Published on: April 8, 2021 by Blair Haas
I was going to start this blog with the concept that this is a challenging and interesting time to be an electronic enclosure manufacturer, but I am struggling to think back to a time when it has not so been. In my nearly 50 year career with the company, we have dealt with skyrocketing inflation, price controls, the evolution of technology, distributor consolidations and disruptions, the dot-com bust, employee shortages, the great recession, tariffs and, of course, the pandemic. Many of these challenges happened at similar times or in rapid succession creating their own unique set of problem. Dealing with each of these problems has been part of what makes working in our industry so exciting – there is always something new to deal with. From a planning perspective, the current time period is among the most difficult to plan for and to effectively forecast. Let me give just a few examples.
There are a lot of facets to this challenge. First, as industry has come back on line and production has begun to ramp up, the demand internationally for raw materials has jumped while capacity has lagged. We have seen increases so far this year in the cost some of our key raw materials such as 43% in cold-roll steel, 49% on galvanized steel and 26% for aluminum. Lead times are also extending from days to weeks or in some cases, months. We are told this is due to increased global demand, the reduced capacity from last year’s decline due to the pandemic and the inability to increase capacity due to worker shortages (also tied into the pandemic and its impact). We know that at some point capacity will increase, but when? Should we stockpile steel to be ready for needs while recognizing that we may end up with expensive inventory when prices moderate?
The much publicized semiconductor shortage is hitting us as well. We know demand is increasing for our products but we are now seeing instances where customers push out our electronic enclosure deliveries since they do not have the components needed to build the complete project. Some say this will last until 2022 but others are seeing some opportunities for improvement so how do we plan?
We build some of our production in Asia.
For example, we produce our popular new PN-A IP68 rated plastic enclosures in Taiwan. We have seen the time it takes to get product from Asia via sea (the best option given the size and weight of our products) jump from 6-7 weeks to upwards of 14. Our factories are even struggling to get containers, often having to wait for several weeks just to get a container into which they can load our products. We know this, too, will ease but if we increase our inventories to offset the delays, we are only compounding the problems by putting more demands on our factories to provide shipment. Costs of freight have gone up by more than 20% in the last 6 months. We recently had a situation where our customer asked us to air in product and the cost jumped for the air charges by 30% between when we got the original quote and 3 weeks later when the product was ready to ship.
We all understand the challenges of operating in this COVID era but now there are new questions being raised. When do we bring our people back into the office and how do we prepare for their return? How would a hybrid formula for remote/in office work for us? Do we insist that they are vaccinated before they return and is that legal? How do we best protect all of our employees including those who were deemed “essential” and worked in our factory during the entire pandemic?
WHAT DOES IT ALL MEAN?
As I reach my 49th anniversary with Bud Industries this summer, (ok, we count the summers and part time work when I was in college), people often wonder when I will retire (I hope it’s not a hint). I find the constantly changing environment to be wonderfully challenging. How do a company and its team adapt to new situations, new technologies, and new opportunities? As I see our products being used in markets as diverse as agriculture and electric vehicle charging stations and we get to participate in these exciting and growing markets, I have FOMO (fear of missing out) over the thought of leaving this industry. I look forward to helping our company president and our management team solve these problems and continue to grow into the future.