By now, you know all about the supply chain mess wreaking havoc on the global economy. The onset of the pandemic was the last straw on the camel’s back that broke the global supply chain, and it may be a while until it’s fixed.
Building owners are undoubtedly feeling the ill effects of product shortages. But we’re here to say the supply-shortage consequence you should be most worried about is in regards to your building’s HVAC system.
HVAC contractors nationwide have been hampered by rising costs, a labor shortage, and the inability to get their hands on needed materials like microchips. All this is leading to delays in getting repairs done. And with winter coming soon, now’s the time building owners need to get started on what could be a lengthy HVAC procurement process.
The supply chain nightmare has given all of us a lesson in logistics and globalization we probably didn’t want. It’s essential for property owners to prioritize HVAC repairs now, be flexible with contractors, and build resilience into their supply chains.
The supply chain chaos
You may remember the supply chain problems all began right after the virus struck and caused a shortage in vital medical supplies and personal protection equipment (PPE). As lockdowns began, tremendous demand for N95 masks and other PPE outstripped supply. Consumer panic buying also caused some strange situations (toilet paper shortage).
Unfortunately, this was just the beginning. Factories in parts of the world with much of the global manufacturing capacity were hammered by the pandemic, leading to shutdowns. Shipping companies thought consumer demand would drop because of lockdowns, but they were terribly mistaken. With stay-at-home orders in place, consumers went on online buying sprees for everything from personal computers to home gym equipment. The increased demand overwhelmed supply chains and slowed down the transportation of goods.
All told, it was a perfect storm. And now, more than 18 months since this all started, just about anything that’s produced or manufactured is in short supply. As a result, almost every industry has been hit hard. In particular, the automotive industry has been significantly impacted, as a shortage of microchips has led to considerable decreases in car production and increased costs for consumers.
The microchip shortage is one problem that’s affecting HVAC contractors. Semiconductors are essential components of HVAC systems and they’re in very short global supply. Shortages for all sorts of other HVAC parts have also been reported, including compressors, motors, and raw materials like copper, steel, aluminum, and plastic.
Shortages of HVAC components have caused significant price increases. Raiven HVAC supply chain research reveals that specialized equipment including semiconductors will likely see 10-30 percent price increases soon. Copper prices reached an all-time high in May 2021, jumping more than 130 percent from March 2020. The steel price nearly doubled in August 2021 compared to last year, according to a U.S. government index tracking the price.
The U.S. Pacific Northwest and Southwest just went through a historically hot summer, increasing demand for HVAC services. The HVAC industry is also no stranger to labor shortages, but the pandemic has made it worse. All these factors have combined to cause the highest HVAC distributor lead times since 1987, according to Raiven research.
Karl Pomeroy, GM and President of Motili, a nationwide HVAC service provider, said many of the HVAC industry’s supply-chain problems have also been caused by very close to “all-time highs in terms of business growth” for the industry.
The HVAC industry’s labor shortage has had a significant impact, too, Pomeroy said. “As our industry gets more technically advanced, I think the labor shortage is more pronounced,” Pomeroy told us. “It takes a higher level of skill to service some of these pieces of equipment. The industry is also feeling a rising inflationary cost for labor because so many of these companies have to attract and retain top employees, and they’re paying more. So, not only are we paying more for finished goods and parts and pieces, but we’re also feeling the pinch of more expensive labor.”
Pomeroy added that for the typical building owner, they’ve seen fairly dramatic rising costs throughout the past 18 months, and “there’s really no end in sight.”
Stay ahead of the seasons
So, yes, it’s all rather messy right now. But while it seems like an apocalyptic scenario, it’s not all doom and gloom. By taking the proper steps, building owners can do many things to alleviate the pain. Undoubtedly, you’ve already been dealing with increased HVAC service prices and lead times for more than the past year, so you’ve probably come up with some solutions. But as this supply chain mess drags on, it’s imperative to keep a laser-like focus on your HVAC system—especially as winter approaches.
HVAC systems are one of the most expensive and vital pieces of equipment in commercial buildings, and breakdowns can be catastrophic. Get a fall inspection on your HVAC now, especially if it’s acting up. If there are needed fixes that require parts, lead times may be longer. Be proactive and patient with contractors, and get repairs done before the cold weather sets in.
Preventive maintenance of HVAC systems is more critical than ever right now. Check and change air filters on a monthly basis, keep the unit clean, and check heating-specific parts like gas/oil connections, burner combustion, and heat exchangers. This type of maintenance extends the unit’s lifespan and helps avoid significant problems during the heating season.
“Tenant satisfaction is a huge factor affected by HVAC systems,” Pomeroy said. “A lot of our clients are moving into a model where they’re looking at their total portfolio of (HVAC) products, looking at the age of those products, and doing preventive maintenance to keep them in peak operating condition. Our clients are also more proactive when their systems starts to approach its age of replacement and putting it on a planned replacement strategy.”
Backing up a system
A second and equally important thing building owners can do right now is build resilience into their supply chains. And this doesn’t just go for HVAC repairs and contractors. Take a look at all your vendors and suppliers and devise ways to make your supply chain stronger during these unpredictable times.
Beware of being stuck in a sole supplier situation. Establish secondary vendors and contractors for essential services (like HVAC), and don’t hesitate to reach out to them if their lead times are shorter or in emergency cases. Consider using supply chain management software, as well. Common programs from Blue Yonder, Infor, Oracle, and SAP help building owners gain better visibility into their vendors and supply chains and they also greatly benefit planning.
Perhaps the worst part of the supply chain nightmare is no one’s quite sure when it will end. Major exporters in Southeast Asia of critical components like semiconductors are still struggling to contain COVID-19, and global port and shipping congestion may last well into 2022.
The Biden administration has taken steps to alleviate the problems, such as urging the Port of Los Angeles to operate 24/7. But as General Motors CEO Mary Barra and other business leaders have indicated, the shortages and rising costs have forced many companies to re-think supply chain management altogether.
Pomeroy said building owners have to be “proactive instead of reactive” with their HVAC systems. Property managers need to focus on their HVAC units and ensure their mechanical components are in good working order. If they’re not focused on HVAC right now, he said, “they’re setting themselves up for a very difficult period of time.”
“I don’t believe this is a case where, in two to three months, all these supply chain and labor shortage issues affecting HVAC go away,” Pomeroy said. “I think we all came into 2021 thinking, well, it’s going to be better. In some cases, it has been better. But in some cases, it hasn’t been. The demands on the HVAC industry have been high. For those clients who are sitting back and waiting, they’re running the risk of the day they decide to do something, they’re going to find themselves not being able to find a labor source or not being able to find the materials.”
Lead times for HVAC repairs may be longer, and costs may be higher, so be proactive about this situation and keep a close watch on it. Get fall HVAC maintenance done as early as possible, and also think about other essential supplies and parts that may be affected. Resiliency, flexibility, and planning skills are the key attributes for surviving this supply chain turmoil. You likely already know about the supply chain issue, don’t wait until it leaves you out in the cold.