Mastering Uncertainty: The Construction Supply Chain
What happens when even the best-laid plans are consistently challenged by supply chain disruptions? Join David Hamilton, Vice President of Purchasing at Structure Tone, Joe Rossi, Executive Director of Workplace Delivery & National Real Estate at Verizon, Charlie Pavelec, Senior Vice President of Shambaugh’s Electrical Division, and Tom Ike, Executive Vice President of Lutron Electronics, as they dive into the day-to-day challenges and long-term opportunities today’s unpredictable supply chain represents.
David HamiltonVice President, Director of Purchasing, Structure Tone
Joe RossiExecutive Director, Workplace Delivery, Global Real Estate, Verizon
Charlie PavelecSVP, National Purchasing, Shambaugh & Son, L.P.
Tom IkeExecutive VP, Sales, Lutron Electronics
Welcome to Building Conversations, a construction podcast powered by the STO Building Group. On today’s episode, Structure Tone’s vice president of purchasing, David Hamilton, explores how the complexities of today’s construction supply chain impact stakeholders from all angles. Join Joe Rossi, executive director of workplace delivery and real estate at Verizon, Charlie Pavelec, senior vice president of national purchasing at Shambaugh, an EMCOR company, and Tom Ike, executive vice president of Lutron Electronics.
David Hamilton (00:41):
Hi, and welcome to Building Conversations, the STO Building Group podcast. I’m David Hamilton, vice president of purchasing at Structure Tone in New York, and today we’re going to be talking about one of the most challenging aspects of our business—the supply chain. Joining me today are Joe Rossi, executive director of workplace delivery and real estate at Verizon, Charlie Pavelec, senior vice president of EMCOR. He works for a company called Shambaugh & Sons, which is a fire protection company under the EMCOR umbrella, and he’s also responsible for national purchasing. And last, but by no means least, Tom Ike. Tom is executive vice president of Lutron electronics. Thank you for joining us today, gentlemen. I wanted to maybe just go around the room and have you introduce yourselves and tell me a little bit about your background and your roles at each of your companies. Maybe start with you, Joe Rossi.
Joe Rossi (01:39):
Sure David, thank you for having me today. I actually work for a company that has a lot of real estate. We always hover around a hundred million square feet, and it’s quite a mix too, between garage work centers, administrative office space, central offices, where we have our network. I am an architect, but I’ve worked my entire career in corporate real estate. I grew up as a project manager. I love project management. And today my responsibilities include planning, design, and construction nationally. The company looks for me to own the overall workplace experience. So, it’s not only design and construction, but things like change management, hospitality, corporate services, anything that happens in the office to make sure that the employees have great experience from start to finish.
David Hamilton (02:29):
Super, sounds like you’re keeping your hands full with a hundred million square feet. That’s impressive. Tom, I’m going to turn it across to you and ask you about Lutron and your experience there.
Tom Ike (02:39):
Thank you, Dave. I’m executive vice president at Lutron responsible for the Americas. My role is really focused around number one, I’m a member of the corporate executive board where we set our strategy for our company, but my personal responsibilities are for managing our client relationships, the development of the strategy for our go to market across all of our channels and also to identify new business opportunities. So, I’ve been in the industry about 33 years.
David Hamilton (03:09):
Excellent. Super, thanks so much, Tom. And Charlie, what about yourself?
Charlie Pavelec (03:12):
Thanks Dave. Charlie Pavelec. I’ve been with EMCOR for 12 years, in the construction industry for my entire life and I’m 54. So, I guess that’s quite a bit of time. EMCOR, as you know, is about a $10 billion specialty contractor doing work across the United States and I am in charge of our supply chain management.
David Hamilton (03:34):
Excellent. Well, it really is great to have you all here and just to, kick things off and start the conversation I wanted, maybe start with Joe, if you maybe could tell us a little bit of some of the challenges that you have been experiencing either pre, early, or even, pandemic issues right up until today, what are the challenges that you’re seeing before we maybe get to the more positive side of things?
Joe Rossi (03:56):
Sure. And I think the challenges that we’re experiencing today are appropriate for pre during and post. It really comes down to making sure that we’re specifying the right materials, products that allow for flexibility, specifying products, using performance specs, rather than a specific, product to give us that flexibility. And it’s always about, you know, reducing the risk to be able to meet schedule commitments. I get a lot of reports from different suppliers and vendors talking about what’s happening with supply chain, how costs are escalating. But sometimes I feel that that information isn’t really getting to the people who work for the company who are providing the support to me. So those teams need to be aware of the items that are being highly impacted. There definitely has to be more upfront due diligence when it comes to specifying materials. And then, you know, it comes down to the 80/20 rule, making sure that we’re purchasing long lead items earlier, earlier decision making, and you’re going to have to base it on the data you have. But then I think now more than ever, experience does matter. Experience and, gut feel because we’re entering a world that we’re not accustomed to, a world that we’re actually creating going forward.
David Hamilton (05:11):
Very interesting. Yeah, no, I definitely go along with the gut feeling there that we can be scientific about a lot of it, but at times it really comes down to how we feel and the relationships that we have as well, and the experiences that we have many of us going back for many, many years. Tom, what issues and challenges have you seen either through the pandemic? Or could you give us a for instance?
Tom Ike (05:34):
Sure, it’s been a very challenging time through the pandemic up until today. You know, we are experiencing situations which we’ve never had to deal with before with lack of semiconductor capacity throughout the world. As you know, Dave, we’re a global business with global manufacturing and really moving product from one location to another, to be able to build has been a real challenge. And it’s really because of a lot of different variables. So, it’s not one thing that we’re struggling with. It’s multiple things, as I mentioned, previously, semiconductor capacity, but also shut down of local economies. We’ve had factories where we move product through an example, being Shanghai, where they’ve shut down the area for 12 weeks. So, us trying to get product out of there is very difficult because the airports are shut down. The factories are shut down and it’s really made it for a real challenge. It’s put a lot of stress on our business and obviously we’ve had the result of doing other things such as spot buys, etc. So, a variety of challenges that we’re dealing with.
David Hamilton (06:42):
Charlie, what about yourself? What stresses have you been seeing and challenges in the last couple of years?
Charlie Pavelec (06:48):
I’d certainly like to echo what Tom said because I purchased Tom’s product, so I feel that stress. I think the difference is that even pre pandemic and early into the pandemic, you had the opportunity. You could expedite something. If there was a supply chain issue, maybe you needed to spend some additional money to make that happen, but you could expedite something through the process. Now, the manufacturers like Tom just mentioned, don’t have the parts to manufacture something. So, no amount of money is going to allow me to get that product more quickly and therefore I’m slowing Joe’s job down, right? Because I don’t have something to install. And really, I think that it’s really forcing us to move into a much better planning phase than we have in the past.
David Hamilton (07:41):
Absolutely. Oh, I could echo that certainly with looking back and what you gentlemen have talked about, I know we could talk about the next two hours and we could keep going with, with many of the challenges and issues and, the persistence of them that they just don’t seem to go away, but I want to really try and turn the conversation a little bit and ask you somewhat of what has this all meant? What, is it as a catalyst? Is it an accelerator? Is it, you know, how do you view this, Joe, as far as some of the things potentially that Verizon has been able to do, and maybe before you jump in, I’ll just give you maybe a couple of for instances that we at Structure Tone organization or STO Building Group have been able to do so with our center of excellence and innovation that I lead, that I’ve mentioned at the beginning, we’ve been able to put a few things in place that have really helped us at the project level to really get our arms around lead times and be able to communicate those in a much different way.
David Hamilton (08:37):
So rather than just having a submittal log, now we have a “hot list” items list, and those are being communicated with the architects and those who specify and trying to make changes, trying to develop sticky relationships with manufacturers to really place the calls and leverage the relationships that we have as an organization right across. So there are a number of ways too, that we’re actually sharing and awful lot of the information that we’re gathering across the whole organization with Govin Brown up north in Canada, to BCCI on the west coast, Structure Tone Southwest and Texas, and the Structure Tone offices up and down the east coast with Ajax, etc., and beginning to leverage and share all of that information right across the whole organization. A lot of the sharing has actually proved to be very, very useful along with, the I’m sure some of you here have seen the market update bulletin that we publish around every four to six weeks.
David Hamilton (09:33):
We try to get that out into the industry and we’re getting good feedback that people like to hear that they like to hear the good information, the real-time information as it were that we’re running into on our jobsites. So, this has been a catalyst for us. I would say, as a company, we have never shared information across the organization the way that we have, and then try to leverage our strength and our relationships now with the manufacturers at a different level that we never did before, we would rely on an EMCOR, no disrespect, Charlie, but now we’re able to step into that arena because of our size and geographical reach. So, Joe, that’s hopefully given you a little bit of time to think and tell us something about what you would say from Verizon’s aspect as to this being a catalyst for change on your company.
Joe Rossi (10:20):
Yeah. And David, I’ll start by saying, I mentioned we receive a lot of reports. One of those reports we received is the one that you just mentioned from Structure Tone. And I have shared that with other team members to make sure, again, that they’re aware of what you’re seeing from a construction perspective and taking that into consideration. For example, when our suppliers are designing, right, we didn’t use the word catalyst throughout this. We’ve always used the word accelerator. We’re always looking at our office space and taking into consideration lessons learned and always looking at, you know, what’s the next workplace guideline, right? What is the future office, right? That’s the, what, how does it differ from the past and what are the things that we should be focusing on? We concluded with choice, right? Choice in terms of workplace setting, hospitality, which ties to services, more amenities, and then also safety.
Joe Rossi (11:15):
You have to, when you’re taking into consideration what occurred throughout the pandemic and people’s behavior, post pandemic, and then wellbeing, there’s definitely been an acceleration too, on the development of technology we’re dealing now with reservable space. So how do you find that space? How do you book that space? And then also, how’s it being used? So, tracking the data, using the technology to track the data, to make better decisions in the future. So, our strategy is based on a working model with anticipated behavior, but you also have to prepare for change as you collect the data. So, there’s what, and then there’s the how. How do you implement what we’re calling the interventions quickly prior to the pandemic, right? And my motto was always to be prepared. Prior to the pandemic, we actually got all of our strategic partners together, Structure Tone included, spent weeks upon weeks, over a six month period to develop a project methodology that we called concurrent that we actually submitted for patent, right, where we integrate technology, shift responsibilities, to be able to make more informed decisions faster, right? Taking into consideration the knowledge of the supply chain issues. So, there’s the what, and then there’s also the how. You need to be ready to adjust because you’re not going to get it right day one. You have to be ready to do those interventions quickly to support the business.
David Hamilton (12:36):
Very, very interesting. Yeah, accelerator was the word that certainly resonated there with me. So, it certainly has brought a lot of things to the fore and it’s been a time for us to change. Charlie, what would you say about EMCOR as a company? What has changed in the last couple of years with regard to having to turn things around and adjust slightly?
Charlie Pavelec (12:57):
I think a couple of things that come to mind, first of all, we always have had a good relationship with our vendor partners, be it a Trane or a Greybar or Ferguson. I think this situation has really amplified our need to have those vendor partners in place who appreciate the money that we spend with them. And communication, as Joe mentioned, being key and from a project management perspective, our planning and preplanning to let Joe know that we need to release this equipment immediately. The lead time is this, and we’re getting some solid information from those vendor partners currently about those lead times. I know that in the recent past, it’s fluctuated quite a bit. Fortunately, we’re at the point where I think we’re at our worst at this point. So at least we’re putting that information out there, so we know what we need to do and how quickly we need to do that. And I think folks like Joe, who are specifying not to a piece of equipment, but to a performance standard are the ones that are going to get the best result at the end of the day.
David Hamilton (14:11):
Excellent. Yeah. That’s great. How would you say that you share that knowledge and that information that you’re getting from those vendors? How is that shared across as a company?
Charlie Pavelec (14:21):
So, we’re doing a couple of things. One is we’re using the Teams channel to share that information at the right level and also doing Teams meetings. We currently have a monthly team meeting to talk about vendor relationships, both on the mechanical, electrical, and fire protection side of the business, but we also are using the team’s channel. So as that information becomes available, it is immediately out on the channel visible and can be reacted to quickly.
David Hamilton (14:52):
Great. That’s excellent. Interesting. We’re kind of doing pretty much the same thing ourselves, lots of shared workbooks and trying to get as much of that raw data there. Tom, what would you say with regard to Lutron catalyst for change accelerations that was brought along to the organization?
Tom Ike (15:09):
Well, Dave, as we mentioned that with the supply chain challenges, we’ve really had to leverage the knowledge of our entire organization. So, what we’ve done is we’ve set up product recovery teams from across the organization. These would be people that include the business unit leadership, engineering, quality, obviously supply chain, but also looking at our data analytics and manufacturing capability. So these teams are constantly evaluating all the information that we have on parts availability, including things like supplier decommit. So, when we have a supplier that committed 50,000 pieces of something, and then they called the day before and said, we can give you 25,000, but it’s going to be two weeks from now. So, they’re the kind of real-life issues that we’re dealing with. So that puts us in a position where we have to go after things such as spot buys and work to modify our bills and materials so that we can still build a quality product that meets the customer expectation. So, in a very odd way, this has really brought our company closer together, where we have people working cross-functionally to help mitigate the impact of these challenges to our clients.
David Hamilton (16:24):
Interesting, Tom you mentioned data analytics. Can you just talk a little bit more about that? Because that’s something that’s very interesting for us at STO Building Group, having just recently promoted a chief data officer, something we have not had in the past, but really trying to harness data internally. And I know that’s something that you had mentioned there that you folks certainly deal with and how you would even deal with some of the challenges with looking at some of the data and saying, can it really be right? Is that the right information that we’re looking at?
Tom Ike (16:54):
Yeah, so historically we’ve always used building scientists as part of our team and the development of products. What we’ve also done is hire data scientists to help us aggregate the information as it relates to trends in our business, as it relates to capability of our products, but also where we’re seeing ordering spikes, where we’re seeing issues in how we commission projects. So, these data analysts are really incredible. They take this information and help us parse out where our real challenges are and where our real opportunities are. So, them being involved in this process is really accelerated that change that we need. So that’s, that’s how we’ve used them, Dave.
David Hamilton (17:37):
Excellent, great. Joe, I’m maybe going to start with you with the next question, which is really around geographical regions and trying to look at that. I just wondered if you had any aspect or, with your hundred million square feet, I can just imagine the footprint that you have all across the US anywhere that you would say in particular that you’ve noticed particular spikes or issues or anything you’d like to say around that.
Joe Rossi (18:01):
The spikes and the issues that come to mind are obviously of projects that we’ve recently completed in major cities we designed and constructed during the pandemic, an office space, 18 floors, over 400,000 square feet in Boston sits a top TD Garden, created an innovation center. The good news is that we weren’t impacted schedule wise, but costs went up. You know, luckily, we were able to purchase the majority of the project before we saw major spikes. And we were able to bring that in without the need for additional funding, we actually came in under budget, but you know, we have a project now in New York that we’re designing, the budget was prepared last year. I think New York is in terms of cost escalations is the third highest behind two cities in California that are typically high. And we’re seeing a need to go back to the table to be able to accommodate the needs of the business and complete that project on schedule.
David Hamilton (19:02):
Yep. No, that’s a good lead into the economics question as well here. So, Charlie, I know this is dear to your heart with regard to approaching a client and how you tell that bad news. Do you want to say a little bit about how EMCOR would handle that as far as escalation and the squeeze, right, really with the cost of materials increasing so much, and that being passed on to you as a subcontractor who then has to go back to the CM or the end user client? And I’m sure you’re feeling a lot of pressure being in the middle of that.
Charlie Pavelec (19:36):
Absolutely. David prior to say the last year or so, there were always slight fluctuations in copper, steel, or raw materials that went into the products, but over the pandemic, obviously we can even use gasoline as an example, right? Middle of the pandemic, gasoline went down to a dollar, $1.50 a gallon. Now it’s hovering around $4.50. Same things happened with steel and all the raw materials that go into a construction project. I know one of the things we’re trying to do is at the time of a budget or bid, we’re trying to benchmark those commodities that go into our product to let you know how we were at bid time and where we were so that as the price does fluctuate up or down, if it does go down, we’re more than happy to lessen our price. Unfortunately, that hasn’t happened much during this timeframe, so we all understand where we’re at, because it’s all about, I’m trying to take as much risk away from myself during this volatile timeframe and let you know what I did. And so that you can let the customer know. And obviously we want to build some buffer in there, right? So if copper was at $4.30, I’ll cover $4.40 to $4.20 cents. Anything over that, we would need to come back and have a conversation about that. Copper has been relatively within a bandwidth of tolerability, but steel has been crazy. And nickel that goes into stainless steel’s been absolutely insane lately.
David Hamilton (21:08):
Interesting perspective for sure. Thank you, Charlie. Tom, with being an electronics company, I can only imagine chips and all sorts of issues and driving the prices and the economics. Could you just talk to us a little bit about Lutron’s approach to the economics of the whole situation?
Sure. As you can imagine, the price increases across the board, Dave, have been significant with the semiconductor and capacity, and also inflation’s clearly having an impact across the globe on everything that we do. We’re getting significant cost pressure across all the raw materials we just discussed. The other thing is the logistics are also increasing where we used to be able to put components on a boat or a product on a boat. We now have to air freight those around the world. So being a global organization, you know, we’ve really had to look at these price increases and try to act accordingly. We’ve really tried to hold our pricing flat and leverage our growth and improvements on the effectiveness of our company. But you know, the magnitude of what we’re seeing has really led us to needing to raise our prices this year. So, I think one of the benefits we have is being a private company. We’re not reporting the Wall Street every week, so we can try to manage those costs for the longer term, but it really is having a strong economic impact on our business.
Charlie Pavelec (22:38):
Dave, could I interrupt and just add one more thing, because this has just happened in the last couple of days. So, the worst thing that can happen is we received a price increased notice from an HVAC equipment manufacturer just the other day. And it was 12% and it was 12% not on future business where I could share that with the owner. It was every order that’s been placed that has not been delivered yet. So, I wrote a purchase order. It’s in production. I’ve told you what the cost is and all of a sudden out of nowhere the other day, “oh, you can’t have that equipment until you agree to this 12% increase.” I’m being held hostage. And now I’m bringing a surprise to your table, right Dave, and they’ve put out this two-paragraph letter about why there’s a 12% increase.
Charlie Pavelec (23:30):
It’s just so hard to react to that and deal with that from a construction standpoint, right? I had no idea it was coming. When we know it’s coming and we can say, “Hey, if you make a decision by July 1st, here’s where we’re at, but after July 1st, it’s going to be 3% more.” You have a decision to make. When I call you up and say, “Hey, I just got this. And here is the timeline it’s already passed.” I’m being hit with it. I can’t control it. That is really what throws the monkey wrench into this whole conversation, right? And causes so much stress up and down our food chain.
David Hamilton (24:06):
Absolutely. And delivering bad news is never easy. Getting that back to companies like Verizon, etc. And it’s certainly very, very challenging, indeed, Tom. Just before we move on to maybe wrapping up talking about the longer-range view, just before we leave the whole topic, I wanted you to talk a little bit about Lutron and your geographic reach and some of the things that potentially you might have had to do with regard to where your manufacturing bases were and then what you’ve had to maybe adjust. I think that would be very interesting.
Tom Ike (24:40):
Sure. As, we discussed, we’re a global company with global manufacturing, we’re fortunate that we have set up manufacturing operations around the world to service our different clients with the pandemic though. And with the supply chain, we’ve really had to become much more flexible in where we manufacture products and how we manufacture products. So, we build in a significant redundant manufacturing capability across all of our facilities around the world. So, if we have a challenge with a product in Asia, as an example, as long as we can get the parts, we can build that product in the US or in Mexico or in Puerto Rico or in Costa Rica. So, we’ve really built these different capabilities throughout our organization and it’s really going to help us become a little more sustainable and also mitigate risk that we have due to things that are happening in different parts of the world. So, it’s really been again, through these challenges, become change that should help us going forward. After we get through this situation.
David Hamilton (25:48):
Tom, would you say some of this reshoring or nearshoring or whatever you want to refer to it as that was accelerated as something that potentially you may have discussed as an organization, but now you have the real reason to do it being, you know, the issues that you’d mentioned in Asia. Would that be right?
Tom Ike (26:05):
Yes, it is. We were fortunate we were doing a lot of it, Dave, but this certainly accelerated that capability for us.
David Hamilton (26:12):
Great. Okay, so just onto our final topic that I wanted to go around the table with, and that really is a longer-range view. What benefits, what opportunities are ahead? Joe, I know you live in an organization that’s very dynamic, obviously very large, but a lot of things, I’m sure you could talk about like things like sustainability and supplier diversity, except what, what topics like those are near and dear to your heart and do you feel that companies like STO Building Group and even the second, third tier vendors will be interested in hearing from you about.
Joe Rossi (26:48):
Yeah, I think we’ve gotten smarter. We were forced to get smarter because of the pandemic and because of all these issues that they were experiencing on the supply chain side. So, we’re making sure that we take advantage of what we already have rather than just going to new, right? As you can imagine, you know, folks are coming back to work. We’re not seeing the utilization that we’ve seen, in the past numbers that we saw pre pandemics. So, if there’s less people in the office, were revisiting our strategies for office space, there maybe some locations we end up darkening or if a lease expires, closing, if the pre pandemic numbers were low, the post pandemic numbers will probably be low or lower. So that’s an easy decision. So, you know, we established an asset management program. So, when we decom a space, we’re recapturing AV equipment furniture and that’s the first stop that folks shop, you know, when they’re managing a project to see what’s available, right?
Joe Rossi (27:44):
To reduce cost and also avoid the risk that we’ve been talking about. There’s no doubt that there’s a greater focus on options when it comes to purchasing materials or even services. So, more supplier diversity going to minority-owned businesses who may have, you know, some of the things that we need, right? So maybe instead of going to larger companies, now it’s not one company, maybe it’s more companies than we typically go to to get what we need to make sure we get it in time and at the right price point. And in some cases, you may end up paying more and we realize that, right. But if you can get it depending on how important it is to get it, at a particular time, we’ll go that way. So definitely more focus there, more focus on hospitality as I mentioned, right?
Joe Rossi (28:31):
Making sure everyone has the hospitality mindset, making sure that the experience within the office place is a good one training folks so that their ambassadors of the program, regardless of your responsibilities, whether it be managing projects, community manager, facilities, right? Everyone needs to have that mindset. And then, you know, the last piece, when we talk about accelerating, I mentioned this technology we’re in a hybrid world, you’re going to have distributed meetings where some folks are going to be in the office. Some folks are going to be in other conference rooms around the globe. Some folks may be sitting, you know, in a coffee shop or at home, you have to make sure that those folks feel like they’re part of the meeting or they’re going to disengage. So, we’ve got to figure that out and push the technology. So that experience is a good one regardless of where you are.
David Hamilton (29:20):
Yeah. I would say too, just from STO Building Group and where we are, certainly a lot of what you mentioned too are very much what we would be aligned with. Supplier diversity, making sure that our supply chain is diverse, but not just that our subcontractor base is diverse as well. And we know the benefits of that and many companies, including yours and others are really taking a tremendous leadership role in that regard to ensure that diversity is really developed among our subcontractor base. And that we really put our arms around a lot of the contractors who need our help, who need coaching and who may not be as strong as some others initially financially in various aspects where we’re able to really help and work through that with them, just one or two of the other things that I know STO Building Group are looking at, we’re looking at the logistics of the supply chain.
David Hamilton (30:14):
You know, it’s a tiered system right now. There are barriers to that. Is there a better way of actually procuring the material and rather than having that being a step by step by distributor to manufacturer to distributor and, and maybe a number of distributors, right to a local distributor, it really is a very challenging supply chain with very limited visibility. Currently, I think that in the next couple of years, or maybe even a five-year plan is going to change and that we look forward to being a real catalyst for change. And in that we’re right on the leading edge of that, we’re talking to some very big organizations from a technology standpoint to make sure that the technology is in place. And then we’ll go out there and have the conversations with the manufacturers like Tom and others to say, we feel this could be transacted potentially a different way.
David Hamilton (31:04):
And then hopefully having clients like yourselves, like Verizon and other companies on board in order to be able better to manage their risk so that we don’t find ourselves in the situation that we do currently. And that is just being reliant on that phone call of finding out, well, what is the lead time? How can I move that piece of product up? What can you do? And how can you help me maneuver that around your factory? And without any knowledge of that, actually being an issue two, maybe three months ahead of time, that we’re only finding those things out whenever the product is ordered, that there’s no visibility for even the manufacturer to understand potentially what’s coming down the pipe with projects and the product that’s on those projects. So those are a couple of the things that we are working on, but Charlie, I’m interested to hear from you and then Tom, as well with regard to what you think the longer-range view here really is with regard to supply chain.
Charlie Pavelec (32:01):
Yeah, Dave, I guess first let’s touch on this. Can you imagine going through the pandemic without some of this technology that we have today, be it, you know, team, or zoom meetings or some of those things. I think about that, how fortunate we are to have the technology. We have to be able to work from home right. In a collaborative way and be successful. And I think we also got probably comfortable previously with our supply chain relationship. And now there’s a huge strain on the supply chain. I think it’s really made us evaluate who participates in that supply chain. Who’s actually bringing value and Joe hit on it. It certainly has to do with being competitive, but not necessarily dollar low, if you can do things to help deliver things more rapidly or on time really has made us look at our supply chain across the entire nation for EMCOR so that we are trying to take some of the surprise out of the system. So, we don’t have to come to someone and tell them the bad news, right? I want to tell them the good news. “Hey, we weren’t able to get it here, but we were able to get it there.” And it’s because I have great relationships with these two or three first in class manufacturers like Tom’s business.
David Hamilton (33:20):
Before I hand that to Tom, I’m going to plug here a white paper that the company put together as part of our CEI or center of excellence and innovation group. We actually develop a paper that’s called methods of approach to supply chain interruption. So, what we said, we’ve analyzed different methods of approach to issues that clients and design teams would’ve had. Glad to share that with anybody. You’ll find out on our website, it’s a document that we’ve put out there to help our teams, not just our downstream teams on the field, but also upstream in the design side as well. And part of our VDC group, and really, really try to help, is it substitutions or, is it expediting or is it stockpiling and how to lose things, you know, work together to mitigate some of the risk that we’re seeing. But Tom, I’m very, very interested to hearing about Lutron being an electronics company. I’m sure you’re right in the cutting edge of the future and looking into the future as to, you know, your products and what you’re doing to really look ahead.
Tom Ike (34:23):
Yeah, Dave, we, we continue to put a significant amount of our revenue into research and development. Historically as a company we’ve been around 10% of revenue into R & D, and that includes a variety of things, not just development of new products, but also supply chain manufacturing capability and where we manufacture, but also how we manufacture. So, this has really forced us to work with our suppliers to make sure that we’re developing the most efficient circuit boards. We’re continuing to look at the technology that’s available to us to improve our speed to market, but also our quality and our scalability and our business. So again, these are really challenging times, but I’m hoping that the lessons we’ve learned really make us a much better organization and much better industry as we go forward.
David Hamilton (35:17):
Excellent. Gentlemen, I have really, really enjoyed the conversation with you all today. It’s been a real pleasure to chat together and to talk about supply chain used to be not maybe one of the most interesting topics, but these days it’s come right to the front of every boardroom discussion. I’m sure in America and around the world for that matter. And to have the three men that gentleman that we have here today is, is just amazing. So, Tom, Joe and Charlie, I want to thank you for your time this afternoon. We really appreciate it. We look forward to having conversations certainly well into the future. We’re all in this together. And on behalf of STO building group, we would like to thank you very much for your participation here today. And also, we’d like to thank those who are listening. Certainly, feel free to reach out to us on our website and we will be glad to share any of the information at a deeper level that we talk about here today. Thank you very much.
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