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Appliances: Currently the Most Challenging Part of the Construction Supply Chain

July 1, 2022
Osman Dadi
A case study from this week, and five suggestions, on how to handle the “Wild West” of supply chain delays for Appliances. As I discussed in detail in my May industry updates, we’re already in a “Wild West” period for Supply Chains and Shortages on Architecture & Construction projects, occuring at the most unexpected times and sometimes in […]

A case study from this week, and five suggestions, on how to handle the “Wild West” of supply chain delays for Appliances.

As I discussed in detail in my May industry updates, we’re already in a “Wild West” period for Supply Chains and Shortages on Architecture & Construction projects, occuring at the most unexpected times and sometimes in profound ways.

One of the most affected trades has been the market for Appliances – especially for high-end appliances from top tier brands. Appliances are used in virtually every single type of Architecture & Construction project being built in today’s era of sky-high demand. The market is still booming (for now) for office space, light commercial, new buildings, residential, hospitals & bio-technology facilities, education and institutions, and industrial facilities – all project types which have appliance requirements (even warehouses have pantries with appliances).

Anecdotally, the worst impacted product seems to be refrigerators, one of the most basic requirements for a new build out.

The combination of earlier supply chain delays and incredibly long lead times, in the midst of recent great demand, has worsened the situation by shifting demand, concentrating them to the remaining inventory.

With such shortage of availability, Design and Owner teams are redesigning for new appliances and thus increasing their production demand; at the same time this is happening, other teams are grabbing up other inventories of appliances to use temporarily, while waiting for their own longer term appliances to arrive. It’s not clear what happens to the temporary appliances after new ones are installed, but I suspect a fair amount are discarded.

This ponzi-like cycle has produced complex shortages across the market.

Live Case Study in New York

This week at a 115,000 square foot, three level commercial project I am overseeing – in construction since December ’21 and slated for move-in this September ’22 – we received some disappointing news. We learned the Appliance vendor is receiving the entire order of refrigerators in late November, instead of August as originally planned. The reason is the same – the Liebhaber products are unavailable due to supply chain and lead time delays, and despite placing our order around February ‘22, the company’s own constraints has extended the product lead time since then, which even the sub cannot control.

Consider that a refrigerator has many different internal parts sourced from different parts of the world; plus, high end refrigerators also come with special finishes, commodities which are also facing major disruptions.

What’s truly remarkable is that we already planned for a delay, long ago – and it happened anyway, but on our second attempt!

This project was originally specified and designed with Sub-Zero refrigerators, and when the project went out to Bid in December ‘21, we learned that those products were unavailable until early 2023, several months past move in. Thus, months ago in Jan/Feb ’22 the Ownership and Architect team re-specified the entire suite of appliances to Liebhaber products, which were showing a July delivery date.

Accordingly, the entire millwork design for the pantries had to be redone at all Pantry locations on the project, to accommodate the Liebhaber refrigerators instead of the SubZero refrigerators. In total, five pantries/gathering areas with appliances were impacted. The shop drawings were re-done, a Bulletin and Change Order package was approved, and the new appliances package along with a new millwork pantry design were submitted for order/production.

Now in late June ’22, we are delayed with our second attempt, and the product may arrive in November. In other words – despite completely changing project design for a new brand of refrigerators, the supply chain unexpectedly rose in the same time period and still affected us anyway.

This has created a major project complication in two ways.

First, the company is planning for move-in for September; if the refrigerators are arriving in late November, then that’s still 6-8 weeks of full occupancy without a functional pantry. For a 115,000sf office, three floors with approximately 60-80 full time staff per floor, it’s not a viable option even for one month.

Second, the lack of appliances is preventing millwork from being completed, as the built-in paneling cannot be installed until the correct refrigerators arrive. This create an eyesore, while simultaneously making parts of the pantry difficult to use. It certainly will delay full utility of those areas.

Finally, because everyone is facing simultaneous shortages, it’s unclear if temporary refrigerators are even an option for us at this point, with some markets having shortages across all brands and product lines. Temporary appliances are also a hefty extra fee we’d prefer to avoid.

On our end, we’re still working through the problem.

Is There A Solution? My Five Tips

It may not seem like there is a clear solution to the Appliances Supply Chain problem – but I have some suggestions how teams can proceed:

1. Prioritize Appliances Early In Your Project

Traditionally in Architecture & Construction projects, appliances have not been a priority or critical deliverable to follow – often these would only be bought for installation about midway into construction. In those times the main reason people waited to purchase appliances was not just mass availability, but also for having extra time to configure complex millwork shop drawings and pantry designs, and also not having anywhere to store the appliances once bought. These are bulky items, difficult to store on a project site (getting in the way of construction) as well as with subcontractors (large items consuming valuable rented space).

Times have changed – appliances are no longer massively available, new inventory is delayed, and they should be prioritized for early purchase anyway. If the project isn’t ready to take on delivery of the appliances, they should be held in the subcontractor’s warehouse offsite until the site is ready for their delivery.

2. Plan Your Back-Ups In Advance

Good planning means good preparedness – there’s many ways to plan a back-up:

  • Procure your temporary appliances in advance, and store them off-site, early in the construction process. Storage fees are involved, but it’s likely worth the small cost.
  • This does not necessarily mean buying new temporary appliances, either. Perhaps you are aware of sister companies, owners and businesses moving as well, disposing their appliances. I’ve witnessed disposal of perfectly good, almost like new refrigerators, from older projects.
  • There are several months available to plan for this during construction – if you’re the Owner/Manager, make sure to follow up on this often.

3. Design Pantry Millwork to Accommodate Temporary Devices

It’s helpful to have flexibility with supply chain disruptions – as many appliances are integrated with millwork and paneling, it becomes equally feasible to design and execute the millwork to accept temporary panels and trims, if required.

If custom millwork or panels are required for refrigerators, remedial plans should be developed, if even partially, in case supply chain causes delays. Coordinate this during the design and shop drawings stage.

4. Re-Use Old Appliances Temporarily, or Refurbish For Re-Use

If you’re coming from an old space and moving into a new space, consider saving your old appliances and planning for temporarily installing them, while waiting for new appliances to arrive. A complication may be having to temporarily live without the appliances in the old space, shortly before move-in.

Another option may be to have old appliances refurbished and renewed, then installed in the new space.

5. Consider Selling Old Appliances Not In Use

Like we’ve seen with used car prices rising to record highs, the used appliance market is hot right now, especially for temporary appliances.

Instead of sending older appliances to the junk yard, consider selling them to a refurbisher, or direct to market if in good condition.

As for the situation on our project – I’ll be sure to update everyone where we landed, as we work through this process in real time!

I know it’s been some time since I’ve posted, and there hasn’t been much new content. Please bear with me, we are working on some pretty cool things in the background – I have a TON of new content, and also some massive product updates, to share for Arcobee.

I’ll be posting a broad, immersive update soon!

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