‘Supply chain’ and ‘inflation’. The two words all of us have probably heard enough over the past year. Both have greatly impacted the operations of utilities and the everyday lives of their members and customers, with seemingly no short-term end in sight.
In terms of supply chain disruptions, more than half of supply chain executives don’t expect a “return to normal” until the first half of 2024 or beyond, according to survey results reported by SupplyChainBrain.
And with inflation at its highest level since November 1981, fears of an impending recession–which some experts believe has already begun–are on the minds of businesses and consumers alike.
While it’s difficult for organizations to pivot their operations during unstable market conditions without skipping a beat, recognizing potential operational concerns early on and taking a proactive approach to address them can help weather the storm.
That’s the approach RESCO has taken, increasing our utility product inventory by over 70% in the past 12 months alone. We’re pleased to report that, as of the writing of this article, our inventory stands at over $42 million — an all-time record high for RESCO.
And thanks to our strong relationships with our manufacturer partners and our dynamic Purchasing Department, we’re also able to pivot quickly and obtain additional quantities of specific products when needed, such as when severe weather impacts your service area.
This record amount of inventory is much more than just a number. It’s an assurance that your utility has access to the materials, supplies, and equipment that you need, when you need it. Utility operations–whether it’s regular maintenance, storm-related repairs, or ongoing projects–cannot wait for better market conditions to develop or for the supply chain to normalize. That’s why we take pride in our ability to provide reliable availability and prompt delivery of products you need.
We thank you for your partnership with RESCO and look forward to continued growth of our relationship with your utility.
A huge ‘thank you’ to our warehouse team in Williston, ND, who continue to work tirelessly following the powerful blizzard that struck western North Dakota, northwestern South Dakota, and eastern Montana April 22-24, resulting in downed utility poles and power lines.
The Williston team—Skye Velenchenko and Chad Six—along with help from John Larson and Greg Schaefer from our Moorhead location—has moved 370,000 pieces of material (thus far) out of the warehouse and are playing an important role in helping our members restore power to their customers.
A big shout-out also goes to our Purchasing Department—Lori Knoebel, Dillon Marchese, and Kevin Salmon—who have done an incredible job of keeping up with material for the warehouse, expediting orders, tracking down shipments, and placing warehouse transfers. Great job, everyone!
Chris Pederson, regional vice president, spoke with KX News in Bismarck/Minot, ND, about RESCO’s response to the storm. Watch the video here.
Williston, ND – Rural Electric Supply Cooperative (RESCO), a member-owned, not-for-profit electrical wholesaler and one of the Midwest’s largest full-line distributors of high-voltage electrical products, has shipped a record amount of equipment, supplies, and materials to its electric cooperative members following a strong blizzard that downed utility poles and power lines in parts of the Dakotas and Eastern Montana in late April, resulting in power outages for thousands of households and businesses.
Employees at RESCO’s Williston, ND, warehouse shipped 370,000 pieces of storm material over the last 30-plus days, a record amount over that specific time frame (the typical storm response duration is four to seven days, which makes this situation very unique).
These products were essential in helping its cooperative members restore power to their customers.
“This strong blizzard that struck the region April 22-24 delivered a swift and powerful blow to the region’s power grid, with thousands of poles and lines downed due to the rain, snow, ice, and intense winds that the storm unleashed on us,” said Chris Pederson, RESCO regional vice president. “Given the widespread amount of damage, our cooperative members needed supplies and materials well in excess of what they normally would for storm-related repairs, and we responded immediately.”
Pederson adds that the RESCO warehouse team continues to process deliveries and ship orders daily to member cooperatives still in need of materials to repair damage and restore power in areas impacted by the April storm.
“When an event like this occurs, it’s an ‘all-hands-on-deck’ scenario, and our dedicated teams in both the Williston and Moorhead, MN, warehouses, as well as the Purchasing Department in our Middleton, WI, office, did a fantastic job of keeping up with inbound shipments and outbound orders of products,” he said.
RESCO has completed its transition from its former office and warehouse location in Ankeny, IA, to its brand-new and larger facility in Elkhart. Conveniently located just a short distance north from Ankeny near Interstate 35, the new location provides us with more inside and outside storage areas, allowing for greater inventory for Iowa members and customers, as well as for those in surrounding states.
The new site features:
- Larger, more efficient warehouse space to accommodate additional growth.
- Energy-efficient technology.
- Office space designed to accommodate future growth.
The new office and warehouse is located at 1308 NW Laurel St., Elkhart, IA 50073.
As we’ve reported previously (and which you’ve undoubtedly experienced in your own operations), supply chain and inflation issues have plagued our sector over the past year or so, impacting lead times and creating inventory challenges.
While we are not any closer to a correction in the market, we are noticing a stabilization in the market, both in terms of product lead times and inflationary impacts on pricing. We’re hopeful that this stabilization will soon turn into positive adjustments within the supply chain and, ultimately, normalized operations of our members and customers.
As we’ve done throughout our history as your valued partner, we’ll continue to provide the knowledge, support, and products you depend on for efficiently and successfully managing your utility operations. Here are a few things that we’re currently focused on (and for you and your organization to keep in mind) as we continue to successfully navigate through the current logistical challenges:
- Record inventory on hand. In the January edition of this newsletter, we reported record inventory across all of our warehouses. And that amount continues to rise. As of April, we now are housing $35 million of inventory in our warehouses. This enables us to meet your requests for equipment, supplies, and materials, whether for routine maintenance, emergency repair services, or planned construction or projects. Adequate inventory is always a major focus of RESCO, and we will continue to expand our inventory to meet our members’ and customers’ needs
- Opening of our new Iowa office/warehouse. We completed our move from our previous location in Ankeny to our new and larger office and warehouse facility in Elkhart the last week in April. Our new building—which encompasses 30,000 square-feet—enables us to store two-and-a-half times the inventory that the Ankeny location did, allowing us to better service the needs of not only our Iowa members and customers, but those from surrounding states as well. The added space allows for even greater inventory.
As an extension of your organization, your success is our success. We thank you for your continued support of RESCOrder placement for 2023. Given the extended lead times our manufacturer partners continue to face, placing orders early for 2023 is essential in helping us ensure that product is available when you need it. If you haven’t already done so, please work with your account representative to identity needs for the upcoming year.
Editor’s note: RESCO spoke with Nate Boettcher, president and CEO of Pierce Pepin Cooperative, for his insights on the electric vehicle sector. Boettcher is also the president of CHARGE EV, LLC, a national electric vehicle (EV) charging brand powered by electric cooperatives that also invests in EV-focused companies. CHARGE affiliates are part of a growing brand that leads a nationwide cooperation among cooperatives’ effort (the sixth Cooperative Principle) to help promote and educate members about EVs.
Question: What does the current EV sector look like, from a cooperative’s perspective? What opportunities exist for cooperatives to be a leader in helping expand and grow this sector?
Answer: The broader market for EVs looks very positive. Just about every major automobile manufacturer has committed to moving their fleet to electric. From a cooperative’s perspective, the ability for manufacturers to deliver cars and trucks that look like vehicles that people know and love today will be a big key. That’s what was so exciting about the Ford Lightning announcement: it looks like an F-150, and its price point is competitive.
Cooperatives can be leaders by continuing to educate the market, which includes more than its members. There is an entire ecosystem that needs to exist to support EVs, including car dealers, electricians, home builders, fleet managers, etc. Cooperatives need to think about how they educate each of these audiences relative to their role in the broader ecosystem.
Q: What challenges does the EV sector face? What has been the impact of supply chain disruptions, inflation, rising gas prices, and power grid/infrastructure concerns?
A: The EV sector has been slowed by availability, including the availability of computer chips and raw materials to make the batteries needed for production. Without a doubt, if the supply changes and materials become readily available, there is a large demand of drivers. The war in Ukraine has politicized EVs and, unfortunately, it’s not helped the momentum of electric vehicles. Hopefully, individuals and companies recognize the overall value of an EV beyond the choice between electricity and gas.
EVs are filled with innovation, and the driver experience is greatly enhanced. The grid challenges are not a large issue today, but depending on adoption, cooperatives will need to be aware of this in the future. Cooperatives should plan for having multiple electric vehicles charging on residential chargers. This load may be 20 to 30 kW. The ability to monitor and control these chargers is important.
Cooperatives should be looking to invest in technology now that allows them to be involved with EV drivers. It will be much easier if cooperatives have a plan as members are adopting them, rather than trying to catch up after the fact.
Q: CHARGE EV continues to grow in number of affiliates. How is this benefitting the EV industry, electric cooperatives, and current/future EV drivers?
A: The concept of CHARGE is really easy for cooperatives to grasp and to see the value and benefits of joining. CHARGE was specifically created to create a national EV charging network powered by cooperatives. The benefit of having access to content, information, training, etc., is helping to drive cooperative programs. We see CHARGE as a way to collaborate, organize, and promote under a single umbrella, which will be important for cooperatives who compete for EV driver attention from other providers. We are closing in on 100 cooperatives who have joined CHARGE, which is over 10%. We have a ways to go, but as more and more people join, the value will continue to go up, because your neighboring cooperatives will be able to share their partnership and value they get from being part of CHARGE.
Q: What are your predictions/anticipations for the EV sector for the remainder of 2022 and beyond?
A: My personal opinion is that 2022 is going to be a slow year for electric vehicles. The demand is high, but vehicles are in short supply. The broader economy is still trying to figure out the effects of 2021 being hampered by COVID, high inflation, material, and supply chain issues. Manufacturers are struggling to get vehicles produced.
I expect 2023 to be a much better year overall for EV growth and adoption, barring any big changes with the current environment. I do think 2022 will be a great year for electrification in other non-traditional passenger vehicle markets, like electric bikes, quads/rangers, snowmobiles, etc. I just saw a company starting to deliver an all-electric snowmobile with a range of 65 miles. E-bikes are becoming better and better.
There is also a ton of movement happening in the large truck/delivery vehicle sphere. What we are seeing is a electrification across all sectors of transportation, and it’s really interesting to see the innovation that’s occurring.
Lastly, the infrastructure bill will have a heavy impact on EVs. I think the market is really starting to gear up for how they participate in this federal investment.
The future of automobiles is electric, and there’s no denying that the future of this technology is now.
The statistics speak for themselves. According to Greencars.com, sales of all-electric vehicles in the United States surpassed 4 million in 2021, with an additional 2.4 million plug-in hybrids now traversing our country’s roads. From a global perspective, electric vehicle sales were up 98 percent from 2020. And for those who watched this year’s Super Bowl (and the commercials as well), you probably recall how electric vehicles took center stage, with seven automobile manufacturers represented.
As Nick Nigro, head of the research group Atlas Public Policy, told Vox, “We’re in the early stages of the biggest transition in the auto industry since the car was first invented.” This transition is also impacting the sources of power for these vehicles, which in many places of our country are (or will soon be) rural electric cooperatives and municipal utility providers.
INFRASTRUCTURE CHALLENGES
While the shift to electric vehicles continues at break-neck speed, infrastructure capabilities have not kept pace in many locales, which could result in delays in providing adequate charging stations and equipment. According to a recent Wall Street Journal article, the U.S. power system is faltering as millions of more Americans are becoming more dependent on it. The article went on to state the grid is also undergoing the largest transformation in history, with natural gas-fired plants displacing coal-fired and nuclear generators and the addition of wind and solar technologies rivaling traditional power sources in many markets.
Another major infrastructure concern is aging equipment. According to the American Society of Civil Engineers, 70 percent of transmission and distribution lines are past the halfway mark of their 50-year lifespans.
These factors, along with regulations that attempt to further the rate of build-out renewable energy, mandates to reduce and eliminate carbon emissions, and unpredictable and oftentimes severe weather patterns, are placing added pressure to the country’s energy grid.
And these concerns will undoubtedly impact the ability for utilities to continue to deliver an increasing need for electric power, while at the same time foster the growth of new technologies and products to enable rural electric cooperatives and municipalities to meet these growing needs.
RESCO’S ROLE
As a partner of electric cooperatives and municipal utility providers in the Upper Midwest since 1936, we always have a pulse on the latest technology and equipment for the energy sector. In turn, this enables us to work with our manufacturer partners to offer the necessary materials to our members and customers. Regarding electric vehicles specifically, we’ve partnered with ZEF Energy to meet the needs of both our members and the CHARGE EV group.
And just like other businesses and organizations nationwide, we’re readying our facilities to accommodate the future charging needs of electric vehicle owners. Recently, we installed a ZEF Energy ZEFNET PRO-80 dual port charger at our soon-to-be-opened office and warehouse in Elkhart, IA.
As the growth of electric vehicle ownership continues to increase, RESCO will play an important role in helping utilities deliver the power their members and customers need for their vehicles.
Elkhart, IA – Rural Electric Supply Cooperative (RESCO), a member-owned, not-for-profit electrical wholesaler and one of the Midwest’s largest full-line distributors of high-voltage electrical products, is pleased to announce the opening of its new Iowa office and warehouse at 1308 NW Laurel St., Elkhart, IA 50073.
Situated in the Elkhart Industrial Park, the 30,000-square-foot location reflects RESCO’s commitment to providing its electric utility members and customers with exceptional service and reliable inventory.
“Our new Elkhart location provides RESCO with more inside and outside storage areas, which will not only enable us to better serve our members and customers in Iowa, but also allows us to inventory product for those in surrounding states as well,” said Matt Brandrup, RESCO president and CEO. “This additional space lets us store around two to two-and-a-half times the inventory that the former location in Ankeny (IA) provided, thanks to greater square footage and higher ceilings in the warehouse.”
The new site features:
- Larger, more efficient warehouse space to accommodate additional growth.
- A convenient location, just north of Ankeny near Interstate 35.
- Energy-efficient technology.
- Office space designed to accommodate future growth.
RESCO completed the transfer of existing inventory from its former location in Ankeny the week of April 25, 2022.
As we begin a new year, our industry continues to face the challenges of inflation, supply chain disruptions, inventory shortages, and extended lead times. We are not alone. Logistical bottlenecks in the global supply chain are impacting many sectors of the economy. And while some experts predict a positive correction in 2022, it’s important for utilities to prepare for—and be cognizant of—continued interruptions in product acquisition and delivery.
The Impact of Inflation
According to the U.S. Department of Labor, the country’s rate of inflation increased at its fastest pace in nearly 40 years last month, up 7 percent from the previous December.
The utility industry is experiencing the impact of inflation at an even higher percentage.
The inflation rate on the basket of electric utility products RESCO distributes (distribution and transmission products) averaged about 10 percent in 2021. In other words, every product RESCO sells, the cost from the manufacturer of that product rose by 10% on average from January 1, 2021 to December 31, 2021. Like every industry impacted by inflation, this increase was entirely out of our hands and not specific to RESCO or our specific manufacturers.
The ripple effects of the current high inflation rate are occurring nationwide. RESCO members/customers, and all of the utilities around the country, have lost 10 percent of their buying power; in other words, if an electric utility in 2022 plans to buy or build at the same level as they did in 2021, the costs will be 10-percent higher. That sort of inflation can really take a large bite out of any utility’s work plan dollars.
Extended Lead Times on Many Products
Just as inflation is impacting utility budgeting and spending limitations, lead times are proving to be another challenge for utilities and manufacturers alike. They remain extended on many products, but single-phase and three-phase transformer lead times are the most concerning, as you can’t put in new electric service without a transformer. Essentially, production at the North American transformer manufacturers is maxed out for 2022 due to record demand.
Additionally, many transformer manufacturers are on an allocation with their customers, which means that they’re allocating a set amount of production—and no more—to their distributors and customers. While many are doing this to try and take care of as many customers as possible, it’s almost certain that the total demand from all customers will not be met.
Additionally, other products experiencing extended lead times include:
- Primary and secondary conductors
- Fiberglass enclosures.
- Certain day-to-day type of items, such as anchoring.
Fortunately, RESCO is effectively managing these challenges by carrying a record amount of inventory. This gives our members and customers the peace-of-mind that they can count on us for their product needs. (Keep in mind, however, that RESCO has a limited number of transformers in stock, and this will likely be the case for the remainder of 2022 due to record demand and limited supply.)
In addition to our inventory reserves, we’re also helping our members stay within their purchasing budgets by maintaining product pricing, thanks to our non-profit cooperative model. When demand increases, for-profit companies typically increase their pricing to maximize their margins. RESCO does not, which makes us the ideal partner for utilities’ product needs.
Communication is Key
Despite the difficulties utilities face regarding product inventory and purchasing, there are ways to minimize the impact on their own operations.
Above all, communication is key, as it’s the one factor that all utility providers can control and manage. Effective and regular communication to all stakeholders can go a long way to ensuring up-to-date product and delivery status and realistic expectations.
To accomplish this, RESCO recommends all utilities focus on ensuring effective communication with the following stakeholders:
- Internal personnel. Make sure your utility’s purchasing department is talking to your operations and engineering departments, which will help ensure a very clear understanding of upcoming projects and material needs. Conversely, these departments will need delivery updates from the purchasing department on product lead times and material availability when planning projects.
- Developers and commercial members. If a commercial development is being planned, the developers need to fully understand that lead times on products—such as transformers—have been greatly extended, and the expected timelines to get electrical service finalized (i.e., getting a three-phase transformer in place) might take much longer than “normal” years.
- Suppliers. Electric utilities should work closely with their suppliers and review their upcoming projects with them, so they can keep up to date on lead times and material availability.
In addition to effective communication, here’s a checklist to consider incorporating into your utility’s planning operations:
Ensure that all of your major capital expenditures orders—transformers, conductors, fiberglass/metal enclosures and other major materials—have been placed for 2022.
Make sure your operations, management, and board personnel are aware of the significant price inflation. This will help ensure that work plan budgets are adjusted accordingly.
Consider carrying more inventory for the next year or two to better insulate your utility in the case of unexpected storms or continued supply chain disruptions.
Communicate, communicate, and communicate even more. Not to sound like a broken record, but regular communication with suppliers, members/customers and developers will help you establish realistic expectations on lead times for completing new or upgraded electrical service.
Don’t let supply chain disruptions leave you feeling powerless. Consider the information and tips above when planning and managing your current and future purchases and projects.