Skilled labor shortages, product delays, shipping issues and ongoing price increases have become standard practice in the electrical products arena during the pandemic and have created unique challenges for electrical contractors in an industry that’s also seeing renewed construction activity and robust demand for its services.
Following, executives from several IMARK member firms nationwide share their thoughts on how electrical contractors in their served areas are faring during these trying times, the distributor services of greatest value to their contractor customers and how manufacturers can help support the entire channel’s success.
State of Electrical Contracting
Tony Buonocore, United Electric (New Castle, Delaware): Many of our contractors are struggling with labor—some to the point that they’re not bidding on specific projects. However, labor issues aren’t affecting them nearly as badly as material shortages. Material lead times are preventing contractors from completing projects on time.
Michael Mammone, Mars Electric (Mayfield Village, Ohio): As of right now, the overall construction market is holding steady in northeastern Ohio. The majority of electrical contractors are being selective about the projects they bid on; their backlog is full for the balance of 2022 and many have projects booked that will carry them through 2023 and beyond. A shortage of labor is one of the biggest concerns for many of our customers right now and the majority of contractors I talk with say that they could bid more work and secure it if they had more electricians to build the projects. Today, we see projects taking longer to complete, but all indications are that the delays are more directly tied to material shortages rather than the lack of labor to complete the project.
Kevin Kalish, Sunrise Electric (Addison, Illinois): The majority of our contractors have been extremely busy in 2022 and appear to be keeping up with the workload and demand. However, we’re seeing a growing labor shortage for office personnel and many of our contractors are continually seeking experienced estimators and project managers while exploring innovative means to fulfill their office workloads.
Electrical Contractors’ Changing Needs
Kalish: The greatest need and problem we’re trying to solve with our customers is lead times. Being the largest switchgear distributor in our market for two of the major manufacturers, we’re constantly asked for alternative solutions, whether it’s value engineering and re-design, local builder options, etc., in an effort to meet project schedules. We’ve seen the “need for speed” become the No. 1 priority.
Buonocore: Based on the frequency of price increases that we’re currently experiencing, we’ve seen demand increase for our kitting and storage services. Customers want to order early and lock in the lower prices, but they have nowhere to put the material. As a distributor, we’re also starting to struggle with space; even auxiliary short-term lease space is now hard to come by.
Mammone: Today, contractors are doing everything they can to protect themselves against price increases and material shortages. As soon as the contractor is awarded a contract, they’re working to procure as much of the material as possible and finding ways to have it stored until it’s needed on the jobsite, which could be 6-12 months out. Communication from contractors on project timelines seems to be improving, as they see the need to be transparent about when the material is required onsite to keep the project on schedule. A few of our commodity product manufacturers have worked with us to lock in pricing and delay shipments of material depending on the project schedule; in other cases, we’ve rented additional warehouse space and agreed to bill the material up front along with storage fees to help ensure that the customer has all of the material available when needed.
Information, Services Important to Contractors
Buonocore: Due to material lead times, the most important service has become project management. Contractors rely on us for scheduling support and to proactively reach out to manufacturers regarding shipping delays. They also rely on us at the beginning of the job to value engineer the bill of material (BOM) for a lead-time advantage. The focus of value engineering used to be related to price, but it’s shifted to availability, as delivery in many cases has become more important than price. Our ability to get creative on locating alternates and helping the contractor get them approved makes us integral to the contractor’s ability to navigate the supply chain crisis.
Mammone: For our project business, we provide weekly shipping reports so that the customer can see when the material will be available and plan their labor accordingly. Our warehouse operation also does a great job of utilizing job management software from Eclipse to accurately store lighting and switchgear packages; it’s not uncommon for us to hold parts involved in a project for more than six months and only deliver the equipment that’s needed onsite to minimize damage and theft on a jobsite. Many of our customers also rely on us for our crane truck service, as we have two stake body trucks, each equipped with a crane that’s used to set heavy equipment in place as well as assist with installation of site lighting poles on projects.
Kalish: Project management and constant communication of delivery schedules are among the most important services to our contractors. Additionally, we’re often asked for the “quickest” option in lieu of the least expensive. We’ve seen many of our contractor relationships grow stronger as the value and integration of our companies have become increasingly critical for our customers to succeed during these challenging times.
Most Popular Products
Mammone: Labor is the biggest risk a contractor has on a project, so reducing installation time is definitely vital for them. The types of solutions vary based on the contractor. Among those who do the most upfront planning for a project, for instance, the complete turnkey prefab solutions offered by ACS/AFC and Caddy are great options, as entire rooms of rough material will show up in boxes labeled by room with all of the components prewired by the factory. This works well on projects that have several rooms designed in a similar fashion with repetition. However, this solution can be challenging if the project has several design changes that occur as the job is progressing. Many of these manufacturers also offer prefab components that give the contractor some labor savings while still having the flexibility to adjust to changing designs in the project, which can be common.
Kalish: We’ve seen an increase in pre-fabrication work being performed by our contractors to minimize scheduling impacts once items with excessive lead times arrive.
How the Pandemic Changed Contractor Engagement
Buonocore: Jobsite activity has largely returned to pre-pandemic levels. However, sales activity that used to take place at a contractor’s office has likely permanently changed. Many of our contractors are offering some form of hybrid/remote work arrangements for their office workers and I don’t expect that to change. Our sales team isn’t going to travel to their homes, so in-person meetings can be difficult to pull off. This has forced the sales team to embrace electronic communication, often in the form of a Microsoft Teams meeting.
Mammone: Many of our customers allowed us to continue to call on them during the pandemic while using safety measures wherever possible. We do have a few customers that have reduced the number of face-to-face interactions and moved to hosting Microsoft Teams meetings. We see the benefits of both options, as the efficiencies in time from Teams meetings allow for more work to be done before and after the sales call, but it’s hard to replace the relationship-strengthening benefits that occur in a face-to-face sales call. During the pandemic, we provided product trainings using YouTube videos with our local manufacturer reps as well as hosting virtual product and service seminars on a quarterly basis, but we’ve since moved back to holding the training sessions in person.
How Manufacturers Can Help Electrical Contractors
Mammone: Partnership is critical for us to achieve success when promoting a manufacturer’s product to our customer base. Joint sales calls to discuss upcoming projects and determine product selection depending on the application, material planning if the volume is significant and lead times are long and new product education are all part of the process when partnering with a manufacturer. We have strong customer relationships, but we rely on our manufacturers’ expertise to help identify solutions that will either improve installation efficiency or reduce cost and eliminate waste for the contractor.
Buonocore: Effective and accurate communications are most important. Shipment dates are constantly changing and it’s critical that we keep our customers informed. Also, when shipment dates are missed, contractors may need someone from the manufacturer to meet with the end user to validate the reason for the delay and give them assurance that everything is being done to expedite the process.
Buonocore: Inflation is hiding how badly global supply chain issues have eroded growth in our industry. Our sales and profit numbers are at all-time highs, but the number of lines sold are significantly down from pre-pandemic levels. Based on the numbers shared by our manufacturers, we’ve taken market share, so I believe it’s an industry phenomenon and not specific to our company. The pandemic has opened our eyes to how long the supply chain actually is and we’ve learned about upstream participants we never knew existed before; for example, a worker’s strike in a copper mine in Chile is suddenly and directly impacting our business. It’s going to take coordination from the entire chain for us to effectively navigate through this supply crisis.
Kalish: Up to this point, demand in our market has remained very strong and the majority of our customers are booked with work. While no one is hoping for an economic downturn, many of our contractors are questioning how much of a downturn might be required to correct the supply chain issues. We appear to be seeing the start of this supply chain correction in the retail and B2C markets.
Mammone: Despite concerns of instability in the economy, we’re very optimistic about the future of electrical construction in our market. Demand for our products and services remains strong and emerging technologies such as EV charging and solar as well as the need to strengthen the electrical grid will provide many opportunities for us in the coming years. Contractors see the value in partnering with electrical distributors who provide value-added services focused on jobsite efficiency and labor savings. Our primary focus continues to be as a solutions provider, not just a material supplier.