2020 was one of the most unique and challenging years that the world has experienced. While it’s refreshing to see that we are getting back to normal, there are still residual effects that we will have to face after a 15-month shutdown. Along with just about every other industry, the supply chain issues in the HVAC industry are taking their toll.
Thankfully, here at West Allis Heating & Air Conditioning, we’ve had minimal issues with our supply chain needs during a record-breaking year…so far. That is largely in part to the proactive planning by ownership and the amazing suppliers that we work with to help keep our customers comfortable.
However, we’re not out of the woods yet as we approach the second half of 2021, where supply is struggling to match demand.
WHAT’S DISRUPTING THE SUPPLY CHAIN?
Lack of Employees
Without getting deep into the political and socio-economical issues, the largest contributing factor of the supply chain disruption (specifically for the HVAC industry) is the global lack of workforce that is needed to make & distribute HVAC equipment.
Sure, there is a sheet metal and lumber shortage but that’s because the labor force isn’t there to produce it. Even though many products we use are manufactured in the United States, those products come from materials made around the world. The HVAC industry relies on a global supply chain and there are extreme delays in shipping due to the lack of workers. For example, the lumber shortage is leading to the lack of shipping pallets, making the distribution even more difficult.
Think about the workforce needed to install a new A/C unit for a customer:
- Captains to drive the ships carrying the material across the ocean
- Truckers to drive the materials to trains
- Conductors to drive the trains full of material
- Truckers to drive the materials from the trains to the manufacturer
- Workers to use the materials to make the A/C unit
- Truckers to drive the A/C units from the manufacturer to HVAC dealers
- Workers to install the units for the customer
Despite incentive programs and wage increases, people aren’t returning to work as we need them to be. It takes a more skilled worker to make high-end products, which is why there are more mid-tier and base models available to the consumer at this time.
Demand is Exceeding Supply
As mentioned above, we are experiencing a record year along with many other companies in the industry. Of course, that is always great to have but the exceeding demand is catching up with the increasingly limited (and expensive) supply.
One of our manufacturers had planned for 25% growth in 2021 while operating at 100% employment, which they are fortunate to have. They’re facing a 60% higher demand for air conditioning products than they saw two years ago. Thankfully, they planned ahead during COVID and still have stock available but they are being forced to allocate supplies to their dealers. It’s also difficult for them to have every make, model, and size in stock for their dealers.
We’re sick of using “the C-word” but COVID played a huge role in the HVAC industry, just like every other. It led to shutdowns, job losses, lifestyle changes, and numerous unforeseen circumstances that uprooted just about everything we once knew as normal. One of those circumstances led to the need for rapid distribution of vaccines. That rapid distribution led to a microchip shortage. Microchips are crucial for the functionality of HVAC systems…and how those systems get made.
Another unpredictable factor was when Texas experienced extreme winter conditions like never before this past February. They didn’t have the resources to overcome them as most northern states do. That caused massive power outages and shutdowns that contributed to a plastic resin shortage. Plastic resin is used for many ventilation supplies in the HVAC industry.
These are just a few examples of how we’ll have to deal with and adjust to unpredictable events that took place in the last 15 months.
As you can see, there is a ripple effect causing havoc across the HVAC industry…and all industries for that matter. We live in a global market and there are so many moving parts that need to work in unison for our supply chain to work.
While we can’t promise you that our prices won’t increase or we won’t run out of certain products, you can rest assured that West Allis Heating & Air Conditioning will always have the customer’s best interest in mind – as we have been for 62 years and counting.
Give us a call at 414-543-2800 for upfront pricing and free estimates on new equipment.