Switchgear Delays

The switchgear supply chain issues are well documented and well known … and the continue to plague the industry, delaying distributor sales and hindering the performance of other manufacturers whose products cannot be installed until switchgear is performed.

Prior to COVID few understood the concept of “supply chain” dynamics. COVID came about and delays were attributed to COVID, transportation issues, chip shortages, China factory issues and more … much, if not all, was valid.

While most, if not all, of these issues have been resolved, no one foresaw the convergence of increased technology usage (think something as “basic” as Teams / Zoom usage and work from home) that required more data centers and has been exacerbated with the emergence of AI, which requires more power and more data centers, the government investing billions (annually) into infrastructure with the monies expected to be spent within a short-time period; the focus on the electrification complex ( battery facilities, automobile factories, electric vehicle infrastructure, etc..); industrial reshoring as well as expansion; enhancements to the utility grid and more.

In other words, the switchgear companies could not anticipate a series of “Green Swan” events.

The companies have reacted by committing to spend over $1.5 billion in new factories, most to be built in the U.S. The program is that it takes time to build these facilities. Then they have to hire staff, usually in areas that are not highly populated. Then they need to train this staff. And, inevitably, they will have some turnover and have to hire new people and train them. It’s the cycle of starting a new factory.

Will they get ahead of the issue? Eventually, but not for a while.

So, while sales are still generated, contractors and distributors get frustrated with delivery dates well into the future, and then the delays are further delayed. Much personnel time is spent in following up and communicating with customers and factories.

More Switchgear Delays

Colonial Electric, a leading Philadelphia-based distributor, last month shared a communique with its customers to advise them of Schneider Electric’s continued challenges.

In an email dated March 15, Colonial stated:

“Dear Valued Customer,

Due to high levels of demand along with ongoing supply chain issues our distribution equipment manufacturing partner, Schneider Electric, continues to face challenges in regards to meeting their ship dates.

Current shipment schedules of Engineer-to-Order products will be revised moving existing Q2 and Q3 order ship dates out. Schneider Electric is engaging in this action to level-set production across several plants due to high demand and persistent supply chain challenges for these complex customized solutions. This measure is expected to provide more accurate and reliable communication to customers and significantly reduce or eliminate the need for multiple delay notifications. We anticipate a delay of up to 20 weeks for several of Schneider’s product lines.

Schneider is not prioritizing or escalating projects other than those deemed as a National Security Priority. All other projects will be fulfilled based on first in first out. Please note that Schneider’s Project Based Condition of Sale T&C’s states the following in regards to project cancellation:

• 20% after issuance of approval drawings
• 50% at release to manufacturing
• 100% at start of fabrication

We apologize for the inconvenience and assure you that we are working in junction with Schneider Electric to provide you with the most accurate and up to date information as possible. Our commitment to providing excellent customer service each and every time is still our priority. Thank you for your understanding and ongoing partnership during this time.

If you have any questions, please do not hesitate to contact your Colonial Electric Supply sales representative.

Thank You,

Colonial Electric Supply”

Colonial is, presumably, trying to get ahead of the communications cycle and efficiently get the message out to its customers.

And as many, if not all, distributors know, this issue is not unique to Schneider Electric. Eaton distributors have shared similar issues, if not worse at times.

Thoughts

So, this got me thinking …

Which “stakeholder” gets more frustrated? The end-user, the engineer, the contractor, or the distributor?

• If you were an engineer, would this affect your recommendations for other projects you are working on?
  • Here’s an architect that, on their website, warns developers of transformer and generator delays.
• If you were the end-user, would you ask “can we use someone else so we can get our project done sooner? What is so special about their product that no one else can come close to replicating what we need?”
  • Here’s an EV consultant warning property developers about challenges in getting EV chargers installed. He specifically calls out transformers, switchboards, electrical panels and circuit breakers.
• At some point the contractor turns to the engineer and end-user and says “you told me to use this product, so don’t blame me.” If it was a design / build project the end-user says to the contractor, “I’m paying for the project to be completed within a timeframe, it’s your problem. Fix it. (which the contractor can’t do without it costing him money and his response will be “you approved the BoM.”)
• The distributor says “sorry, you placed the order, they have control of either your schedule or your money. If you want to cancel, here’s the fee schedule.”

Am I missing something?

And I can hear Eaton now … “thank you Schneider, now we can do the same”. Perhaps ABB and Siemens are saying “give us a chance!”

I’ve also had other distributors comment that they do not see a benefit to be exclusive. The nominal rebate is not enough compensation to make up for lost / delayed sales. Many report that sales of companies such as LS Electric, Noark, Spike Electric, and others are increasing. Perhaps not for new construction but for projects that need to get started / done.

And while the switchgear companies sell via direct sales organizations, their delays impact independent manufacturer representatives as sales get delayed. In fact, in our recent Pulse of Lighting survey (results later this week), all audiences commented on how switchgear delays are impacting their lighting business, and this may be one of the reasons why mid-sized and large project sales are delayed.

Unfortunately, there is not anything that can be done other than explain, again, to contractors the “why” and reiterate at the time of the order that everything is subject to delays (and perhaps it is like the airlines with “rolling delays?”)

The only alternative, and most likely it will not work for new construction projects, is to recommend an alternative, lesser-known, brand … but it might not hurt.

What are you seeing? Other than the alternatives mentioned, who else should be considered?

Thoughts?