How the Recent Air Conditioning Equipment Shortage Affects Your Supply Chain Process

5 MIN. READ

COVID-19 upended procedures and business practices in every industry, and HVAC is no different. While things are improving from a health perspective, the effects of pandemic-induced shortages are still taking their toll. For HVAC contractors, perhaps the most recent notable shortage is of air conditioning equipment. There are both immediate and long-term supply chain process effects of this and other shortages that you must consider as you move forward.

Understanding the AC supply chain process and challenges

As the prevalence of COVID-19 increased worldwide, companies that make many of the parts for air conditioning units struggled with lockdowns and workforce shortages. The countries that export the most air conditioning units and parts are:

• China (33.6%).

• Thailand (11.1%).

• Mexico (8.48%).

In China, governments forced quarantines that shut down factories and stopped the production of AC components for months. Many of those factories are still trying to catch up.

In other countries like Mexico, where there were no mandated shutdowns, there were still significant issues related to COVID-19. Millions of people got sick, and many factories were understaffed and unable to meet demand.

In early 2021, a significant number of dockworkers got sick in California, causing a ripple effect of stalled cargo ships. That backup has only gotten worse as the pandemic subsides.

Suppliers are scrambling to keep up with changing demand in consumer buying habits, a surge in orders from U.S. businesses and shipments from overseas suppliers. This is causing delays at the ports for everything, with container ships forced to wait significantly longer to unload cargo.

What shortages HVAC can expect

The most significant shortages for HVAC contractors are things coming from overseas, including:

• Fans

• Compressors

• Control boards

• Control panels

• Condensers

However, with a completely interconnected supply chain, it could even be simple materials that are delayed — a piece of plastic or a small screw that normally comes from overseas. Some of these parts might be easier to find a replacement supplier for. However, it is important to carefully vet a new partner to ensure that they offer the level of quality you expect.

Immediate effects of the shortage

You probably will not be able to fix the supply chain, so in the short term, it is critical that HVAC contractors know what to expect:

• Lead time delays. You probably have an idea of how long it will take for parts to get in. However, you will need to adjust your normal expectations and factor in potentially long delays.

• Customer dissatisfaction. With the delays and hot weather (including record heat in many areas), you will likely have to put customers on waiting lists. However, if you can manage expectations with customers from the start and help them understand the delays, you can prevent some of that dissatisfaction.

• Incomplete projects. You may start some projects hoping that supplies will come in, only to find that the parts you need are delayed for several more days or weeks.

• Lost income. With delayed installations and repairs, and incomplete projects waiting on parts, your business might suffer in the short term.

• Strained vendor and supplier relationships. Just like you are trying to manage expectations and maintain good relationships with your customers, suppliers are doing the same. Many of them are working hard to get production back up to normal levels and meet surging demand. Nonetheless, it could be difficult in the near term, especially for small business AC contractors who do not have the high order volume of other contractors.

Improving your supply chain for long-term success

Millions of companies have been thinking about how they can improve the supply chain process in a post-pandemic world. The risks of a global supply chain came sharply into focus in 2020 and 2021. Buying from a single supplier across the world might be less expensive. But is it worth the risks in the event of another significant disruption to the supply chain?

The good news is that you can use this time to evaluate your own supply chain moving forward.

Supply chain process improvements

As we come out of the COVID-19 pandemic, there is an opportunity for HVAC contractors to evaluate what is working and what is not, and find ways to fill the gaps. That means:

• Uncovering “hidden risks” in your supply chain. Research your own suppliers to find out where they have manufacturing plants, what their transportation protocols are and how those things could impact your parts in the future.

• Evaluating where you are vulnerable. For example, do you buy a critical part from one supplier? Are there other suppliers in other countries that could offer you a backup plan?

• Holding more stock.If you cannot find alternate suppliers or diversify your supplier base, you may need to hold a larger stock of specific parts that could be vulnerable to future supply chain disruptions. However, this has a cost, so carefully evaluate how much you need to protect your business without overbuying.

• Using technology to your advantage. Technology tools can improve your ability to meet customer demands and smooth out the entire supply chain process. For example, when you use the Raiven contractor platform, you get up-to-date information on raw materials and finished product shortages so you can provide accurate information to customers. This level of detail also helps you make operational and staffing decisions because you know when materials shipments are coming.

Supplier partnerships

You may decide that you want to maintain your current supplier partnerships. If so, it will likely take some time and hard work to rebuild the trust that you had previously. You and your suppliers will also need to create a plan for how you might handle future supply chain disruptions.

It may be a good time to evaluate new partners as well. Raiven Marketplace gives you access to a broader range of suppliers and allows you to research and find new partners. You can find information on supplier reliability and pricing to help you choose partners that will improve your business and your ability to meet customer demands.

Learn more about how Raiven can help

As the world recovers from a historical catastrophe, society will continue to deal with the ripple effects. For HVAC contractors, that means absorbing the hit of parts shortages and finding ways to optimize your supply chain process to be more prepared in the future. Find out how our leading HVAC platform can help you prepare and overcome the challenges in a post-COVID-19 world. Contact Raiven today to learn more.