Editorial: UNDER PRESSURE
The vectors and sources of business pressure have changed in the last year.
October 20, 2021 By Patrick Flannery
In a previous incarnation, I sold CNC machine tools. I remember well the pressure to keep that pipeline full. It was a daily challenge to find the customers who were buying, thinking about buying or at least willing to talk about what I was selling. And I had some good stuff!
That pressure increased in the late ‘90s and early ‘00s when Chinese automotive manufacturers got in the game in a big way. Work had been migrating to Mexico for some time, but most of the more sophisticated machining had stuck around. Then, bids from Chinese companies started showing up with photos attached of huge, gleaming factories filled with the latest equipment. The prices were as low as 80 percent less than what our local shops had to charge. For that price, you could ship your product back and forth a few times to have mistakes fixed if you needed to. Smaller shops started to lay off and close their doors, and the market was flooded with used equipment from auctions. It was partly to get out from under that pressure that I took the different career direction that has me writing to you here today.
Pressure is mounting in business and manufacturing again today and, again, China is involved. But it’s coming from an entirely different direction. Rather than having trouble finding customers, we’re having trouble filling orders. Shortages are hitting just about everything we use to make windows and doors. Customers are sitting on piles of cash accumulated after a year of not being able to take vacations. They are looking at their old frames and itching to do something about the view. That scuffed and squeaky front door suddenly leaped into focus when they had to walk past it 20 times per day. Meanwhile, governments are “helping” with generous rebate programs aimed at driving sales of energy-efficient products and retrofits. The phone is ringing off the hook, but I suspect some salespeople are hiding under the desk rather than having to disappoint their client with an eight-, 10- or 16-week lead time.
The pressure has to be hitting the corner office too, because the cost of everything is rising even as volumes can’t rise to meet them. A lot of people laid off during the pandemic have not returned to work. There’s been next to no immigration for over a year – that’s a hit to the available labour pool that may be underappreciated. And, as if the pandemic wasn’t enough, there was the freak ice storm in Texas last spring that damaged refineries that provide many specialized polymer and resin products for the whole North American market.
But probably the largest impact to supply shortages has been the choking off of overseas shipping. At first, it was the anti-COVID measures themselves preventing container ships from docking at ports. But even once that was sorted out, a bizarre problem revealed itself: a shortage of shipping containers. Apparently the slowdown in production in North America caused empty containers from Asia to pile up in ports and depots. For some time, they couldn’t even be returned empty because we thought they might transmit the virus. Once Chinese production ramped up again, there were not enough containers to carry the goods on order, especially with the backlogs. The result has been a decrease in availability of just about everything because there is very little produced in North America any more that does not have at least some Chinese components.
Some of this pressure may be vented in a re-thinking of our industrial supply chains and a willingness to pay a bit more in order to source supplies closer to home. Fenestration Canada had an online seminar recently where Tony Clement, the former federal industry minister, addressed these issues. Recommend you check out the Regional Week recordings at fenestrationcanada.ca.
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