Product shortages, shipping delays, price increases and project hold-ups have become more the rule than the exception at the hands of the pandemic—and no one knows this better than quotations managers, who have been right on the front lines of the supply crunch.
Below, distributor professionals with quotations responsibilities at several different IMARK Electrical member companies nationwide discuss the current state of supply issues, how they are navigating it with both their suppliers and customers, and how—and when—current conditions might ease.
IMARK Electrical Now: How long have you been in your current job and what traits are necessary to be successful in your role?
Lincoln Owens, Walters Wholesale (Brea, California): I’ve been with Walters for 18 years. In the quotations role, there is a need to be a jack of all trades who understands the industry and market as well as vendor and contractor relationships. Success as a distributor selling lighting controls requires solid product knowledge and a good understanding of the market as well as competency in energy codes.
John Habrowski, K/E Electric (Mt. Clemens, Michigan): I’ve been with K/E Electric for almost 32 years and in my current role for 21 years. This job requires a person who’s adaptable, patient and organized.
Dan Whalen, Gordon Electric (Kankakee, Illinois): I’ve been with Gordon for 22 years and have been in the switchgear specialist role for nine years and an account manager as well for the last three years. To be successful in these roles, you must be very detail-oriented, have strong communication skills, and be very punctual with quotes and delivery of products.
IMARK Electrical Now: Please describe the current market conditions you are experiencing—for example, which products are experiencing the greatest delays and how long are the delays? How have material prices and/or transaction costs been impacted by these issues?
Owens: Pricing is more volatile than I have seen during my tenure in the industry; across the entire spectrum of building materials—from lumber to copper to steel—prices have skyrocketed as of late, largely as the result of underestimation of demand and shortages of labor. COVID protocols have reduced staff density, causing many manufacturing and logistic delays. In addition, shortages of electronic components have affected many of the more complex finished goods like lighting fixtures. It seems that not one product category is immune from one or more of these issues.
Habrowski: We’re experiencing delays in the shipment of larger switchboards and panel boards. Delays are four to five weeks longer than normal for switchboards and two to three weeks longer than normal for panel boards. Prices are also rising on steel, copper, etc., so not only are things taking longer to ship but the costs are going up as well. Both of the power manufacturers we stock have had two price increases already this year.
Whalen: As we come out of the pandemic, it seems like some of the factory shutdowns that happened during that time are really starting to show now that previously built-up inventory has been depleted. Any products that contain resin are experiencing the longest delays. While material has been in short supply (causing prices to fluctuate drastically), the uncertainty regarding the duration of some of these backorders has had a bigger impact on which jobs happen and which jobs do not. On several occasions, I have been given a date when material was going to be available for my customer, but when that date arrived the material still was not there; I was then given another date and the whole cycle started all over again. There have been some end users who have felt like it is not worth it to proceed with certain jobs, which isn’t good for the contractor or the distributor.
IMARK Electrical Now: How are these delays impacting other parts of the chain and the ultimate construction projects for which these products are destined? Are you seeing or do you anticipate that construction projects will be delayed or cancelled due to shipping delays and material cost increases?
Whalen: I’ve seen some contractors who have enough capital buying a little more than necessary when the material is available so that they can have material “locked in” for their end user. That makes a huge difference as to whether or not a job gets off the ground. No one wants to start a job and then have to stop it multiple times because no material is available.
Habrowski: As a result of these delays, contractors are facing penalties for not being able to complete their jobs on time. It’s going to be interesting by the end of summer when contractors need to get any school-related projects finished and are still waiting for equipment to arrive. I anticipate that some jobs or portions of them will be canceled when it gets down to jobs needing to be finished on time.
Owens: It is not just the electrical industry that is being impacted—the entire construction market is affected when products and production are delayed to the magnitude that we’re seeing. We are trying to manage contractor expectations more than ever. We can’t hold pricing as long as we used to or as long as the industry expects, but we’re being as transparent as possible and often need to overcommunicate about what we see coming and how customers will be affected.
IMARK Electrical Now: What primary adjustments have you and your team made as a result of current conditions, and have they been effective?
Habrowski: We’ve been utilizing local switchboard and panel builders, as they can typically turn this equipment around quicker, but even they are experiencing delays now depending on which manufacturer they use for breakers or fusible switches. We have also turned to some suppliers of “reconditioned” equipment to get some jobs finished or temporarily powered up until the new equipment comes in.
Owens: We’ve added verbiage to our quotations to help manage expectations and we’re asked to proactively consult project schedules earlier and more often. Product availability and, more importantly, a contractor’s/distributor’s deftness at navigating product shortages and/or market volatility, may more often be factors in the award of a project now, so we are managing our inventory to keep stock on hand where we see the need. On the project side, customers are looking for ways to mitigate pricing and availability uncertainty. Storage options and other distributor value-added services are favored and in demand in our market.
Whalen: We have a big network of vendors who support us very well and we’ve been able to utilize those relationships which have been forged over the years to help fill in the gaps. We also have a strong customer base that realizes that we are all in the same boat with these issues. There have been times I’ve called a customer and asked if they have had an extra part that I am short of; they help me out and when my backorder comes in, I return it to them. In that way, I think we have been effective at pushing in the right direction.
IMARK Electrical Now: How would you describe the response of electrical contractors to these challenges? How have their wants/needs/demands changed?
Whalen: Communication is key, and it helps a lot with contractors. They know that there are shortages and, while they are tired of hearing about it (like we all are), we find that if we communicate at the front end of the order/job, for the most part they’ve been planning accordingly. There have been plenty of times that an emergency has come up and we must do what we can to make it work, but I think that their expectations can be molded if you are just honest with them. If a vendor gives me a lead time of four to six weeks, I let the contractor know that information right at the start and then keep them in the loop as the job evolves. The key is for vendors/suppliers to communicate with us that a potential delay is coming so that we can address it sooner rather than later.
Habrowski: Contractors are obviously not happy with the current state of things. Some are scrambling to whomever or wherever they can go to get their jobs done. Some of the contractors understand given that most of the manufacturers are in the same predicament and are unable to receive raw materials to produce their products.
Owens: Medium and larger-sized contractors understand the process and have longer-term projects that offer some flexibility. Smaller contractors find it tougher because they are more reactive; their projects are often shorter in schedule/duration and they need to source alternate products if they can’t get what’s specified. Tough decisions have to be made when the schedule will be significantly impacted and lighting agents, specifiers and architects have been more understanding of that than in the past.
IMARK Electrical Now: Finally, what is your prognosis for the future as we continue to emerge from the pandemic and move forward? Are you seeing signs of stabilization in product availability/pricing or will we be dealing with these issues through all of 2021? What is your hope for the future?
Owens: We are expecting these turbulent conditions to continue through the end of this year. Stability will slowly creep back in, but it’s going to be a while and pricing may be slower to reach previous levels. The fact is that we have little influence over the cost of goods—we can only control our inventory and how we purchase and sell it. As a result, we will place our focus on providing service and do our best to educate our customers on the market, deliver products in a timely fashion and help support the market and alleviate the contractor’s pain points wherever we can. Given the labor shortage, we can offer customers labor-saving alternatives and pursue new ways to support contractors to help them retain margin.
Habrowski: Right now, I think that the future looks a little bleak and that this will continue through 2021. Not that we are lacking for business, but I’m hoping for a better 2022, that supply chain issues will be a thing of the past and that we can completely chalk the situation up to COVID.
Whalen: As we come out of this pandemic, I think that we all have a different perspective on work, life and the balance between the two. I’ve seen some customers mellow out because of this experience. I think that with Zoom and other technologies, our communicationhas gotten better and that we will emerge stronger from this experience because of that. There isn’t much stabilization in supply or pricing right now and I am guessing that we will be dealing with pricing issues through the fall and with supply issues through the end of the year. However, I think that the future is bright. I always live my life with the mantra of “you can’t control the situation, but you can control how you react to it.” A lot of this is out of our control, but I think that if we react to it in the correct way as an industry, we won’t just survive, but thrive.