When the world began opening in the aftermath of the peak of the pandemic, many were expecting life to return to the way it was pre-Covid, or as close as it could be. In the United States, that may hold true, as a lot of people are returning to life as it was. For business, on the other hand, that is not the case. Government policy differing by nation, a war in Europe, continued labor shortages, and a changing climate all factor into the supply chain issues we continue to see today. Some of those challenges seem far from home, but each plays a role in the water treatment industry daily, and new strategies are needed to continue to operate businesses as efficiently as possible.
Just in Time Inventory is No Longer a Good Plan
In years past, ordering goods when they were needed was acceptable, even if not best practice. Raw material shortages continue in every industry, as the current lead times for many commodities are unprecedented. Here’s how you can plan ahead to make sure these lead times don’t run your water treatment system out of chemical:
Have extra chemical in inventory. Assuming space isn’t an issue, it is a good idea to order an extra drum of chemical the next time you order to ensure you a buffer in case lead times are increased.
Optimize inventory management. Discuss with your water treatment provider what equipment is necessary to have spares of. For example, in the event that an actuating blowdown valve on a boiler fails and the lead time on a replacement is 8 weeks, what is your plan? Controllers have a 3-4 month delivery date. Can you run that long without one? Inventory, inventory, inventory.
Paying over $5/gallon is no longer a nightmare, but rather reality. With gas prices continuing to rise with no end in sight, shipping costs have skyrocketed. Experts predict the fuel prices to keep rising as we reach the peak over summer travel season, and the price of crude oil will likely stay high as long as the war in Europe continues (Russia accounts for about 10% of global petroleum production). Additionally, 2022 hopes to bring a 4.5% increase in the global ship fleet, but the cost for diesel fuel is expected to remain high, to the tune of a 2.5-3% rate increase throughout 2022. The best way to respond, in this case, is to minimize orders! As mentioned previously, inventory management is crucial to keeping cost down in the inflationary economy, and being able to ship in more product, less often will not only help keep you stocked with chemical, but also help to significantly reduce your shipping costs. With Freedom Plus hands-free delivery capabilities, monitoring usage and inventory has never been easier. Robust level sensors mount on the top of the bulk chemical tanks, and with a WTLink Remote Monitoring system, your Watertech representative has 24/7 eyes on chemical inventory in addition to all other technology in the system. Not only will this help plant efficiency, but reducing shipments is also environmentally conscious!
Chemical Excise Taxes
It is important to note that in January of 2022 the IRS published Notice 2021-66, which revives excise taxes imposed on certain chemicals. This will be the first time this is in effect in nearly 30 years. Chemical companies will be facing higher pricing from suppliers and this will be passed on to end users. Although there is no way to avoid this tax, it is important to understand where it originated, and be prepared for higher prices moving forward. From the standpoint of Watertech, there is nothing we are able to specifically do. If you are unhappy with said tax, work with your Congresspeople to work on eliminating said tax.
Now is an excellent time to work with your provider to come up with a contingency plan in the event that a shortage has the potential to negatively impact your facility. Watertech will discuss alternative products/sourcing if a chemical has a longer lead time than neededacceptable. As mentioned in both previous sections, inventory is crucial. What products or equipment will shut down the plant if it runs out or fails, respectively? Have spares or at the very least a plan to proceed in the event of a supply chain shortage.
Watertech is continuing to source a 6-month supply of raw materials and finished goods on items where supply could be an issue. This helps give the customer peace of mind that we will never run the facility out of chemical.
As we’ve all come to see over the last 2.5 years, we all need to expect the unexpected. Continue to upgrade inventory management, prepare for the inevitable long lead times, and plan for the worst-case scenario.
Do you have questions about managing supply chain issues?
Solutions will vary for each facility. To learn more and come up with a contingency plan, reach out to Watertech for a Site Survey and one of our technical engineers will be in touch.
Jake Russell | Territory Manager
Jake has been with Watertech of America for 3 years providing industrial water treatment solutions for boiler, cooling and wastewater applications. Jake frequently leads educational training events and seminars to promote better water management and improve safety. He holds a BS in Engineering from UW-Madison.