For states in the northern half of the country, particularly the Midwest and Northeast, tough winters are expected. Prolonged freezing temperatures and heavy snowfalls rarely catch anyone off guard in those regions.
Even so, not many were ready for what Mother Nature brought last winter. Extended periods of below-zero temperatures and wintry conditions pushing south into unprepared states caused havoc in the energy and transportation grids.
The distribution industry had to deal with the polar vortex head-on, and it was often costly. As we forge into December, suppliers figure to be better prepared for another particularly difficult winter.
Several national weather forecasting services, including AccuWeather and The Old Farmer’s Almanac, say a repeat of the winter of 2014 is entirely possible.
“After record-shattering temperatures and high snow totals last winter in the Northeast, a similar theme will continue into the 2014-2015 season,” says AccuWeather in its winter forecast. “The polar vortex, the culprit responsible for several days of below-zero temperatures last year, will slip down into the region from time to time, delivering blasts of arctic air.”
“With its traditionally 80 percent–accurate weather forecasts, The Old Farmer’s Almanac predicts that this winter will be another arctic blast with above-normal snowfall throughout much of the nation,” that publication says in promotion of its 2015 edition.
The cost of last winter
In the Midwest, which endured week-long periods of sub-zero temperatures in many regions, suppliers were hit hard.
“Last year’s winter was the most disruptive that I recall,” says Bill Henricks, COO of Wheeling, IL-based DGI Supply. “Several of our major suppliers were shut down for multiple days, as were some of our customers.”
DGI is No. 31 on Industrial Distribution’s 2014 Big 50 List.
Henricks says none of DGI’s distribution centers had to be closed last winter, although three branches were, and customer service calls were routed to other branches within the network.
For electrical and mechanical supplies distributor Van Meter, based in Cedar Rapids, Iowa, last year’s snow removal costs were 50 percent higher for its locations in the eastern half of the state than the year prior, and overall facility heating costs were 10 percent higher than average for winter months. (Van Meter is No. 38 on ID’s Big 50 List)
“Besides the obvious cost associated with higher than normal snow removal and heating bills, we also experienced about a 5 percent decrease in sales from what we projected in Q1 2014,” says Todd Ettleman, Van Meter’s Regional Vice President of Sales. “We believe most of that decrease was the result of several construction projects being delayed as a result of winter starting earlier than expected, coupled with above average snowfall and below average temperatures.”
In Beacon Roofing Supply's 2014 Year-end financial report, the company stated, "2014 was unfavorably impacted by the severity of winter storms and prolonged colder temperatures in most markets during the first half of the year."
Winter’s effects on facility maintenance are one problem. But even bigger is the effect on the supply chain itself. Transportation disruptions made on-time delivery frequently a challenge for suppliers hit by either the extreme cold or heavy snow.
Sometimes that called for individuals going above and beyond to keep things on track.
“I don’t have hard data on the precise impact, but anecdotally, our account managers intervened on an unprecedented scale — intercepting packages and making special deliveries to keep our customers supplied,” Henricks says.
Henricks didn’t have a dollar amount of the true impact the cold weather had on sales volume, but says it certainly impacted demand variance and lead-time variance — two of the biggest drivers of costs for inventory and freight. Both were up in Q1 for DGI last year.
On three separate occasions at Van Meter last winter they were unable to run nightly delivery trucks responsible for replenishment from its central distribution center. They were able to get the trucks out by mid-day, resulting in a minor inconvenience for some customers.
Not many know the logistical effects winter brings more than Scott Smith, vice president of sales at Pennsylvania-based TrailerSuperStore.com, which carries a line of snow plows, salt spreaders, and accessories.
“In the polar vortex last year we experienced anywhere from 3-5 percent reduction in production,” Smith says. “It was a tremendous bottleneck in freight moving in and out, which was really complicated. There was a 3-4 week delay in normal ship times. That’s not just directly affected by freight, but by manufacturing shutdowns and not being able to get parts.”
Smith says TrailerSuperStore.com usually gets 3-4 thousand unique visitors per day. During the worst parts of last winter, it dropped to 2,000.
“The last 4-5 winters were soft. That polar vortex came down and just gripped the entire Northeast and Midwest,” Smith says. “Right now year-to-date sales are up 42 percent. However, months 12, 1, and 2 were down 26 percent. What happens is when that weather comes down, it wreaks havoc. The media on TV fuels the fire, showing people sliding all over.”
Prepared for the worst
So after enduring and recovering from the winter of 2013-14, what have these suppliers done to prepare for this winter that seems to have started mid-November in many northern states?
Hendricks says DGI will continue building inventories through the latter part of Q4 in anticipation of weather-related disruptions. The company has also beefed up its information technology disaster recovery and added further redundancies to its customer service routings.
For TrailerSuperStore.com, Smith says they’ve made winter orders early, and doubled down with all their manufacturers, making deals with them to reserve space on a floor plan.
At Van Meter, Ettleman says the company has approached this winter like every other year, going into it cautiously optimistic and hoping Mother Nature is kind. More than the financial impact, Ettleman says the bigger concern is safety.
“We spend a lot of time talking about winter weather and the hazards that go along with it,” Ettleman says. “We encourage leaders to start every meeting off with a safety message centered around winter driving or caution them around the dangers of walking in icy conditions. I believe we are ready for the roller coaster ride we call winter in Iowa.”
How much did the winter of 2013-14 cost you? Did it change how your business prepared for this winter? Share your thoughts below or contact Mike Hockett at firstname.lastname@example.org