By Steve Clayman
My brain hurts. Everywhere we turn coronavirus is in our faces. There’s no getting away from it, and rightly so. We must take every precaution to prevent the spread of this potentially lethal disease. As with epidemics and pandemics in the past, this too shall pass.
An ancient Greek historian, Thucydides, wrote of a plague in Athens in 430 BCE that killed about a third of the population. The Great Plague hit London in 1665 killing about 7,000 people in one week. Toronto experienced a cholera epidemic in 1832. My parents were toddlers when the Spanish Flu hit in 1918—there’s another 500,000 down. Throw in countless wars and financial crises and we’re looking at a very troublesome past.
Collectively, we’re a resilient species. Everyone here today has ancestors who survived these devastating times. What can we do to support each other? What is the survivability rate for the businesses we’re involved in during this time of coronavirus?
As I write this (the end of March), countless businesses are closed. The building trades are lobbying to have construction sites closed, as well. This could very well happen and the ensuing nightmare will be devastating for many thousands of construction workers and companies. Cities are planning to go into complete lockdown. We know from the experience in other countries what that looks like.
Project the effect a lockdown will have on the manufacturing, distribution, and contracting sectors of our industry. Cash flow, the banks, unpaid invoices. Should workers become infected, who will produce products, drive trucks, and install pipe insulation? Even if there isn’t an infection in a family, there are kids home from school who need looking after. Most unfortunately, there might be TIAC member-companies that won’t be here after this pandemic has run its course.
I see the distributor sector as the most vulnerable. These companies straddle a fine line between their contractor-customers and manufacturers. That fine line is determined, in good part, by who gets paid. Too many contractors pay suppliers when the contractor is paid. In other words, the distributor becomes the bank. Manufacturers have strict credit terms, and in the past some have stopped shipping when faced with a distributor who hasn’t paid invoices. True, some manufacturers will agree to “work something out” with key distributors, but how long is that sustainable?
I have heard some contractors say they don’t care if a distributor goes out of business because there will always be another to buy from. If a contractor isn’t paying one distributor, another will gladly extend credit. This has been the norm, not only in our industry, but in many others.
What happens when one, two, or even three distributors in an area are forced to close? What choices do contractors have? Are online sources an answer? Not when you consider the function distributors provide on a day-to-day basis. Should a contractor need a box of tape, it’s there. Should a contractor have to change an order because he was told without warning he has to start in another part of a building calling for different pipe sizes, a distributor can accommodate that change. Should a contractor require a 5:00 a.m. delivery because that’s when an elevator is available, a distributor can provide that level of service. The services a distributor provides are very specific and taken for granted.
Some time ago, a couple of contractors I know decided to bypass the distributor and order pipe insulation directly from suppliers in China. The savings would be huge and the local distributor would be used for the bits and pieces. Of course, the Chinese supplier only sold product in container-loads and required full payment up front. The delivery time was several weeks. The contractors went for it.
The containers arrived. The pipe sections were all nested to save space and flat cartons were provided. Time was required to sort through the lot, box everything, and mark the cartons with the sizes. Then the shipment had to be stored. Oh yes, and the supplier didn’t send any bags of the butt tape contractors have come to love. But wait, there’s more! The pipe insulation unexpectedly turned out non-compliant with Canadian requirements. Contractors can return product to distributors. In this case, good luck. Three years later, there was inventory remaining. Lesson learned.
Could manufacturers sell directly to contractors? The logistics would be almost impossible. Manufacturers are organized to produce and ship in 53-foot-long truckloads. What contractors would want to drive 800 or more kilometers (500 miles) to pick up material, and what about fill-ins? No option here.
Distributors are the link between an efficient process and money-losing alternatives. Distributors are the heart and lifeblood of the mechanical insulation industry. Just think about how contractors would have to operate without almost immediate access to a multitude of products and services.
It’s time for a reset on relationships. Eventually, coronavirus will subside and we’ll get back to business. We are all in this together. One sector cannot efficiently function without the other. Profit isn’t a dirty word. The time when one sector beats up on another should be over. There must be a better way of working together in a competitive environment that doesn’t result in financial hardship, poor quality installations, and animosity. Respect for what other people do is a good place to start. We need each other to make the system work and to make this involvement sustainable. ▪
