15/02/2022 - 12:45 pm

Perfect Storm

As supply chains continue to bottleneck, the pandemic endures, yet business booms, there really hasn’t been another period like it, says Steve Napieralski, president at Oz Lifting.

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair,” as Charles Dickens wrote in A Tale of Two Cities. And I know what he meant.

When I was invited to appear as a guest on this magazine’s Lifting Lowdown podcast, I was excited to find out how our conversation would meander around the chosen subject of global supply chain bottlenecks to the backdrop of the ongoing pandemic and a business climate that has never been so good. It really is a perfect storm, as we agreed on the recording.

It’s not for me to judge how well we did at striking the right tone, but I’d like to think we tackled problems head-on, while shedding a positive light on our industry. I want to take this opportunity to share some takeaways from Lifting Lowdown Episode 18.

 

(Lack of) supply and demand

I’m building a house. I know, could there be a worse time? But I’m forging ahead, regardless. The trouble is, our supply chains, like yours, are still backlogged. Back in June (2021), I ordered a bunch of appliances and the latest update told me that they might be delivered by late February. When I asked why, the company said that they can’t get deliveries of polyurethane rigid foam, the insulating material used for refrigerators and freezers. I don’t know where such foam even comes from, but it isn’t getting to where it needs to be. My garage doors, meanwhile, are also leaning up against a warehouse wall somewhere because the manufacturer can’t get the springs, which are currently floating somewhere off the Port of Long Beach, California.

Interestingly, if you asked the fridge/freezer or door supplier pre-pandemic how reliant they were on global supply chains, they probably wouldn’t have even considered that deliveries of their foam and springs respectively were so reliant upon a worldwide network of containers and shipping lanes. I think we’ve all had our eyes opened to the orchestration of such activity as we walk the aisles of our supermarkets and grocery stores looking at empty shelves. Oh, that’s where that fruit comes from. And I didn’t realise that beverage came from there. We’ve all had these conversations.

 

Contain yourself

It’s important to keep a cool head at a time like this – otherwise you’d go mad.

A container I had shipped to my facility in Winona, Minnesota a couple of years ago would’ve cost $4500. The same-sized container, full of the same items, recently cost me $24,000. You can scoff and suggest I tell the shipping company where to go but, reality is, I have no such recourse. What am I going to do instead? The freight firm up the road might be able to do it for $23,500 and the next one $23,750. Nobody is doing it for $4500 anymore.

The shipping companies have realised that they can effectively add zeros to their prices. The process is the same – a container will go to Long Beach, Seattle, or Vancouver just like it always has – but the rules of engagement have changed. We looked at air freight but, guess what, that market has followed suit and there isn’t a loophole to find. It’s not advisable to pass every dime onto customers, and the size of business I sell to wouldn’t be able to handle such mark-up, so for the time being we’re absorbing the colossal impact.

Then there’s the problem with steel. I used to have five reliable steel suppliers that could deliver the type of steel pipe I need to make my davit cranes (we do have other davits, including a popular composite range), but that is now down to two. I’m told that the other three found it increasingly difficult to access the necessary product to sell it to me. We all know what happens when there are less suppliers – prices go up.

As we discussed on the podcast, another galling thing is that this climate plays into the hands of larger companies. Technology and digital marketing have given smaller businesses access to major decision makers where they previously wouldn’t have been given the time of day. I know of several firms that are supplying to major projects that they wouldn’t even have considered pitching to 10 years ago. But the global supply chain bottleneck means only the likes of Walmart – last year they started chartering ships to ensure they had enough freight capacity to meet demand for peak season – have an impactful solution.

If you haven’t already, you might want to investigate using the LCL (less-than-container load) method, where containers are filled by multiple orders or goods. This does seem to present a more streamlined option, but it’s hardly the good old days.

 

Spring of hope

Things are starting to normalise, however. When we first started discussing the podcast, lead times for product from Asia and the South Pacific were eight to 12 weeks. As we turned the corner of the year, that had reduced to six to eight weeks. Perhaps my polyurethane rigid foam and garage door springs have long since been afloat, therefore. It remains a juggling act, though, as even with reduced shipping times, it’s important to strike a balance between too much inventory and not enough. It’s one thing if every supplier is in the same boat (literally) but if someone has read the stars better than another and has an item when the next business doesn’t, it can be extremely frustrating for the one that misses out.

All the while, business is good in terms of orders, and that can be said for most companies in the global lifting and rigging marketplace. Word is getting around too, because my phone rings three or four times a week with prospective buyers curious whether I’d consider selling up. No, I tell them, emphatically. As I said to Lifting Lowdown listeners, my business now has become a flourishing, beautiful young adult, much like my daughters, and I’m very proud of it (and them). For other business owners the timing might be right to step away from the coalface but, for me, things are only just starting to get interesting.

Generally, I do expect the marketplace to continue to consolidate, not only in terms of manufacturers consuming each other or merging, but also at distributorship level. This magazine regularly reports on the upcoming Konecranes-Cargotec merger, and The Crosby Group continues on its merry acquisition way.

What many large businesses and investment companies realise is that the small companies tend to be the ones that innovate and drive change. They’re likely at the cutting-edge of technology too. They’ve got their eyes and, more importantly, ears close to the point of use and constantly develop new products and solutions. Small is often agile. When my customers open a box, I want them to be impressed at the extent to which I understand their application. It doesn’t have to be complicated; we now include a davit crane base template with shipments, so users don’t have to use the actual base to mark out drill holes.

In a marketplace that still thrives on a level of humanity and customer friendliness, these smaller businesses score highly with their customers. People still appreciate personal engagement, especially in a world that’s been so impacted by the pandemic.

“A day wasted on others is not wasted on one’s self,” as Charles Dickens also wrote in A Tale of Two Cities.


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