When the Chain Breaks: Equipment Rental Companies Feel the COVID Supply Pinch

April 8, 2022
For South Florida’s The Equipment Source, new vendors help fill the gap, but delays continue.

When the coronavirus (COVID-19) pandemic began sweeping across the globe in early 2020, it had an immediate impact on global supply chains. The logjam began with China, which is home to thousands of factories that produce countless types of products, machinery, equipment, and parts. When that country shut down to stem the virus, many of those factories had to close their doors – much to the dismay of their customers, who then had to decide whether to empty out their inventories, find alternative suppliers, disappoint their own customers, or do all of the above.

The rental equipment sector was no exception, according to Steve Acquafresca, general manager of The Equipment Source, a Naples, Fla.-based tool and equipment rental company owned by Eberhart Capital.

At first, The Equipment Source was fortunate. It didn’t come under pressure as soon as the pandemic hit, Acquafresca says. 

For a while, the company was able to take advantage of the fact that some of its suppliers still had product in the pipeline that they could deliver on the usual schedule, including equipment and parts. Eventually, though, these product flows dried up, and suppliers started falling behind.

As a result, the company has felt the pinch everywhere.

The impact adds up

“It’s not just in one area,” Acquafresca says. “It’s not just equipment. It’s not just parts. Even when one of my trucks breaks down, we have to wait for that. It’s not 100 percent of everything, but I haven’t even been able to get something as small as a wheelbarrow in two months.”

The breaks in the supply chain were supposed to be short-lived through COVID, particularly since Chinese manufacturers began re-opening their plants following the first wave of lockdowns. Two years later, though, things are worse. Global supply chains are still experiencing major disruptions, especially in countries where commerce took a backseat to public health policy. There, businesses of all kinds – service providers, retailers, wholesalers, manufacturers, brokers, and traders – are still having difficulty obtaining everything they need to continue operating.

“As COVID has drawn on, as different parts of the country and different parts of the world have shut down, there have been more problems,” Acquafresca says. “We get a lot of our parts out of Japan and Italy for some of the equipment we own. We’ve seen that those supplies have dried up or had transport problems and now take four months to get here.”

Long lead times are affecting The Equipment Source’s ability to add to its fleet, which is especially frustrating considering how the housing boom in southern Florida is driving demand.

“In the past couple of weeks, I’ve had to place orders for equipment we want in the first quarter of 2023,” Acquafresca says. “We’re just entering the second quarter of 2022, and we’re already trying to forecast what we need going into the first and second quarters of 2023. All major manufactures slots are filled through 2022.

“Just this morning, I had someone tell me he’d need 18 to 20 weeks to deliver a new boom lift. I called another supplier, and he told me he couldn’t do it until the first quarter of 2023, middle of the first quarter. And then another supplier told me he’s already sold out for all of 2022 on the boom lifts he’ll be able to produce.”

Dan Eberhart, founder and managing partner of Eberhart Capital, echoes these frustrations.

“Eberhart Capital has a diversified portfolio with holdings in construction, logistics, manufacturing, oil and gas, and other sectors, and we’ve seen that all of our divisions are hurting,” Eberhart says. “Everybody has stories to tell about finding out that it’ll take two or three months to get a part that used to arrive in two or three days, and then when two or three months pass, there’s a message saying sorry, but it’ll be another two months. And every time this happens, the impact adds up. There’s a ripple effect.”

A creative solution

The Equipment Source was able to overcome some of these hurdles by turning to other vendors – and by revising its procurement criteria to prioritize availability over price.

“We started doing business with basically whoever had the products we needed,” Acquafresca says. “Rather than sticking with particular vendors, we had to broaden our scope and look at other places to try and get what was needed. We also got a little creative about finding what we were looking for.”

That — and a good measure of understanding — helped the company maintain strong relationships with their customers.

“They realize it’s not just our business that’s being affected by these events,” he says. “It’s across every sector, not just the equipment business. I mean, you can go to the grocery store and they’re missing things because of the supply chain. I had a guy who told me that his mother’s refrigerator broke, and it’s going to take six to eight weeks before he can replace it. So, it’s across everything. People are very much understanding what is happening. Yes, they’re disappointed, but they’re not holding it against us.”

Disruptions not going away

With supply chain pressures continuing, what does the near term look like?

Acquafresca doesn’t have a crystal ball, but he says he doesn’t expect conditions to improve any time soon.

“I’m in touch with many vendors daily and weekly, and they are telling me they don’t see an end in sight any time soon,” he said. “They say it won’t go back to the way it used to be right away.”

To make matters even more challenging, while turnaround is slowing down, prices are going up.

“The prices are through the roof on the things you can get,” Acquafresca says. “Let’s say that before the pandemic, you paid $60,000 for a 40-foot boom lift. That same boom lift is now almost $70,000. So not only can you not get what you’re looking for, you’re going to pay a higher premium to get it.”

According to Acquafresca, these disruptions have challenged The Equipment Source’s plan to open new shops in southwest Florida, where the burgeoning construction market has intensified demand for rental equipment.

“Here in Florida, we’ve got a lot of people coming to the west coast of the state. It’s a high-growth area, and construction is surging,” he says. “We want to grow, and Eberhart Capital wants to grow the business. But it’s tough to get the equipment to outfit the new stores. Still, we are getting the stores open.  Sometimes inventory is tricky, but we are making it work. We hope that things settle down as 2022 progresses.”

For his part, Eberhart says he remains optimistic about the prospects of the rental equipment market in general and The Equipment Source in particular over the long term. He also predicts, though, that the sector would remain under pressure for some time.

“The reasoning behind Eberhart Capital’s investment in The Equipment Source remains solid,” Eberhart says. “Southwest Florida’s a growing market, and construction’s a growing market. Demand for equipment is on the rise, and there’s ample opportunity for expansion in the medium term. It’s just going to take a while for all the components of the supply chain to fall back into place.”

Jacob Eberhart is director of Eberhart Capital, Scottsdale, Ariz.