Why Proactive Supply Chain Optimization Helps HVAC Contractors Achieve Better Bottom Line Results
8 MIN. READ
Let's talk about HVAC contracting and supply chain optimization in 2021 in the form of a metaphor.
One afternoon, you decide to go out in your boat on Lake Superior. You are in a hurry, and you forget to bring your life preserver. After all, it is a nice day, you are a great swimmer, and you have never had any problems in the water.
In a rush, you also leave your emergency Coast Guard transponder at home. You do not bother to get the weather forecast either.
At sunset, miles offshore, a storm whips up. Suddenly, 20-foot waves swamp your boat, you go into the water, and your boat goes under the waves. There you are, floating in cold water, in the dark, with no trace for the Coast Guard to see.
You are in dire straits, now wishing you had brought your life preserver and emergency beacon. But that is 20/20 hindsight, too late.
The reality of HVAC contracting in 2021
In any business, especially HVAC contracting, failure to practice proactive supply chain optimization can expose you to risks that will leave you treading water.
The crashing waves of the COVID-19 pandemic, the closing of the Suez Canal and the disruptions at the Port of Los Angeles almost overtook the supply chain for the HVAC business.
Now, record heat waves have driven customer demand for repair and installations up substantially.
Shortages in equipment, parts, supplies and labor are the continuing result. Metals like steel keep setting record-highs, with copper at a near-record high as well. There is also a shortage of microchips for control boards.
All of this has left HVAC contractors struggling to get what they need to meet skyrocketing demand.
To prevent this from happening to you, you need to practice supply chain optimization. If you succeed, you will:
- Increase your agility to deal with disruptions quickly and calmly.
- Lower costs.
- Increase gross margins.
- Win more bids.
- Finish projects on schedule.
- Delight your customers.
What is supply chain optimization?
Simply put, supply chain optimization is building and managing your supply chain so customers get what they want:
- When and where they want it.
- In a way that is both profitable for the organization and sustainable for the supply chain.
Indeed, frequent disruptions and reactive solutions are not sustainable. Thus, to take on a more proactive approach, follow these guidelines.
1. Use social media to identify trends and demand changes early
To tune into national and global trends, you need to take advantage of more than just email and phone calls, which are one-to-one tools. Facebook, LinkedIn and other social media platforms, on the other hand, are one-to-many tools. Use these channels to build a network of contacts (suppliers, customers, distributors, etc.) around the world so that you can instantly be aware of the changes in your industry, niche and business.
With eyes on a bigger market, you will be able to anticipate based on a constant flow of information from many sources. As a result, you will be less likely to fall victim to surprises. It is like monitoring the weather while on the water.
2. Monitor and evaluate
Who would have guessed that the closure of the Suez Canal in Egypt would affect HVAC maintenance in Chicago? Today’s supply chain is global, so you need eyes on the world. Maintain visibility across your entire supply chain to catch and address delays and other issues early in order to respond effectively.
Make this a responsibility in your company. Stay close to your suppliers at all times, and appoint smart people to incident response/disaster recovery teams. Give them clear responsibilities and authority to identify risks and plan mitigation with the right resources.
3. Choose your suppliers wisely
Your supply chain is only as strong as your suppliers, so your procurement team must choose those with:
- Strong manufacturing capabilities.
- Geographically close distribution centers to minimize transportation costs.
- Robust, transparent inventory levels.
- Agile supply chains.
- A history of solid lead times and staying true to contracts.
4. Evaluate suppliers in real time
Once you have chosen reliable suppliers, you have to evaluate them periodically to ensure they consistently meet your needs and perform up to par. To begin, develop key performance indicators as your supplier evaluation metrics. Monitor items such as price, response times, quality score, support and more in real-time.
You will need a centralized place to gather accurate data on supplier performance to ensure you have a birdseye view of the whole situation and enable you to make the most educated conclusion possible. As you assess performance, remember to evaluate your suppliers objectively, based on verified facts, not perceptions or emotions. This will further guide your decision with reason and objectivity.
5. Digitize, digitize, digitize
You need clear, complete, timely and accurate sales projections to enable effective procurement of labor and materials. Make sure you build lead times into project schedules based on facts, not guesses.
Likewise, you need to accurately track your spend data in real time in one place to spot trends in your purchases. For example, if you are suddenly buying a lot more roof-top units, that may indicate an increasing market demand for them. Or, on the other hand, it may mean that you are over-buying and creating increased costs of carry.
On top of sales and spend data, you need to monitor market trends and supply and demand changes to mitigate surprises. While a huge pandemic may have been difficult to predict, there were early warning signs that did not register with many businesses.
Ultimately, using Excel spreadsheets and paper to gather and analyze all of this data is a recipe for disaster all its own.
For effective supply chain optimization, you need to utilize the right kind of technology to make your processes simpler and capture good data. The right kind of technology:
- Fits your needs and budget.
- Is easy to use and implement.
- Centralizes purchasing and other data.
- Simplifies processes.
Supply chain management is a relative newcomer to applied technology. Today, things like artificial intelligence, machine learning and blockchain technology are finding their way into supply chain optimization. Only your budget and appetite for change are the limits.
If supply chain optimization seems like a lot of work in the middle of a difficult market, it is. However, by taking advantage of the right partners and resources, it can become a lot easier.
Raiven can help you take the first step to a better bottom line
Raiven offers robust tools to build a simple, solid foundation for supply chain optimization with minimal disruption.
Primarily, Raiven Marketplace provides a centralized, user-friendly platform for procurement. Users no longer have to toggle back and forth between supplier portals.
Indeed, you can load your own suppliers into Marketplace. What is more, you can take advantage of our alliance with Avendra, a leading supplies, parts and components purchasing company, to access their universe of suppliers. Avendra pre-qualifies suppliers for performance, capacity and quality, saving you time and resources.
As a result, you can hit the ground running with a reliable portfolio of suppliers and Raiven discounts of 7-25%!
In fact, Carrier Enterprises recently joined Raiven's leading purchasing and procurement platform, making over 800,000 supplies, parts and equipment line items available from a robust supply chain with over 150 locations.
This type of resource will kickstart your optimization initiatives while preserving time and money.
Ensure purchasing compliance with Raiven
Non-compliant spending jeopardizes your budget and established supplier relationships. Raiven browser extension protects you from these risks. It provides compliance tracking and “guardrails” to ensure that users do not buy from unapproved suppliers.
Track performance
Once you have KPIs in place, Raiven Marketplace enables you to track supplier performance in real time with a clear, relevant dashboard. It is a central, easily accessible repository for accurate, complete data and analytics, thus solving a crucial need. Your finance team will be delighted with the transparency and your procurement team will gain new credibility.
What about labor?
Labor is another pain point for HVAC contractors. Even before the pandemic, there were not enough skilled laborers available. Thus, subcontractors are now feeling the pinch.
As with suppliers, reliable, qualified labor is acute. And the need for accurate data, centralized procurement, performance management and real-time monitoring applies to labor as well.
Raiven's contractor platform addresses these needs with:
- A cloud-based, one-stop-shopping procurement tool.
- Central, real-time data storage and analytics.
- Purchasing compliance tracking and management.
- Contractor performance reporting and management. Raiven generates a subcontractor Quality Contribution Index from 0 to 1,000, giving you complete visibility into the best and worst performers at all times. You will know who you can rely on in tough times.
- Regular, fact-based communication with contractors to eliminate surprises.
And Raiven is there with close implementation support to make the transition easy.
Time is money. So, start now to build the foundations for supply chain optimization! Increase gross margins, reduce costs, get agile for the next storm, win more bids, finish projects on time and, best of all, delight your customers! Contact us today to learn more.
