By John Mesenbrink
At PHCCCONNECT2021, experts tackle the industry’s most critical topics, including supply chain issues, regulations and the skilled labor shortage.
Ordering from a limited menu at an industry dinner in Baltimore, it was somewhat peculiar that there wasn’t a crab selection, since we were right on the Inner Harbor known for its exquisite crab and seafood cuisine. The woman sitting next to me explained that the Northeast was experiencing a crab shortage. Really, I thought? All of a sudden, no crabs in the Atlantic Ocean along the Eastern Seaboard? The woman backtracked a bit on her original assessment and said that it wasn’t the number of crabs, necessarily, but more the distribution challenges and labor issues that were causing this so-called “crab shortage.” Aha!
Supply chain issues. Labor shortages. This encapsulated, in a nutshell, what most contractors have been experiencing these past 20 months or so, and it was the perfect lead for one of the closing sessions – Industry Perspectives: Confronting Change and Uncertainty When Things Go Sideways – at PHCCCONNECT2021 in Kansas City, Missouri, this past October.
Industry leaders Bruce Carnevale, president and CEO, Bradford White; Elisabeth Sutton, director of marketing, professional channel, Kitchen and Bath Americas, Kohler Co.; Randy Roberts, vice president of sales and marketing, Rheem Manufacturing; and Scott Teson, vice president of skilled trades, Milwaukee Tool, participated in a lively roundtable discussion, tackling subjects regarding the supply chain, regulations and, of course, the skilled trades labor shortage.
Supply Chain in Flux
COVID was the perfect storm for the current supply chain chaos, and it has left contractors asking questions. Considered “essential workers” during the pandemic, contractors have remained relatively busy throughout, but through supply chain issues and labor shortages caused by the economic slowdown – and the subsequent resuscitation of it – due to COVID-19, they are looking for answers in this unprecedented time.
In part, over the past 18 months, more consumers were home, getting stimulus checks and reinvesting in their homes, creating a rise in demand. Rising materials costs – from steel to magnesium to foam and more – and supply chain backlogs have created inflated costs and never-before-seen product lead times. “While some experts say that the supply chain may take at least two years to rebound, my prediction is that it will come into some degree of balance in six to nine months,” said Carnevale.
While Rheem’s Roberts admits things are improving a bit – and while he is starting to see inventory in the channel – he says we need to keep in mind that the supply chain issue affects the entire global economy. “It’s a challenge we all face. It seems that every week it is a different product or component that is a problem.”
At Milwaukee Tool, “we have to control our own destiny by responding quickly to market changes,” said Teson, “and that includes qualifying as many additional suppliers who meet Milwaukee’s high standards.” While the next eight to 12 months are going to be pretty tight, said Teson, “we need to sit down with our partners and have a conversation about what 2022 is going to look like for business and how we can work together moving forward.”
Kohler’s Sutton said that, overall, the industry has benefited from the pandemic and concurs with Carnevale in that people were spending more time in their homes. “The kitchen and bath were the main areas impacted,” she said. “For us, the demand was there, but we just couldn’t keep up.”
New Regulations on the Horizon
“The regulatory environment is on steroids,” said Carnevale. “We worked very hard during the past administration to get practical regulations in place such as the Process Rule, which included test procedures to know if the standard for water heaters was met … common sense processes that the DOE would follow.” Other regulations such as the Gas Interpretive Rule – a decision by the DOE to combine condensing and non-condensing standards – is being undone. “What this means is that the DOE will move toward condensing standards for boiler and water heaters … a clear indication that the DOE is heading toward high-efficiency standards, which we support, but it may not be practical in application because you cannot install condensing equipment everywhere,” said Carnevale. “It’s a clear reversal from the previous administration.”
And while the Appendix M1 efficiency regulations for air conditioning and heat pump equipment for areas such as the Southeast and Southwest are slated for January 1, 2023, “I’ve never seen an installation date requirement – not a manufacturing date – on an installation,” said Roberts. “With current supply issues, getting transition of product is going to be a huge undertaking for you as contractors and your industry partners.”
And let’s not forget the American Innovation and Manufacturing (AIM) Act of 2020, which addresses the phase-down of the consumption and production of hydrofluorocarbons (HFCs), to manage these HFCs and their substitutes and facilitate the transition to next-generation technologies starting in 2025. “It is good that we have a national date so we don’t have certain states moving forward first. In any event, get with your local chapters and chapter wholesalers and get educated on what’s coming down the pike, because there are a lot of changes that are going to impact your business in a big way,” said Roberts.
A push toward decarbonization in the country has reached critical mass, said Carnevale. There’s a significant uptick in local and state level policies on the West Coast, not just California. “We are going to see this move toward electrification. Whether the grid can handle this, it doesn’t matter because of this ideological move toward electrification, so be prepared.”
The Talent Pool
How can we get more people interested in the trades and replace aging workers? New technology, social media and a new PR image all can help attract people to the trades as a viable, sustainable career choice.
“This has to happen at the local level, and we have to address kids in middle school. Align with industry associations,” said Sutton. Also, “social media is the future. Show your work on social media and get in front of your customers,” she added.
According to Teson and Milwaukee Tool, it’s about improving productivity, supporting apprentices in the PHCC chapters, and getting involved in the communities.
For Roberts, it’s all about training. “Invest a lot of funds into training programs, and find ways to partner with local initiatives. And I agree with Elisabeth, you need to be in the social media space. If you’re not going to do it personally, do it as a company. We are using it as a communications tool. It’s a fantastic way for us to communicate directly with contractors, and it’s a great way to show your work to consumers,” said Roberts.
“If you look at the hard numbers and benefits, make a decision to go into the trades vs. college. We need a big voice to address the public relations aspect to this,” said Carnevale.
Throughout the pandemic, it’s imperative to keep the lines of communication open and show patience and perseverance. This too shall pass, at some point, hopefully. We just need to ride it out. “In any crisis, there is an opportunity to differentiate ourselves. You guys can do the same,” Carnevale advised. “How can you differentiate? Continue to communicate with us; two-way feedback is really important to us.”
John Mesenbrink, president of Mechanical Hub, and editor-at-large at CONTRACTOR Magazine, has been covering the plumbing and HVAC industry for nearly 20 years. He also moderated this PHCCCONNECT2021 roundtable.