SNOWBIRD, Utah - "Soft" was a word used more than once among wholesalers and manufacturers at the Northamerican Heating, Refrigeration and Airconditioning Wholesalers (NHRAW) summer meeting.

Greg Trimbach of 2-J Supply Co., Dayton, Ohio, with Marty Hansell, Skuttle Mfg. Co.
SNOWBIRD, Utah - "Soft" was a common word used to describe the hvac business climate here in this mountain setting in June, a word used more than once among wholesalers and manufacturers at the Northamerican Heating, Refrigeration and Airconditioning Wholesalers (NHRAW) summer meeting.

No one was exactly singing the blues, but there were definite indications that the red-hot sales economy of the last two years has cooled. Karen Bunting, Armstrong Inds., said May and June were looking good after a flat first quarter. Greg Trimbach, 2-J Supply Co., concurred, saying a soft economy and the weather were contributing to lackluster sales, and a year that would probably be down 5% overall. The weather in Dayton (Ohio), he said, was typically 90? followed by several days of 70? -- leading to unspectacular early season air conditioning service and sales.

Still, there was plenty to remain hopeful about. One subject addressed in a roundtable discussion was hearth products. Several wholesalers reported a boom in this niche market. Hvac contractors are proving more successful sometimes than the hearth products stores. "I was surprised at just how big an industry this is," said wholesaler Rolland Johnson, Blacks-Industrial, Spokane, Wash. According to the Hearth Products Association, 1.67 million of these appliances were shipped in the U.S. during 2000, 62% of them gas appliances. This was the first year shipments of the gas burning units topped 1 million: as recently as 1992, the figure was below 200,000.

In fact, in many new homes the cost of the hearth products is as much, if not more, than the entire traditional hvac package. Contractors can help themselves by showing off these products in their own showrooms.

Ductless cooling, the so-called "mini splits" made by Mitsubishi, Sanyo and others, are also growing increasingly popular. "We call them problem solvers for situations where traditional ducted air conditioning won't work, or isn't practical," said one wholesaler. Several agreed that the installations are simple and the equipment durable: "We don't even stock replacement compressors for them, they're so reliable."

Gas cooling, on the other hand, has been a tougher sell. Some of the wholesalers present said they are reluctant to extoll the virtues of gas cooling, despite inroads made by some manufacturers. There is too much uncertainty among energy prices.

Energy efficiency in general, many agreed, can be oversold, and there are many misconceptions about high efficiency equipment. "We're seeing a shift to high energy efficiency," said Bunting, even in some areas that hardly warrant the energy savings, such as Colorado. Some utilities may be exaggerating the benefits of higher efficiency equipment and creating artificial demand. The payback period for the higher cost equipment varies greatly, for example, from Denver to Dallas. Nor, it was pointed out, do the higher efficiency units always translate into acceptable comfort.

One other subject touched on that one participant said was also being oversold: radiant floor heating. These systems are growing in popularity and are generally deemed to be a comfortable means of heating. But Martin Hansell of Skuttle Mfg. Co. said they do not lend themselves well to either humidification or air cleansing. Buyers of such systems can often wind up being disappointed if these problems cannot be adequately addressed, he said.

A perpetual problem of associations is getting members to attend, particularly to take part in the planning sessions and committee meetings. A recurring theme among wholesalers is the need to coerce manufacturers to partner with them in order to best serve their contractor customers. However, at the associate member committee meeting, only three manufacturers were represented: Armstrong, Ductmate and ICM. A special effort will be made to bring in representatives of the major equipment manufacturers for a December convention session on e-commerce and supply chain technologies.

NHRAW president Scott Nicholson, Empire Gas & Electric, with wife Denise, and Brent and Pam James, of Johnson Air Products, Portland, Ore.

A word from the prez

The so-called "two-step distribution system" is an antiquated term that has no basis in reality, according to current NHRAW president Scott Nicholson, Empire Gas & Electric, Denver. There are actually more like five steps, and such innovations as buying "online" over the Internet doesn't eliminate the need for wholesalers -- it just adds another step or two into the process.

That doesn't mean Nicholson is taking a swipe at e-commerce, which he said means more than just having an electronic catalog on your company website. True e-commerce will allow wholesalers to link more closely with manufacturers. EDI isn't dead because of the Internet, according to Nicholson, in fact adding value to the supply chain is more important than ever.

Nicholson's company was started by his father in 1949, who was joined by his brother a few years later. Scott Nicholson runs the business today with the help of a brother-in-law, a successful company with 26 employees. He became president of NHRAW last December at the group's national convention in New Orleans. One of his greatest interests has been in the wholesalers' need to streamline their operations.

E-commerce allows us to increase the speed, accuracy and simplicity of the ordering process, according to Nicholson. In an industry where as many as 70% of orders can be filled inaccurately, this is imperative in controlling and cutting costs.

Eliminating these inaccuracies takes cost out of the supply chain. E-commerce is essential in other ways as well. An ultimate goal is for the manufacturer to maintain and fill the wholesalers' shelves: "A frightening thought" for some, Nicholson admits, but a necessary step. Manufacturers have to know what the wholesalers' needs are, so they can fine tune their production based on those needs, "rather than just by what's going out the door."

Eventually, hvacr wholesalers would benefit by following Wal-Mart and some of the other major retailers' concept of the "hollow building" as warehouse. These giant mega-retailers don't allow product to sit around idle until needed; the warehouses are really just temporary holding points for incoming goods as they are redirected to the individual stores.

Manufacturers must work more closely with hvacr wholesalers to rid the system of inefficiencies, Nicholson said. For example: there are often several model numbers corresponding to basically the same pieces of equipment. These model numbers often do not coincide with the Universal Product Codes (UPCs) that wholesalers rely on to accurately track inventory. "What's the use of having UPCs if they're not going to be able to do the job for us?" he said.