Five minutes with Applied’s Mark Kenyon

Supply chain disruptions continue into November, affecting manufacturers, distributors, aggregate producers and everyone involved in the supply of equipment and technology. To discuss the latest impacts, P&Q sat down with Mark Kenyon of Applied Industrial Technologies. Applied, headquartered in Cleveland, is a distributor specializing in industrial motion, fluid power, flow control, automation and maintenance supplies. Kenyon serves Applied as industry manager, covering the aggregate, cement and mining industries.

The supply chain has been chaotic all year long. How would you generally characterize the supply chain right now?

Right now the supply chain is overloaded. Lead times continue to increase, and demand is about 20 to 30 percent above capacity.

Customer demand is increasing while supply chain issues are growing. Not only are delivery times and network reliability issues getting worse, but as manufacturing continues to increase, so will the strains to capacity.

In terms of some of the reports I’ve seen from the industry, it will take months to dig out of the hole we’re in. I think the major reason we’re seeing that is because there haven’t been any major policies to help the situation. There is reliance on people to come back to work.

A lot of our manufacturer partners are based in and have manufacturing facilities in the U.S. While we’ve seen more supply chain effects in recent months, many have been struggling for a year or more. We’ve had less impact because we rely less on goods from overseas. Also part of our role as a distributor is to have available inventory, meaning we went into this crisis in a good position and have been able to maintain that across most products.

Trucker shortages have been part of the problem, as well. What are you seeing on this front?

The industry is currently short over 80,000 drivers, and estimated to need 1 million more over the next 10 years. Some contributing factors to the shortage are new laws passed by California – the largest trucker employer and home to the two largest ports in the U.S. One law banned trucks over 10 years old, while another law eliminating owner-operators is looking for an appeal at the Supreme Court, after losing previous legal challenges.

Additionally, the industry has struggled to recruit new drivers for years. The average age of truck drivers is 48 years old and many of them chose to retire during the pandemic. In order for them to have a license, they have to be 21, but by that time, most people in the trades have already started another career.

What are lead times for materials like right now? How about pricing and its volatility?

Most manufacturers have seen multiple price increases this year. Inflation continues to be an issue, with most manufacturers planning price increases around the beginning of the new year.

In regards to lead times, the ISM (Institute for Supply Management) reports that manufacturing for capital expenditure equipment in October increased to 156 days – that’s a 10-day increase in two months. I’m not certain of the baseline, but it’s been increasing for a long time. One hundred fifty-six days is a long time to wait.

For production materials, it’s 96 days and it has increased 10 days over four months. This is the longest since ISM began collecting data in 1987.

MRO (maintenance, repair and operations) items, which make up our space, [are] up to 49 days, a four-day increase in two months. This is also the longest ISM has reported since they started collecting data in 1987.

How are you advising customers at this point?

If we don’t have access to something, somebody else doesn’t either. Customers, while they’re not happy with this, understand what’s going on.

What we’re trying to do to keep them up and running is solve the root cause of the problem, rather than just replace a component. If a bearing goes on a piece of equipment, we’re not just replacing the bearing. We’re trying to do a root cause analysis of what caused the bearing to fail so they can take action and get the full life of their equipment. This increases their reliability while decreasing maintenance and dependence on the supply chain.

We’re also making sure systems are designed properly, and other options aren’t out there that give a better return on investment.

As far as ways to get customers out of trouble, we offer engineering solutions, such as dual-drive applications. Rather than one motor that might be hard to get and heavy to ship, we’re doing a lot of dual-drive motors – two smaller motors – that might be available now.

Do you see the ability to address the ‘big picture’ as a silver lining to supply issues?

More customers are willing to have conversations that take a closer look at their operations. In this supply chain environment, many are forced to do the analysis. It’s very easy to replace what was already there, making that decision and comparing prices on components. But when they’re faced with an issue and what they want is no longer available – and they’re trying to plan through the supply crisis over the next 12 months – we can give them multiple solutions.

What do you anticipate 2022 to look like?

Based on the reports I’ve heard, it’s going to take months to dig out of the hole we’re in. Supply issues are likely to extend into the beginning of 2022. It’s hard to know beyond that. A lot of that has to do with manpower shortages, issues with China, closing ports and power outages – things you wouldn’t think would be going on forever.