“No one predicted the current spike in demand in the volume we have seen in the last three weeks.”
In a year of surprises, Terry Ludwig illustrates that they aren’t all bad. Ludwig is executive vice president for sales and purchasing at APR Supply, headquartered in Lebanon, Pennsylvania.
Ludwig and other distributors agree that while it may have the occasional upside, the biggest challenge for HVAC distribution in an evolving reopen landscape remains uncertainty and its impacts.
Seth DePuy, director of sales and marketing at First Supply in LaCrosse, Wisconsin, said his firm remains optimistic that business conditions will remain favorable for the second half of 2020. And yet, “What happens if a second wave of COVID-19 hits later in the year?” he asked. “Right now, there are still a lot of questions that cannot be answered.”
Several HVAC manufacturers experienced shutdowns during the worst of the initial crisis, said Mike Meiresonne, chief operation officer at Dakota Supply Group, with executive offices in Plymouth, Minnesota.
“We expect the production recovery to last well into late summer and early fall,” Meiresonne said. “Planning our supply chain has become a unique challenge.”
Kyle Cline, vice president of operations for Locke Supply Co. in Oklahoma City, said that ensuring sufficient inventory is hard when lead times and availability can change overnight. A supply chain that is as large and complex as for many HVAC distributors only amplifies the uncertainty.
Cline pointed out that a single COVID-19 case at a manufacturer can instigate a spike in demand from competing distributors, making it tough to procure products efficiently.
Even in a good period like the one APR’s Ludwig described, distributors know that tomorrow may be a different story.
“The supply chain is stretched in the short term. A plan to continue to inventory to support the current demand could be risky, but not as risky as the alternative.”
HVAC Hygiene
Distributors have made a wide variety of cleaning and safety adjustments, as discussed in a Distribution Trends article earlier in the year. Recent trends do not suggest those will go away anytime soon.
Jason Halmen and Richard Boynton of F.W. Webb Company in Bedford, Massachusetts, mentioned that while making the adjustment is one thing, liking it is another.
“While we practice social distancing and other safety protocols, we do miss the personal interactions with our customers and vendors,” they said. “We are still getting used to not being able to shake their hands and talking to one another with a facemask or Plexiglas between us, but we know these are necessary precautions to protect everyone’s safety.”
F.W. Webb has had to increase time spent on cleaning and sanitizing — as has APR Supply, spending one to two hours per workday at each branch in what Ludwig concedes is an “unproductive disruption” but a needed investment with a cost the company absorbs.
All the companies participating in this article said that the added cleaning has not translated to new hires, but the policies and time investments look to continue, and companies frequently handle these issues a little differently.
APR has purchased sanitation foggers. Locke continues increased regular disinfection of counters, coffee stations, and shared areas in branches.
At First Supply, the distributor has made cleaning protocols more thorough or perhaps more frequent through a daily or weekly outside service.
Less Luggage, More Log-In
Another immediate shift early in the crisis, a pivot to virtual meetings, also looks to stick in many places moving forward. That comes in part with ongoing safety concerns, but also due to some recognition that it simply meets the need with less expense.
“There will be elements of this that continue for years to come,” said DSG’s Meiresonne in talking about his team’s sales practices.
DSG has implemented a “TalkNText” line for fast response to customers who prefer it, and the company’s Expressway curbside pickup seems to have passed its audition, too.
“While face-to-face remains the ideal format for discussions and relationship building, meetings through video have proven to be highly interactive and certainly more cost efficient,” he said.
Locke Supply’s Cline agreed that the savings is real, but he sees the video option as more of a solid alternative “when in-person meetings are not practical.”
APR’s Ludwig reported that these months demonstrated the company’s ability to conduct business as usual while working remotely. Video has been used for meetings, training, and events. But he noted that the distributor’s comfort with these methods is only part of the equation.
“The real test is whether the marketplace will embrace (or even demand) these alternative solutions going forward,” he said. “It is to our economic advantage if they do.”
Internal Successes
Distributors’ answers to a follow-up question illustrated that manufacturers were not the only ones with a few moments to be proud of through the initial rough stretch.
Cline’s proudest moment came in the form of Locke Supply’s associates’ commitment and dedication during the scariest moments of the pandemic, especially as part of an essential business category.
“Our associates immediately adjusted to new business processes and came to work every day to serve our customers while COVID-19 cases were growing,” Cline said.
At DSG, Meiresonne pointed to leadership’s early attention to a range of issues that many distributors can attest seemed to all require top attention at the same time.
“We executed on a plan that included remote work environments, digital customer engagement, and travel restrictions to ensure we are not putting our employees and customers at risk.”
Meiresonne added that a weekly company-wide update regarding what employees are seeing and how to address that has proven equally valuable.
First Supply’s DePuy relayed that their “HVAC team was able to lock up commitment with customers throughout the uncertainty of COVID-19 for the entire year.”
Offering flexibility “that others were not able or willing to offer” created opportunities that he sees as setting the foundation for a good remainder of 2020.
At APR Supply, Ludwig referred to a big-picture commitment at the top.
“Early on, we made the decision to keep our teammates employed.”
Ludwig explained that they “quickly pivoted our internal teams who had greater capacity to projects that would benefit APR beyond COVID.”
The company worked to field anything from legal questions to PPE loan inquiries. Meanwhile in the safety realm, APR reacted to unfolding events in at least one instance by “locking the branch doors and providing curbside service only, without regard to what our competition was doing.”
F.W. Webb cited daily commitment to customer needs and safety as a source of pride, but the team also generated more creative responses.
“Our Hampden, Maine, branch designed a mobile handwashing station that they are building for a number of project sites with limited facilities,” said Halmen and Boynton. “It features a 2.5-gallon electric water heater, mop sink with a bar faucet, and a bucket to catch all the water.”
Add a garden hose and extension cord, and contractors have easy access to hot running water.
Forward Thinking
How, if at all, will the COVID-era realities affect demand and the business mix for distributors such as this group of ASA members?
At APR Supply, Ludwig says that “with so much of our business being replacement and repair, we don’t have any ‘hunches’ on lasting changes.” The demand for APR’s core business, however, is remaining steady.
As for others, the individual voices become more of a chorus about one ascending category.
“We have seen an increased demand for indoor air quality products, and I believe that trend will continue,” said Cline. He also expects Locke Supply and others to see the continued increase in delivers, curbside pickups, and mobile orders.
“Our society was forced to change purchasing habits during the pandemic,” he observed. And much like another distributor’s previous comment that more communication via video is ultimately economically advantageous, Cline said that, “Honestly, some of the [purchasing habit] changes are more efficient and convenient.”
First Supply has seen the IAQ boom as well. DePuy mentioned a “dramatic increase” in demand for “everything from UV air purifiers, ion generators, electric air cleaners, and media cleaners, among others.”
DePuy has also tracked a “tremendous uptick in sensor-related products” for First Supply, and he expects that to continue.
“IAQ products like air purification, humidification, dehumidification, and ventilation systems are in higher demand,” echoed F.W. Webb’s Halmen and Boynton.
They also observe more awareness when it comes to maintenance, on both the residential and commercial sides, as owners come to a deeper understanding that better maintenance improves the performance of those IAQ investments and decreases overall costs.
They see the increased consumer interest as creating a corresponding need for distributors to have quality information available for contractor and customer inquiries in order to meet a given need with the right product(s).
ALTERED OFFICE NEEDS: Some distributors expect a reduction in new office construction projects. The recent work-from-home period might also reduce existing tenants’ requirements. Technologies like VRF may assist owners of conventional office space who now need more flexible comfort delivery. Photo by Jaysin Trevino, CC by 2.0
F.W. Webb and DSG’s Meiresonne both expressed a belief that some work-at-home makeshift arrangements will become more permanent, with a resulting downturn in new commercial office projects on one hand while other companies reduce their existing square footage.
Meiresonne said DSG expects growth in IAQ, touchless technology, and antiviral/bacterial infused products going forward.
Such changes in square footage requirements will hasten the need for building owners to have “flexible buildings with multiple tenants, where there may have only been one before,” said Halmen and Boynton.
For F.W. Webb’s part, they explain that this trend may lead to increased popularity for technologies such as variable refrigerant systems that can help systems adapt efficiently to changes in demand and occupancy.
The COVID era is already reshaping some consumer demand and extending already uncomfortable periods of volatility and uncertainty for distributors. Nevertheless, successful distributors are finding new ways to serve contractors — including APR Supply’s expansion into PPE supply for industry customers.
And as Ludwig commented, while emphases on IAQ and job site cleanliness will likely settle into the new normal, “helping contractors be prepared both from an education perspective and by distributing related product is probably an opportunity going forward.”
That much, at least, has a familiar ring to it, doesn’t it?
IAQ ON THE RISE: Distributors have all seen the increase in consumer and contractor interest toward indoor air quality products. Polarized filtration media, humidity control, and electric air cleaners are experiencing what could be the start of prolonged demand. Photos courtesy F.W. Webb
Experiences Up The Chain
Asked for entirely anonymous feedback about how their respective manufacturers had done through the turbulence in the first half of the year, distributors gave their partners fairly high marks.
“A partner and large manufacturer reached out to us at the onset of the pandemic,” recalled one distributor, acknowledging that his company like many others had yet to fully understand the disruption taking shape.
“This manufacturer outlined what was taking place on the global scale and walked through some of the possible challenges we might face in the coming months. Wow, were they right on!”
That intelligence let the distributor in turn “get in front of some of the supply chain issues that others might have incurred” and helped the company to preserve its quality of service.
Another said that some manufacturers transitioned more quickly and more smoothly than others, but he noted that “the frequency of communication was a differentiator.”
The ones who communicated frequently and in various methods, as his company worked to do with its own customers, proved most helpful to the distributor’s decision making.
“Some sort of hid in the bushes, waiting to see when it was safe to come out,” he said. While some suppliers implemented policies like split shifts and mandatory vacation time, the distributors noted that some used the virus as an excuse for poor customer service.
Another distributor praised the “great job of keeping us informed of extended lead times and possible supply chain issue,” emphasizing that being “completely transparent with what was happening in their factories” made for better distributor strategic decisions.
Hiccups and weak moments aside, another commented that “the fact that most, if not all, of our manufacturers were able to keep the supply chain open despite COVID-19 was remarkable.”
He pointed to extra help in the form of prioritizing high-demand products and assistance with delivering educational webinars to customers and employees.
