Hope Is Not A Plan: Can’t get it – Let’s get creative to solve supply chain woes
By Adam SnookFeatures Business Intelligence business intelligence opinion supply chain
Shortages are going to force us to get creative.
The list of things you can’t get is growing.
First on the list is people. As we discussed in the last article, getting qualified, engaged, and motivated staff is extremely challenging right now. And it’s not likely to get easier any time soon.
How about reasonable financing and capital investment? With inflation reaching record highs across all aspects of life, interest rates had to rise and rise rapidly. The Bank of Canada just put through the largest increase in 20 years. If prime goes up 0.5 percent commercial financing rates go up one percent or more. What you could finance at five percent 12 months ago is now going to cost you eight to 8.5 percent on a lease, if you’ve got good credit. Manage your cash flow accordingly.
Equipment is hard to get. When your business is 100 percent dependent on equipment to generate its revenue there is no bigger concern than not being able to acquire the assets you need to continue to operate. The local Bobcat dealership has zero new skid-steers available for sale in its yard. How do you function as a dealership with no new inventory to sell? There’s no used coming in on trade, because there’s nothing to replace it with. Your parts and service department better be operating at 110 percent capacity to keep the lights on.
I recently called a long-time supplier of portable toilets to inquire about a load of 10 to 15 new toilets and they told me there’s no availability until October or November. Also, no one is selling used for the same reason. I never thought I’d see a shortage of porta-potties.
There is no quick fix to the supply chain issues that plague manufacturers, so you’d better figure out how to adapt.
With new gear being so difficult to acquire the price of quality used is through the roof. Just watch the next couple of Ritchie Brothers auctions. It’s actually quite astonishing. On one hand, the value of your existing fleet has increased five percent per month or more over the last 12 to 18 months. But unless you’re planning on selling your business now that doesn’t do you a lot of good.
If you plan on growing you’ll have to be creative to get the assets you need. Being less brand specific is an easy one. The quality gap between most major manufacturers is pretty much non-existent now. Whether it’s a skid-steer, excavator or air compressor, if you can get your hands on a recognizable brand chances are very good it’s a quality piece of equipment that’ll serve your customers well. This may require a bit more upselling or “training” of your customers, but if it’s what’s available they will rent it.
There is late model fleet that’s always being turned over at the auction or directly from the multinational companies, even if you’re now paying a premium for it.
Talk to your contractor customers. Do they have any idle equipment that they’d like to either sell or do a rental split on? If you go this route on a rental split, make sure all the expectations are laid out clearly. This can muddy a relationship quickly otherwise.
If you’ve never developed a great re-rental relationship with other local providers, there’s no time like the present! Fifteen to 20 percent of something and keeping a customer supplied is better than nothing.
With all of these increased costs let’s hope your increased rental rates can keep up!
Adam Snook owns Just Bins, a Regina-based provider of waste disposal solutions.
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