Jose Baltierrez began noticing thinning supplies at his co-op’s three warehouses and staging yards last October.
Deliveries for seasonal work projects and repairs were arriving less consistently. Back-ordered items were increasing.
“I started ordering a little heavier in materials, including transformers, poles and anything else that I know has a long lead time,” says Baltierrez, a warehouseman with Sulphur Springs Valley Electric Cooperative in Willcox, Arizona.
Fallout from the COVID-19 pandemic and a spate of natural disasters have combined to trigger an industry-wide parts shortage, driving up operating costs and creating logistical challenges across the country.
Analysts say the problem could continue well into 2022.
Troubles began in early 2020 as the pandemic forced many manufacturers to reconfigure their plants to accommodate social distancing, which slowed production, packaging and shipping, and deliveries.
Commodity prices are also up, with the cost of steel, copper and petroleum-based items rising 6% to 8% since the pandemic began.
According to logistics and distribution members of the Electric Utility Distributors Association, transformer and conductor lead times have doubled or tripled.
“We have extended our procurement to other manufacturers that we may not have traditionally bought certain products from,” says Jason Caudle, chief operating officer of Tarheel Electric Membership Association. “That’s allowed us to maintain a level of inventory to keep our members’ orders fulfilled.”
Companies have logged as many as three price increases for manufactured items during their 2021 production cycle. Some EUDA members have reported certain item costs rising more than 300%.
“We have been educating our members on these trends and encouraging them to plan ahead,” says Caudle, whose Raleigh, North Carolina-based operation supplies 35 distribution co-ops in three states. “This has allowed us to help keep material costs down, along with hedging lead times.”
Pressures on the logistics system began showing up in the Southeast and West nearly a year ago, as co-ops and contractors began rebuilding from hurricane and wildfire damage.
Unusually low interest rates have also spurred utility infrastructure investment, including expansion of electric vehicle charging networks and transmission to support renewable generation. The deployment of advance metering infrastructure components and the phaseout of analog control and metering equipment is also up.
“This is helping fuel the demand for all distribution and transmission products,” says Matt Brandrup, president and CEO of Rural Electric Supply Cooperative (RESCO) in Madison, Wisconsin. “If lead times triple from 12 weeks to 36 weeks, distributors should triple the amount they have in inventory on that product to keep up with normal demand.”
RESCO, which supplies co-ops and other publicly owned utilities in eight Midwestern states, has boosted inventory levels by 40% since the pandemic began.
“We’re placing orders for material with ship dates well into 2022,” Brandrup says. “We expect extended lead times to remain in place well into next year, and perhaps beyond.”
EUDA members’ combined inventory of $300 million in hardware and system components is providing the surge capacity needed to respond to spot shortages.
“We are constantly in touch with each other to assist when one runs low on certain items to help bridge the gap until additional inventory arrives,” says Jennifer Eberhart, a Tarheel EMA account representative and current EUDA chairperson. “We pull our collective resources together when a disaster hits a certain area to ensure material needs are met to help get the power back.”
Louisville, Kentucky-based United Utility Supply responded to multiple natural disasters during the pandemic, sending truckloads of transformers to Iowa after a derecho and Texas following February’s deep freeze. Massive supply efforts were also mounted after ice storms hit Ohio and Kentucky, and big shipments moved to co-op yards after hurricanes Sally, Laura and Delta.
“We pulled resources from all of our five warehouses,” says Gary Burnett, UUS executive vice president. “We were shipping material and supplies from Pennsylvania and Ohio to Alabama as we were waiting on vendor replenishments.”
That cooperation among supply and logistics cooperatives continues to help prevent pernicious shortages of essential parts and equipment.
“Working with our vendors forecasting two or three quarters ahead, we have been able to have the material our members need when they need it,” says Phil Clark, UUS vice president of operations.
That’s keeping a steady stream of hardware and components headed to co-ops across the country.
“When they need us, we show up.”