Managing the Supply Shortage

The supply shortage in the trades is real, and there is plenty of uncertainty about when it may end.

Those are among the key takeaways of a recent ServiceTitan survey of 288 representatives of the trades. In the survey, 97.5% say they either have not been told by suppliers when the shortage will end, or the suppliers are not sure themselves.

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Only seven of the 288 who responded to the question said suppliers had addressed when supplies might become more available.

"We have to be much more aware of upcoming jobs and purchase material well in advance,” one respondent noted. “We have increased our lines of credit in order to sit on inventory longer."

ServiceTitan’s survey took place in July 2021, and 215 of the 288 who took part were owners, general managers or office managers of a business. Of the 288, 287 are ServiceTitan customers. Comments were submitted anonymously; ServiceTitan verified each.

William Powers, a Senior Industry Advisor at ServiceTitan, attributes these problems to the COVID-19 pandemic and ensuing shutdowns. Powers said he expects supply chains may not fully reopen until third or fourth quarter 2022, which means it will be the first quarter of 2023 before businesses are operating more consistently.

“The situation is very bad right now,” Powers said, pointing out that shutdowns and the labor shortage mean companies cannot manufacture enough to meet demand. He suggested companies plan ahead for the next 12 to 24 months and adjust by stocking more supplies than usual.

In the survey, ServiceTitan asked business representatives to assess how much the supply shortage has affected their business on a 1-to-10 scale, with 1 being not at all and 10 being very affected.

The average response: 6.5. Which indicates that while there are challenges, those surveyed do not feel the situation has hit the catastrophe stage. Businesses and supplies hit the hardest were garage doors (7.8), pools (7.7) and chimneys (7.6). One commenter said that lead times on garage doors have gone from 1½ weeks to 12-20 weeks, with several components back-ordered. Even with that, the commenter rated the impact a 5.

“Other than the stress of keeping it all straight and (worrying that) steel prices (will) skyrocket, it hasn’t been too severe,” the commenter said.

The attitude on the ground may reflect the short-term experience of dealing with supply chain issues for a few months. In looking at the potential for the long term, Powers sees significant challenges.

The survey showed that price increases cutting into margins is one of the main issues businesses are dealing with. Others include lost jobs due to wait times, smaller shops having a hard time getting materials, customers growing antsy and losing trust, and moving from just-in-time to “holding-on-to” inventory.

“The biggest issue we have is when a product is supposed to be ready and it’s not,” wrote one. “We try our best not to pass on the price increases to the customers, but we have had to raise our prices, and that has led to a few bad reviews.”

Others talked of purchasing extra products in an attempt to plan ahead. Only 14% of those surveyed said they feel the response from suppliers has been amazing, while 43% call the response neutral or say it needs work.

"You would think that suppliers could foresee issues like major shortages and be proactive in alerting customers and providing alternative solutions rather than just say sorry, that's how it is sometimes," a respondent wrote.

Some are more forgiving.

“Communication has been key,” one responder wrote. “I speak with my reps from the three main vendors four to five times a week at least.”

Powers said maintaining and/or developing a strong relationship with suppliers is vital.

“Once you have that relationship, you should be able to get equipment or know where the equipment is,” he said. “You’d like to think those relationships are there already, but anyone who hasn’t done it yet needs to react and react now. Because if they don’t, they’re going to be in trouble.”

Multi-trade businesses cite HVAC, plumbing, and electrical as the top business units affected, with HVAC units, electrical breakers, water heaters and PVC the most difficult to procure.

Almost two-thirds (65.4%) said they are having problems getting service vehicles or trucks for their fleet.

“We have been a Ford-based fleet forever,” a respondent wrote. “We are now having to open up to the idea of all manufacturers. Enterprise has been showing me Mercedes, as at this time they're the most bang for the buck. I don't like the look of showing up in a Mercedes, but it's all we may be able to secure."

When it comes to KPIs, responders mentioned four major facets of the business that are affected: average job ticket (22.7%), booking percentage (11.2%), closed opportunities percentage (23.4%) and installations sold (31.1%).

"Jobs take longer to close,” one wrote. “Though delayed deliveries are not our doing, it looks bad on our company to not be able to deliver in the standard time our clients have grown used to."

While some contractors are seeing growth, most of them see it because they stocked up on and stored supplies. Others have turned to selling lower-efficiency units based on availability, while some have focused on repair when possible.

It seems wise to check with distributors before offering a customer an exact date for a repair. Powers stressed that honest communication with the customers and staff is vital.

“Don’t try to sugarcoat,” he said. “Be known as the company that will tell people the honest truth about why this is.”

Powers offered several suggestions for companies in a LinkedIn post headlined Supply Chain and the Contractor. Among them:

1. Treat inventory like cash. “Have an inventory system in-house and monitored daily.”

2. Develop the relationship with your manufacturer, wholesalers and distributor.

3. Take advantage of all manufacturer rebates to offset the increased cost of equipment, parts and materials

4. Do not try to be every brand. Pick your brand and teach your staff the positives and market advantages over the other brands. (In an interview, Powers stressed the importance of this practice in these times.)

5. Recruit, recruit, recruit. Either you do it or your competition will.

Other business representatives and industry experts have discussed the supply chain issues with ServiceTitan. ServiceTitan also hosted a podcast that included Dr. David Closs of the Michigan State University Department of Supply Chain Management offering insight on the problems, and solutions.