Business Services

Field Report: HVAC Contractors and the Supply Chain

Few Problems with Getting Equipment as More Customers Start to Replace

August 19, 2013

When the summer heats up, it can be harder to get your hands on the necessary equipment and parts. As HVAC contractors strive to meet customer demands, they have developed a variety of ways to manage their inventory. And those customer demands may be changing as some contractors have noticed a swing from “repair” to “replace” mode.

Summer Supply Chain

So far this season, many contractors are reporting satisfaction in the supply chain. “We have not had any supply issues at all in our area,” said Fred Kobie, president of Kobie Kooling, Fort Myers, Fla. “We see a trend to replace rather than repair as R-22 continues to rise in cost. Longer-term solutions are definitely the trend.”

Steve Scott, owner, Comfort Technology, Dryden, N.Y., agreed, stating that supply has been very good so far. “We try to give our suppliers adequate lead time on new installs,” he said. “This summer it’s mostly been new installs. We’ve been installing a lot of mini-split systems.”

According to Butch Welsch, president of Welsch Heating & Cooling Co., St. Louis, “We’re very happy with the service this summer.”

Welsch also noted a growing trend of customers considering replacement systems rather than repairs. “Fortunately, most of our customers seem to be in more of a ‘replace’ mode this year,” he said.

While most contractors are reporting favorable results, a few others noted specific problems.

For example, Brian McDonald, general manager/owner, Outer Banks Heating & Cooling, Kill Devil Hills, N.C., said dealing with the supply chain during the summer is never easy.

“Our primary distributor usually has the parts we need in stock, but we’re an hour and a half from them, and there are times they don’t get us the parts we need in a timely fashion due to logistics,” he said. “It’s a problem for us since we deal with a lot of high-end vacation homes that are rented on a weekly basis. When someone is paying $4,000 to $20,000 or more per week, telling them it will be several days before we can get a part is not an option.”

McDonald said that dealing with rental management companies in these cases can be hard, especially when tenants start to demand money back.

Overall, he said, “We still have a lot of folks that are replacing major components in systems that really should be replaced. A lot of people that would have been able to finance a replacement in the past are stretched so thin, or have such bad credit after the last four or five years, they can’t qualify for financing.”

According to Paul Sammataro, president of Samm’s Heating and Air Conditioning, Plano, Texas, “Parts are adequate; however we are having problems with ordering a specific coil that achieves certain AHRI [Air-Conditioning, Heating, and Refrigeration Institute] ratings.” He continued, “We are having a good year with replacements but a stronger year in service year to date.”

Martin Hoover, owner, Empire Heating and Air Conditioning, Decatur, Ga., noted one specific item that has slowed down the supply chain. “Amana condenser coils are the only thing we have had any unusual delays with,” he said. “Service is still a higher ratio than in the past, but some planned replacements are mixing in.”

Dennis Purvis, service manager at Mechanical Services Inc. of Central Florida, Orlando, Fla., said he has had no problems getting his hands on smaller equipment.

“Ten tons and larger sometimes require a wait of a couple of days,” he said. “Parts are as usual — no problems for the most part.”

Inventory Management

Whether customers ask for repair or replacement, having the right equipment and supplies in stock to quickly meet their needs can be a tricky balancing act. Contractors have developed a multitude of approaches to inventory management that enable them to meet these demands.

Sammataro’s system includes an emphasis on preparedness.

“We hire a shop setup man to stage parts and equipment leaving the next day. The day of the work, he loads trailers for specific jobs before the technicians arrive,” he explained.

He added, “Carrier visits and delivers weekly stock to replenish our warehouse.”

Sammataro offers same-day emergency service to customers, including holidays. To make this possible, he said, “We stock a majority of common repair items and have well-stocked vehicles. If an OEM part is needed, we give our customers the option to pay a late-opening fee. Almost all supply houses have late-opening options.”

Plus, he added, “Our main equipment supplier is open on Saturdays.”

At Welsch Heating and Cooling, the service department is on high alert during the busy summer season. “The service department has the orders ready to place, and then they watch for the first signs of those first hot days. Then they place the order,” Welsch said. “There are too many different parts, manufacturers, etc. to stock much at all through the winter. Models can be changed or discontinued, and you then end up being stuck if the parts aren’t universal.”

For emergency service, Welsch noted that he passes along any supplier fees to the customer with no markup.

Scott noted that Comfort Technology doesn’t use any vendor programs for inventory management.

“R.E. Michel [a wholesale distributor based in Baltimore] gives us next-day service and that’s worked well so far,” he said.

When it comes to emergency service, Scott said, his company offers it, but only with parts stocked on the trucks. “Otherwise it’s next day for odd or OEM parts,” he said.

At Kobie Kooling, Kobie said, “Our unitary equipment needs are well-handled through our manufacturers’ inventory in the local supply house. We do not floor plan, but have not had a problem getting equipment. Parts and ancillary supplies are routinely maintained in a rotation and are plentiful.”

For emergencies, Kobie noted that he does offer same-day repair, and said he will go the extra mile to help customers in uncomfortable situations. “We have temporary unit installs to hold our customers over if need be. We also use spot coolers or temporary units to maintain comfort as best we can,” he said.

At Outer Banks Cooling and Heating, McDonald takes a different approach to stocking inventory.

“Due to our remote location, we keep over $70,000 worth of parts inventory on hand. Several of us do our best to make sure items that are used are reordered before we’re totally out.”

He added, “During the summer season we stock over 20 different compressor models for the most common units we sell. At the end of the season, we return them to the distributor for a credit. We also floor plan over $100,000 worth of new equipment so we have what we need, when we need it. It’s not uncommon to find a system down and have to replace it the same day or the very next day. We also keep quite a few older 10 SEER R-22 loaner units on hand that we can install on a temporary basis until we can get to the house to install a new R-410A system.”

On the commercial side, Greg Crumpton, president and founder, AirTight Mechanical Inc., Charlotte, N.C., said, “We actually do not have any inventory other than refrigerant. With the number of types and brands of equipment we service, we simply have to buy on demand.”

Because of the critical nature of the jobs AirTight works on, Crumpton said, “We offer two-hour response on a 24/7/365 basis. Our vendors and our partners try to support this.”

Commenting on the importance of relationships, he said, for him there is a big difference between a vendor and a partner. “OEM supply houses for us tend to be vendors,” he said. He referenced, for example, CC Dickson Co., a wholesale distributor based in Rock Hill, S.C., as an example of a true partner.

“We have an excellent relationship with Terry Blackwell, regional manager for CC Dickson. They blow everyone else out of the water,” Crumpton said. “Terry and his team support us in an awesome manner.”

Purvis said, as a commercial contractor, he also buys parts as needed. “We quit stocking several years ago,” Purvis said, adding that this approach “reduced inventory and the need to constantly track where things went.”

Plus, he said, “All of our suppliers are available 24/7 with just a phone call.”

He further explained that same-day emergency service is usually a requirement for commercial business accounts.

“Relationship building allows us to differentiate true emergencies, allowing us to put some calls off until the next day,” he said.

Publication date: 8/19/2013 

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