Published on: December 16, 2021 by Blair Haas
As 2021 winds to a close, it has been an incredible and challenging year for us as an electronic enclosure manufacturer. Thinking back to the end of 2020, with vaccines just starting to be administered, we thought that the pandemic and its impact would soon be behind us. We were dealing with slight slowing of business as many of our customers were working to regain their footing after the closures and disruptions of the pandemic. Our thoughts were focused on the future, a return to a new “normal” that would be an improved version of where we had been in 2019. Like so many forecasts, this one was not exactly on target. For all of us in the electronic enclosure industry, the year evolved in so many unforeseen directions with new challenges but really exciting opportunities.
THE OVERWHELMED SUPPLY CHAIN WALLOPED OUR PRODUCTION, ESPECIALLY OF NEMA AND IP RATED ENCLOSURES
Most of our NEMA and IP rated electronic enclosures are manufactured in Asia. This means that we were completely caught up in the supply chain issues that have been in the news for the last few months. At each step of the journey, from trying to obtain empty containers, to getting the containers put on ships coming from Asia, to the ships being able to dock in the US to the delays in unloading the containers, getting them on trucks to get to the trains and finally from the trains to us, there were incredible delays. The shipping lead times jumped from 5-7 weeks to upwards of 20-25 at some points through the year. Almost as bad, there was no consistency. Two containers packed at our factories on the same day could arrive many weeks apart so there was no real ability to forecast deliveries for our customers. As our customers and distributors tried to increase their inventories to offset the extended lead times it compounded the problems.. Fortunately, we have seen some stabilization and even decreases in lead time, although we anticipate this problem will continue through much of 2022.
PRICING ESCALATED AT A STAGGERING RATE FOR MATERIALS USED IN MANUFACTURING ELECTRONIC ENCLOSURES
Steel prices more than doubled in 2021 as did aluminum prices. That impacted more than just the framework of everything from our networking cabinets to our Server Racks to our smaller boxes. Hardware, panels, brackets all were impacted. As oil prices spiked, so did the cost of both plastic resins and the resins used in coating our products. Freight costs also grew at a staggering rate, led by the 5 fold increase in shipping costs from Asia. Our real challenge from a management perspective was that many of these costs will like come back down sometime in 2022 as both capacities increase and bottlenecks resolve. While it is unlikely that they will return to the 2019 levels, we have been through many of these cycles before and know that commodities will find a new, more moderate, level.
MANAGING STAFF AND REACHING CUSTOMERS WAS COMPLETELY DIFFERENT IN 2021
At the beginning of the year, there were near fights over the ability to get an appointment to get vaccinated. People searched for hours to find the earliest appointments and we incentivized our team to get vaccinated. However, many people resisted, creating a balance for us between wanting to create a safe environment for all and respecting people’s views. In addition, work from home was no longer an emergency response to lockdowns, but a shift in how work is done for many. This shift required a change in how our factory team coordinated with their office co-workers and how information flowed through our facilities. Coordinating with our Asian facilities required unusual times for video chats but much less travel. With limited customer visits and many working from home, there were new approaches required to provide needed information and to service their requests.
BUT SOMEHOW, SALES GREW AT THE FASTEST CLIP IN COMPANY HISTORY
The best part is we adapted. Our industry leading 5 day modification program for electronic enclosures was even more sought after with other aspects of production being slowed. We saw continuing growth in the markets and applications for our products. With the rise of electric vehicles, our enclosures are used in charging stations which are proliferating around the country. We saw major increases in security and safety applications. As more people worked from home, increased networking needs from wi-fi to cloud storage also helped drive our growth. Even more traditional markets such as industrial automation grew as labor shortages become more widespread and companies updated their use of technology.
WHAT DO WE SEE IN 2022?
After 2021 developed so differently from what we anticipated at this time last year, I am reluctant to make any projections. However, it is clear that we will have new challenges such as rising interest rates, hybrid work schedules, changes in social media and so many more. But it is also very clear to us that the opportunities for new markets and new customers will continue to explode as rapid advances in technology including 5G, more automation, AI, and so many other trends move our electronic enclosures into new applications. It will be interesting to see where we are next year at this time.
To all of you, thank you for being a part of the Bud Family. As we move through our 94th year, you have our commitment that we will always seek to provide you the best in electronic enclosures at the best price as quickly as possible. We wish you only the best for the holidays and a wonderful 2022.