Supply chain issues, shipping delays, and price increases are rippling through the resort supplier ranks, just as they are in society generally. This Covid fallout is challenging suppliers to meet demand for all the new lifts, snowcats, snowmaking, and other equipment resorts are clamoring for. With the overall level of orders at a high point, the supply constraints have led manufacturers to urge resorts to place orders earlier than usual, and to consider ordering now for 2023 delivery. The overall supply situation, they say, is unlikely to improve dramatically before 2024, and it could get worse.
All this comes at a time when many resorts across the U.S. have enjoyed two relatively successful seasons and are primed for upgrades and expansions. It’s also a time when European resorts are buying again after being largely silent for two years. While that’s all good news, it has compounded demand and stressed manufacturers.
With that heightened demand have come higher prices. Several suppliers SAM spoke with said prices this year were up about 20 to 30 percent, despite their efforts to keep a lid on them.
The scale of the manufacturing challenge has been breathtaking.
SUPPLY, DEMAND, PROCUREMENT
“We have seen unprecedented supplier price increases and lead times extended beyond anything imaginable,” said SMI president Joe VanderKelen. “It is a daily battle to procure raw materials and appropriate parts needed to keep our manufacturing process moving forward. There appears to be no end in sight for supply chain and freight challenges.” That sentiment is nearly universal.
“Long lead times and rapidly rising raw material and component costs are seriously impacting most manufacturing businesses,” said Katharina Schmitz, president of Doppelmayr USA. “In this current business environment, early planning and early orders are essential.” She noted that Doppelmayr’s production capacity for 2022 delivery would be mostly sold out before SAM went to press. “We are now actively discussing 2023 and 2024 projects with our customers,” she said.
“We’re doing everything we can to contain price increases,” said Daren Cole, president of Leitner-Poma of America. “Our margins are probably lower now than they were pre-Covid. If you were looking at a lift, say, a year to 16 months ago, the price difference now is about 25 percent. But our overall costs in the past 16 months are up approximately 32 percent.”
“We are pricing our equipment the same way as before, but factoring in the new material costs,” said Monika Ratnik, business development manager of Ratnik Industries. Customers seem to have adapted to higher prices already, she noted—a sentiment that was widely shared by industry suppliers.
Cause and effect. Manufacturing conditions haven’t been this unsettled in more than 50 years, perhaps since the end of World War II. “The last situation comparable to this, just in price increases, was in the mid to late ’90s when Intrawest was going full speed,” noted HKD president Charles Santry. “I remember a project we were working on at Mountain Creek (N.J.) and the steel prices for pipe then had gone up 40 percent. That was related to the production of steel and China.” Prices came down a year or two later, and business picked up again, Santry recalled.
The current situation stems from what Stefan Spindler, CEO of PistenBully parent company Kässbohrer All Terrain Vehicles, called the “triple whammy”: Covid restrictions and closures in 2020 and early 2021 reduced the supply of raw materials and components; companies then scrambled to replenish inventories as fast as possible, which led to long delays in manufacturing and shipping; and the resulting imbalance between supply and demand led to price increases.
Still, the situation is not all doom and gloom. Industry suppliers have been remarkably resilient.
In interviews with a range of manufacturers, SAM heard that many have successfully navigated the supply chain issues and are prepared to deliver orders this season. Resorts are eagerly anticipating new lifts, snowmaking, and groomers despite the price increases—most resorts are well aware of the supply and pricing challenges. And industry suppliers are responding by planning ahead to 2023.
JUST IN TIME TO JUST IN CASE
The supply chain issues have been widely chronicled, as they impact everything from cars and trucks to cell phones and toilet paper. And the main issue remains: a lack of key components, both large and small. Electrical components, from simple switches to computer chips, have been especially hard to come by, with widespread reports of lead times of several months to a year.
Why the shortages? Some of it is the result of Covid restrictions in countries that produce raw materials and basic components. And a switch from “just in time” supply chain management to “just in case” inventory building has added to the supply/demand imbalance.
“Everyone’s stuck to just-in-time manufacturing for years and years,” Santry noted. “Before Covid, we could usually get every part or piece that we needed in a reasonable lead time. And so we could manage inventory in a just-in-time manner.”
HKD, like others, has had to move to just-in-case purchasing. When there’s an opportunity to buy something, the company buys enough to get through the next 12 months or so, not just the current production run. “Going from just in time to just in case exacerbates the supply problem, because people are ordering out of fear that they’re not going to be able to get the product later,” he said. And that creates shortages, just as the rush on toilet paper emptied retail shelves in the early days of Covid.
“Also, the demand in the ski industry has increased dramatically,” added Spindler. “There was almost no purchasing for two years in Europe, and now it’s catching up again. The demand is there and the supply chain is completely disrupted. This all shows that the just-in-time approach was a very fine-tuned and fragile construction.”
Compounding the uncertainty over the availability of materials and components are two unpredictable obstacles: Covid, which hasn’t vanished, and the war in Ukraine, which is likely further extending supply-chain woes.
IN THE BEGINNING: 2021
Events began to snowball in 2021. While suppliers were generally able to meet 2021 production needs, shipping channels were a bottleneck. There was a serious shortage of capacity—a lack of containers and backlogged ports for the containers that were available.
“The lead time to get shipments to the West Coast was six to eight weeks, pre-Covid,” said Spindler. “In 2021 and into early 2022, we had shipments that took four months to arrive because of the congestion at the harbors.” Snowcats that shipped in September didn’t arrive until January. (PistenBully provided demo cats to resorts while they waited for their new machines to arrive, he said, so that resorts had the equipment they needed early in the season.)
Forecasting. The shipping situation is not likely to change soon. “The forwarding agents, they don’t see a relaxation on the West Coast shipments within the next six months,” said Spindler.
Plus, he added, “freight costs have doubled.”
Others echoed that. “One of our shipping brokers sent an email in regards to expecting longer lead times on top of already long lead times,” said Conor Rowan, vice president of Star Lifts USA, which imports SunKid conveyors from Europe.
Last year, Star Lifts tried to circumvent the bottleneck on the West Coast by shipping through Houston. But once unloaded, containers often sat waiting to get loaded onto trains for their final destinations. Bottlenecks were hard to avoid. All orders were delivered last year, though, due in part to shutdowns in Europe. With European resorts back in operation, this year may be a bit more challenging, Rowan said.
A similar situation played out with snowmaking gear. “2021 was not too bad on large infrastructure items like pumps, motors, and compressors,” said Tim Wang, senior project engineer of Ratnik. “However, the supply chain woes have caught up with these manufacturers, and it is definitely a lot worse this year,” with costs as much as 20 to 30 percent more for pumps and compressors, and electrical switchgear lead times running 45 to 50 weeks, he noted.
ON TO 2022
Faced with all these challenges, manufacturers began planning and purchasing for 2022 back in 2021, well before they had orders in hand. Several manufacturers said they have already begun placing orders with their suppliers for their 2023 production. And production began earlier this year than usual, too.
Even so, suppliers worry that they will not be able to meet all the anticipated demand. (Some resorts have shared that worry, which has led them to place orders now for delivery in 2023.)
“All of us suppliers probably are worried in the same way, whether or not we’ll be able to meet all the orders that we’re going to get—and put them in on time. Installing snowmaking, delivering lifts, grooming, whatever, it’s got to be in by October and November,” said Santry. “Delivering in January doesn’t do anybody any favors. So we’re working hard to try and make those deadlines with all these restrictions that we’re facing.”
Suppliers are most worried about smaller resorts, who typically wait until the season ends to determine what they can afford to buy. Given the limitations on materials and components, it’s possible many suppliers will have sold all of this year’s production by mid-May. If resorts wait too long to place an order, there may be no capacity to fill it until 2023.
What, exactly, are suppliers up against? Steel prices are up, and supply is scarce.
Global scarcity. The war in Ukraine has cut off its steel production for some European companies, and Covid-related production delays in China have shrunk the global supply. Similarly, aluminum prices are up nearly 30 percent in the past year, with supplies uncertain. And electrical components can be next to impossible to find. On the gray market, some simple electrical components are as much as ten times the normal cost.
A few other examples:
“We’ve seen steel prices up 132 percent in the past 12 months,” said Cole. “February was the first month we saw domestic steel go down, approximately 10 percent. But in March it went back up 15 percent.” As the Ukraine war began, he noted, steel in Europe went up 80 percent.
“The price of stainless steel is up 100 percent,” said Kai Köberich, department manager of alpine coaster supplier Wiegand, “and electrical components are up more than 100 percent.”
Industry manufacturers expect these conditions to stick around through at least 2023, based on what they are hearing from their suppliers.
At the same time, they acknowledge that the industry cannot sustain price increases of 20 to 30 percent year after year. If nothing else, escalating prices will eventually cool the market—not that anyone favors that as a solution.
THE FUTURE: CLOUDED
For all their planning, manufacturers acknowledged that some factors remain out of their control. A range of events could unsettle the precarious balance of the moment, from continued war in Ukraine (a major steel supplier) to a resurgence of Covid.
Said Ratnik, “We do get some parts from China. I am aware that the factories are shut down right now [late March] due to another wave of Covid. I have yet to hear about delays due to this, but will be expecting it.
“Aluminum has been hard to get. Sometimes our supplier won’t even be able to quote my request,” she added. The same story applies to steel, according to several manufacturers. Nonetheless, they are placing orders, price unseen.
“We’re keeping a close eye on a huge wave of Covid hitting China,” said Cole. “That’s much different than anything else. We have suppliers in our own factories in China that were down for at least two to three weeks in March, because of China’s zero tolerance policy.
“A lot of people have relaxed, thinking Covid is behind us, and this latest news just snuck up on me yesterday.” The pandemic remains a real wild card.
“Nobody knows what will happen in the future: war, Covid, and inflation,” said Köberich. The interest rate strategies of the Fed and the Euro Zone Bank are yet another variable that could add to the cost of doing business, he indicated.
How are resorts and suppliers reacting in response to all the what-if scenarios? They are taking a long view, stretching out investment plans to 2023 and 2024, and making adjustments to be prepared. By necessity, long-range planning has become the vogue.
Accommodating longer lead times. One example: Leitner-Poma of America has adjusted contract buyout processes “to accommodate longer lead times and lock in raw materials as soon as possible after contract signing to guard ourselves and our customers against continued price increases,” said Cole. “While this can drive other costs, such as storage and additional handling and transport, it reinforces the supply chain against future disruptions.”
Shipping and orders. At PistenBully, Spindler noted that 2022 production had been determined in September 2021, and the company had secured the necessary components. Production would not be an issue, he said. At press time, though, PistenBully was still working on various shipping options to ensure on-time deliveries.
Star Lifts’ Rowan observed that some resorts are ordering further in advance, and even storing conveyors for a year before installing them. That’s both a way to ensure delivery and a hedge against future price increases.
A similar story has played out for Ratnik Industries. “We have seen orders come in much earlier this year,” said Ratnik, with ski areas getting their orders in by early spring.
Wang said the company is seeing the same scenario with snowmaking pumps, motors, etc. “Some customers are looking to purchase this year for spring 2023 delivery so as to not worry about delivery times and to fix pricing at current levels,” he said.
Establishing a price is key. “Our pricing quotes have only a short window,” said Wiegand’s Köberich. “By fixing the contract, most of the necessary raw materials are already bought and at storage, in that way we have no price surprises. We also advise our existing customers to stockpile important spare parts,” he said, since they will not be available on short notice.
The current market has forced resorts to plan further into the future, which has its benefits.
The pandemic taught resorts how to be nimble in the face of immediate challenges to their systems and procedures; the supply issues have required many to take a long-term view of their expansion and maintenance needs.
“I do believe that our customers have learned that they need to make their commitments a little bit earlier to make sure they receive their orders on time,” said Spindler.
Supplier resilience. And the various manufacturing challenges have helped resort suppliers become as nimble as resorts themselves have been throughout the pandemic.
“We’ve really had a look at our process, our procedures, our efficiencies,” said Cole. “We are fortunate that we’ve been able to adjust and not be so dependent internationally. We’re expanding our capacity at our headquarters in Grand Junction, for example.”
“Solving today’s supply chain problems doesn’t only involve the purchasing and logistics teams, it also relies on engineering solutions to identify alternative materials or components to complete critical assemblies,” said Doppelmayr’s Schmitz.
“In the short term, we are focused on safety, technical compatibility, and availability. And looking for suitable alternatives could lead to innovations which will stick around in the long term,” Schmitz noted.
It seems that, for everyone in the winter resort business, the pipeline is always at least half full.