Industry Forecast: Distributor

January 20, 2022

Amid Volatile Mix of Challenges, Distributors Seek Stability and Progress in 2022

BY TOM GRESHAM

As a group, distributors are viewing 2022 with cautious optimism. Most are forecasting at least modest sales growth in the new year. Automation is only growing in importance for many of them, particularly as a response to the widespread labor shortage and the need to do more with less. The broader economic landscape has created a range of challenges in 2021 in influential areas such as inflation, extended lead times, continued consolidation, wage pressure and labor shortages. Extended lead times and the labor shortage particularly loom as potential impediments to growth as some businesses hustle to provide the supply necessary to keep up with the demand for products. Few distributors see those trends going away next year, particularly in the early going, and they are preparing their businesses accordingly.

The following are responses from MHEDA distributors across North America to what they forecast for 2022. They share their thoughts on the year ahead for their businesses and the obstacles and opportunities they foresee playing important roles in next year’s prospects for both them and the broader economy.

Michigan-based Fraza Inc. forecasts sales growth of between 7-10% in 2022. Roger Runyan, the company’s CEO, expects inflation will account for half of Fraza’s revenue increase, while service, parts and rental “will continue to be strong and grow.” Fraza also has plans to expand in 2022. Runyan believes equipment sales will lag for the year, and he expresses worry that the Biden administration’s policies will inflame inflation and supply chain issues.

SJF Material Handling is always reinventing itself, says Frank Sterner, vice president at the Minnesota-based company. Sterner says SJF will expand into new lines tied to the increasing availability of robotic technology. Sterner expects level sales for the company in 2022 with labor and material costs being likely challenges. Sterner believes labor shortages will continue next year, putting wage pressures on companies competing for “a shrinking labor force.” “Lead time will remain extended due to labor,” he says. When considering the landscape for next year, Sterner says, “If the administration [continues increased] regulation and [uses] OSHA as police, cost will rise to meet these demands. Oil cost will increase freight cost, and labor will remain short for availability.”

At V&H Material Handling, Michael J. Ward, president, believes pent-up demand, a lack of a manual workforce and the increased need for floor space leading to demand for vertical storage will be the biggest factors toward a projected 20% increase in sales. The Pennsylvania-based company plans to add new lines in the first quarter of the year, as well as a new software engineer. Ward believes the lack of labor and increased turnover, wages and health care costs help to justify robotic systems and make it a growth market.

Mike Sain, president of Nashville-based Material Handling Inc., believes the macro trends that have emerged in 2021, such as inflation, extended lead times and labor shortages, will only grow in influence in 2022. He expects his company’s growth to remain level for the year, citing the U.S. economy as the biggest factor in his projection and expressing concerns with the current presidential administration’s policies’ impact on economic growth. Sain says MHI will add new locations and new lines of business in the first and second quarters of the year. “This will add significant opportunity,” he says. Potential growth markets for the company include fleet management and warehouse solutions.

Extended lead times and the labor shortage particularly loom as potential impediments to growth as some businesses hustle to provide the supply necessary to keep up with the demand for products.

Alliance Material Handling has projected sales growth of 20-plus% in 2022. Forklift and racking lead times are the largest potential factors that could impact those projections. Tom Albero, chairman and CEO, says the Maryland-based company’s expansion plans include closing one acquisition per quarter next year. Among emerging growth markets, Albero points to Alliance’s involvement in warehouse system solutions. “Plenty of industrial buildings [are] going up each year,” he says.

Orders placed in 2021 represent the biggest factor in projections by Gerardo Padilla, CEO of Seil Rentals, that his company will experience a steep 28% decrease in sales in 2022 and navigate a challenging year. Padilla expects that inflation and the extended lead times that have marked 2021 will continue at least through next year. On the growth side, Padilla says Seil Rentals sees automation as a growth market because of the labor shortage and plans to open an automation branch to build its portfolio in 2022.

Supply chain slowdowns that make it challenging to get inventory to sell is the chief factor that Jeff Cordick, CFO for Washington Liftruck, cites for his projection that sales for his company will stay approximately level in 2022, give or take 2% in either direction. The Seattle-based company’s growth plans do not include new lines, but it does plan to expand one of its manufacturers by 10% to increase its market share. A promising growth market for Washington Liftruck is attachments to forklifts and construction equipment. Cordick says, because of companies’ needs to add newer technology rather than new full-time equivalent employees in a tight labor market. Cordick believes inflation will continue in 2022 and wage pressure will get worse, though he expects the labor shortage will not endure past July. He also expects to see “hyper price increases” from manufacturers.

A backlog of orders entering 2022 and a belief that the current supply chain challenges will begin to smooth out after the first quarter of the year has Steve Duffield, president of the DACO Corporation, projecting 20% growth for next year. Duffield believes the macro trends affecting 2021 will continue through the first quarter of 2022 before declining in subsequent quarters. DACO Corporation, which is based in the state of Washington, has no plans for expansion, but Duffield says the company is considering a retooling of operations and sales to drive and handle more business and believes that adjustment will begin to be impactful in the third and fourth quarters. Looking ahead, Duffield says, “I’m still very concerned about the ability to attract smart, driven people into the industry.”

Jay Williford, president of North Carolina-based Atlantic Coast Toyotalift, projects sales growth of 15% for his company in 2022 with the availability of equipment playing a role in that projection’s accuracy. Williford expects the company to expand its business throughout the year, while contending with the continuation of labor shortages and extended lead times. Automated guided vehicles represent an important growth market for the business, Williford says.

Automation plays a key role in Ring Power’s future plans. Robert Burkhead, general manager of the company, believes automation “will be emerging and expanding over the next few years. We will be focusing on expanding our offerings and effectiveness in this area.” Burkhead expects the Florida-based company to see 6% sales growth in 2022, noting the company is looking at one additional location and one replacement location for next year. Burkhead believes all of 2021’s emerging macro trends will continue through next year. He also worries that “the political turmoil and false narratives from the extremes of both political parties continue to place additional stressors and hindrances on economic growth.”

Todd Maxwell, COO of RMH Systems, forecasts 6% sales growth in 2022 for the company. Equipment and product shortages and long lead times could potentially impact that projection for the company, which has its headquarters in Iowa. Maxwell believes inflation will grow worse next year and “freight will continue to be an issue.” As for expansion prospects next year, Maxwell says RMH is “always looking to acquire the right company that would complement what we do and where we [sell]. Second quarter would be the soonest.” Maxwell sees robotics as a growth market. He says, “As a Fanuc Integrator, we are seeing the need for automation due to the scarcity of labor. Robotics allows the customer to increase output with the need for additional labor.” Looking ahead to possible big-picture impacts on the economic outlook in 2022, Maxwell believes “a showdown with China over several different issues is inevitable.”

Projected growth of 3-5% in 2022 for Jefferds Corporation can be traced to the fact that “much of what we have sold this year won’t bill until next year,” says Richard Sinclair, president of the company, which is based in West Virginia. “Demand seems to be generally high and there is a lot of cash out there that folks want to spend in order to get more efficient.” Sinclair says this year’s macro trends will continue at least through the first six months of next year, which he notes is an election cycle for midterms. “Someone may figure out that the current course of direction isn’t quite right,” he says. Sinclair says Jefferds will continue to grow two fairly new branch operations through next year – “Much of our focus centers on being more efficient,” he says – and he says the shift to electric trucks “has been big in our areas. Lithium-ion seems to be catching hold.” Sinclair believes a desire to be environmentally friendly is driving many decisions, but taking those steps can be “quite expensive” in the short term.

Sunbelt Material Handling, a Dallas-based material handling dealership, plans to expand to new territories to add to growth in 2022. Matt Maddock, president of the company, projects sales growth of 7% next year with e-commerce’s growth playing a central role in that increase. Sunbelt recently opened up a systems division that includes systems in the dock and door category, which Maddock views as a growth market. Maddock expects 2021’s macro trends to continue in 2022.

The continued demand for automation due to low unemployment and rising labor costs is the chief factor in projected sales growth of 15% for Conveyor Solutions, according to Scott Lee, the Illinois-based company’s president. Lee says the company plans to expand throughout 2022 in the areas of autonomous robotic and AGV solutions. “This will put additional demands on our internal staff and require more expertise,” Lee says. Goods-to-person applications and WCS/WES software solutions are key growth markets for the company. Lee believes 2021’s macro issues will continue next year, especially in the first half of the year. “Supply chain issues will start to hit closer to home, impacting [commodities] and items we use in everyday life,” he says. Lee believes interest rates will start to play a role in decision-making on larger capital projects toward the end of 2022.

Supply chain uncertainty is in the foreground of M&G Materials Handling’s prospects for 2022, says Kenneth M. MacDonald, president of the Rhode Island-based business. “The lack of direction with the supply chain causes difficulty in planning and forecasting,” he says. “It has become more reactionary.” MacDonald says the company projects 3% growth next year and has no plans to expand its business in 2022. Automation and fuel cells are two critical growth markets for M&G going forward. MacDonald says he expects macro trends to last until mid-2023, but “I will be very happy to be wrong.”

Komatsu Forklift projects 10% growth in 2022 with new and used truck availability being the biggest factor potentially impacting that forecast, according to Terry Rose, general manager, Forklift North America Retail Operations. Among potential emerging trends that could prove influential, the company expects that zero emissions policies will start impacting new truck sales, especially in California, where the policies are especially ambitious.

Inventory availability will play an important role in Arnold Machinery Company meeting its projected sales growth of 5% in 2022, according to Kayden Bell, the company’s president. The Salt Lake City-based business has plans to expand its business in next year’s second quarter, he says. Bell expects 2021’s emerging macroeconomic trends to continue next year, as well as political unrest to continue and to play a factor in the economy.

Art Sherwood, president of A.J. Gates, says his company has projected sales growth of 10-15% next year. The biggest factor impacting that projection is delivery of equipment, he says. Sherwood anticipates 2021’s macro trends to continue next year.

United Steel Storage Inc., a Georgia-based company, has robust sales growth projections of 32% next year, according to Billy Lindler, the company’s president. The price of steel could be the biggest factor impacting that projection, he says. USSI’s growth plans include expanding solutions offered to its focus industries and adding one or two additional focus industries to those that it targets. Lindler says USSI’s e-commerce market will continue growth next year, amid a continuation of this year’s macro trends. Looking ahead, Lindler says, “U.S. infrastructure investment may make labor, material lead time, and material pricing problems worse in the near term.”

Extended delivery on new products is at the core of FMH Material Handling Solutions’ projected 22% decline in sales growth in 2022, says John Faulkner, president of the company, which has locations in Albuquerque, Denver and El Paso. A limited ability to add workers will continue to be a macro trend that plays a role in the marketplace next year, he says. Faulkner says FMH has no plans to expand its business in 2022.

Next year, Cranston Material Handling will take a new step in response to their clients’ preferences. “We have been developing our rack inspection business and will be launching an app on the Apple Store at the beginning of the year to facilitate companies doing their own inspections,” says David Cranston Jr., president of the Pennsylvania-based business. “Companies are increasingly asking to have their racks inspected by a competent individual to assess their racking systems.” The hiring of a new salesperson is a key factor in Cranston’s projection of 20% growth in 2022. Cranston believes the supply chain will become increasingly fragile next year, and the company foresees that its customers’ lack of workers “increasingly [will] drive our installation sales,” he says.

Strong equipment sales and continued demand for rental and service are the driving forces behind projected sales growth of 5-7% for Georgia-based Briggs Equipment. Leland Wells, vice-president of operations, says the company will target expansion, explaining, “We are always expanding and looking for new avenues of growth, and 2022 will be no different.” Wells believes inflation will be an ongoing challenge, possibly even increasing next year, and “profitability will be highly dependent on how quickly and often we can raise pricing.” In general, he says, “Government policies are a wild card that we cannot predict, but are having a very large impact [on] end markets. Supply chain disruptions and the ensuing inflation are likely far more persistent than originally believed.”

Jim Radzik, president of Storage Equipment Systems, sees the labor shortage as the biggest potential factor impacting the Arizona-based company’s projected 20% sales growth in 2022. Radzik says the company plans to add salespeople and another location in the new year as part of its expansion plans. When considering 2021’s macro trends, Radzik says, “I anticipate a moderate leveling off. However, political pressure and policy decisions could have an impact.”

In order to meet its projected sales growth of between 15-20% in 2022, Conveyor Storage Solutions, a specialty contractor for material handling storage systems, will need to be able to find new personnel, says Chris Rodriguez, sales manager for the San Diego-based company. “We need to grow our team and hiring is difficult,” he says. Rodriguez believes hiring will remain challenging through the first quarter of 2022. He also sees steel prices leveling out next year, but not decreasing.

Jeff Conger, president of Bernie’s Equipment Co., expects sales to remain level for the Wisconsin-based company in 2022. Steel pricing and availability are the biggest factors impacting that projection. Conger believes the macro trends having such a large impact on 2021 will expand their influence next year. He says Bernie’s is not currently looking to expand or enter new growth markets.

The strengthening of third-party logistics providers is a promising development for Advanced Equipment Company’s economic outlook in 2022. The 3PL world is changing and using more automation, says Darin Boik, president of the Charlotte-based business. “Companies are relying on 3PLs to help get product out to customers based on their needs,” Boik says. “E-commerce is the main driver.” Boik says his company expects sales to remain level next year with getting material through the uncertain supply chain being a key factor in its prospects. “I expect lead times to continue and worsen some,” Boik says, though he also expects to see more creativity emerging to get around supply chain shortages. He expects the labor shortage to improve, but wage pressure to continue. Among potential growth markets for the company, Boik says the “service market should grow. Because if equipment can’t be replaced, it needs to be serviced.”

The growing demand for parts, service and rental is integral to 10% sales growth projections for Gregory Poole Lift Systems. In addition, Hal Ingram, group vice president of the North Carolina-based company, says delayed shipment of machines should mean more machines delivered in 2022 than this year. Ingram expects margin pressures will continue to increase next year, while new machine orders decline as backlogs start to reduce. He believes green technologies will grow at a faster rate than traditional technologies, and automation will continue its growth in the face of ongoing labor shortage issues. Ingram says Gregory Poole’’s growth plans are focused on organic same store growth. Looking further ahead, Ingram believes “federal vaccine mandates, inflation at a higher rate than expected and government spending increases could set the table for a business downturn late in 2022 or 2023.”