity levels that they typically have been accustomed to doing,” Schwegel said in the webinar. He also said the procedures such as social distancing, limiting the number of employees in areas within a building, split shifts and sanitizing between shifts used to keep employees safe and healthy is taking hours out of the day. “It has created a problem,” he said. “And the folks that provide the commodities are struggling with that.”
Emerson’s Global commodity team originally forecasted steel commodity prices to come down in 2021, but the prices have kept going up throughout the year. Schwegel added that commodity prices will continue to increase because of competition for the available supply.
So, when you find a supply of the commodity, you accept the price increase. But, you are then faced with shipping issues. “Whether you’re talking about a truck, plane, or shipping vessel, what we’re seeing is significant increases on the amount of time it takes to get a product from point A to point B,” Schwegel said. “Which is challenging for a global manufacturer who has product coming in from all over the world.”
Although Emerson is about 70 percent vertically aligned in North America, meaning most of their product is produced within the confines of North America. For the product coming outside the US, Emerson is seeing 30-plus days of transit time just to get it across the ocean. Once at a port in the US it could take five to 10 days to get the items to an Emerson facility. It used to take one to three days.
“In my 30-plus years in the electrical industry, what I have found is that when the market goes down, it is the AD partners who seem to recognize that there is a shift going on in the market,” Schwegel said. “And when that business goes down, AD partners' businesses typically don’t go down as much as the rest of the chain.” When recovery starts like in this pandemic, AD partners are so close and strong in the markets they serve that they adjust their business before things get to an emergency state and that’s why they don’t go down, he added. And he’s not wrong. Throughout the pandemic, Kirby Risk and our vendor partners have aggressively worked together to stay a step ahead by maintaining stocked inventory of commonly needed materials in order to better serve our customers.
For Rockwell Automation, that means regular supply chain updates for distribution partners and their customers. They have also committed to
Increasing global capacity to build additional inventory where appropriate
Scaling resources in their manufacturing facilities
Finding agility in their supply base wherever possible, particularly with their largest suppliers to aid the most critical areas of operations
Adapting logistics to secure additional freight capacity and managing expedited orders
Accelerating throughput for their distribution and fulfilment for surge capacity
Increasing customer support resources, including a global cross-functional team with business, operations and regional leaders with dedicated resources for resolution, particularly for large order requirements and critical needs
Bussmann predicts supply chain challenges will continue well into 2022. “Without the mitigation efforts, it could be much worse but there is hope that we will get past this by working together and prioritizing our core business needs,” Offerman said.
Buckle up because the roller coaster year we experienced in 2021 is not over yet. We expect to see a lot of the same supply chain issues going far into 2022. “We already have lead-times well into the first and second quarter of the year,” Ramsey said. “We are likely to see a lot of the same, at least for the first half of the year.” Relief is coming and Kirby Risk is doing everything it can to continue to combat the supply chain disruptions to better serve our customers.