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Murphy’s Law: Admit Your Mistakes When You’re Right

AKA: Inventory Planning Gone Crazy

May 14, 2012
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Upon occasion, I have been wrong about things, and when that occurs, I am quick to point out what that really means: I thought I was wrong about something but actually turned out to be right.

Once again, for doubting myself as I reviewed a December 2011 prognostication when I suggested good times for 2012, my sincerest apology. I was mistaken.

Well, actually, it was Tom that led me out on that limb in the first place. To refresh your memory, Tom, a donut-eating friend, had told me: “HVAC, man, that’s got to be a really good business to be in right now.”

To which I asked, “Really, why do you think so?”

As I wrote back in December, “Tom told me that regardless of the economy people were always going to spend money on the creature comforts — staying warm when it’s cold, and staying cool when it’s hot. I asked Tom if he was planning to spend any money on his HVAC system this year. He said, ‘Sure, if I need to.’

“Tom and your customers have a little money to spend on things they need. I predict they are going to need you a little more often in 2012.”

A benefit of penning an occasional column in an industry magazine is that one can take opposing sides of the coin whenever flip-flopping is most appropriate. However, please note this author can easily stand by the above prediction for 2012.

How Can That Be?

If you are an avid viewer of the nightly doom-and-gloom reports, or even read some of our industry’s own trend data, you may wonder how the HVACR business could be on the upswing. Sometimes it sounds confusing. For example, on page 39 we’ve published the latest shipment reports from the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) through February 2012, which indicate gas furnace shipments down approximately 20 percent, and air conditioning and heat pump combined shipments down approximately 19 percent. However, the Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR average distributor sales for March 2012 up 11.5 percent. HARDI’s Monthly Targeted and Regional Economic News for Distribution Strategies (TRENDS) Report showed growth in six of seven U.S. regions; five in double digits.

Oh, well, AHRI and HARDI don’t always agree. However, in this case, someone at The NEWS has uncovered a source (beer-drinking buddy) who suggests that the next available AHRI reports (March and April shipments) should indicate a positive trend for cooling shipments after a very mild winter had put a damper on heating shipments.

Yes, that does mean good news on the doorstep in the coming months because, as most already know, hot summer weather does bring out the joy in all of us.

Dog Day Time

Distributors have already begun to show the tell-tale signs of increased demand, and if that trend holds for the reporting month of April, you can bet that unitary equipment manufacturing companies will be in the strategic throes of chaos — not knowing whether to throw the dice about dusting off those additional assembly lines.

Stacks of boxes left over after the dog days of August do not sit well with most board-of-director types, therefore some of the important far-reaching inventory planning decisions get made about the first week of July. The cautiously optimistic approach, typical of many in the current economy, would dictate building as few boxes as possible while still meeting distributor/contractor demand. Thus, the dice-throwing dilemma — it is really quite difficult to know what that magic number will be.

A Humble Solution

No one likes to be out of product when a customer has a need, and as one experienced salesperson, Bob Laney, always tells his contractor customers, “You can’t sell out of an empty barn.” Usually, Laney made a lot of less-profound statements, but occasionally he got it right.

This is going to be one of those summers for which it makes no sense for anyone to be out of product when a customer is complaining about being hot. Whether a manufacturer, distributor, or contractor, your shelves need to evidence at least a small amount of risk-taking behavior. When the third week of August hits, you can bet that a lot of consumers will manage to limp along for another year — don’t give them any additional cause such as “Sorry, out of stock.”

This summer would be a good time to capture some consumer momentum.

Publication date: 05/14/2012

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