Biz Bits: LES a good example of how supply chain issues are hitting businesses | Local Business News

Biz Bits: LES a good example of how supply chain issues are hitting businesses | Local Business News

There’s been a lot of focus on how inflation and supply chain issues are affecting consumers.

Unless you live under a rock, you’ve probably heard about record gas prices or the difficulty families have had in getting formula for babies.

But consumers aren’t the only ones feeling the effects of the current economic turmoil.

Businesses are seeing their costs soar, as well, while they also deal with shortages of materials and products they need.

Take Lincoln Electric System. At its May board meeting, the utility gave a presentation to board members about how inflation and supply chain issues are impacting its bottom line.

It’s taking two to three times as long to receive many of the materials LES needs. According to the presentation, it took about three months to get transformer poles and pads before the pandemic, but it now takes about eight to 10 months.

Voltage cables used to take about 16 weeks to arrive, and now the lag time is 32 weeks. Things are even worse for the large trucks LES uses. It used to take about a year for the company to get truck bodies and the aerial devices attached to them. Now it takes about three years.

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The price for those truck assemblies has also gone up about 30%, but that’s actually tame compared to some of the other price increases the utility has seen. That includes increases of 38% for switch gear, 50-65% for transformer materials, 80% for ducting and 95% for medium voltage cable.

LES also is paying more in labor costs, with an increase of 46% for tree trimming and residential services and increases of 100-200% for daywork contracts.

Paul Crist, vice president of energy delivery, said LES has delayed some projects to maintain an acceptable inventory levels and has assigned some other projects to its own crews rather than farming them out to strategically manage low inventory items and save money.

Crist said the utility also is looking at other ways to alter its construction practices to lower costs and preserve inventory, “but at this time, certain electrical equipment has few alternatives available.”

When asked whether the cost increases could lead to rate increases for its customers, Emily Koenig, vice president of financial services, was noncommittal.

Koenig said LES is just beginning the budget process for 2023 and will present its proposed budget, which will include assumptions for increased costs related to supply chain issues,  to the board in September.

“It is too early to know for sure, but it is likely that these challenges could make an impact on the budget,” she said.

Building boom even bigger in context

Earlier this year, I reported that 2021 was an all-time record year for building permit value in Lincoln. The $1.2 billion in permits was about $400 million more than the previous best year.

As great as that sounds, it wasn’t until recently that I realized how truly impressive it is.

That’s because Lincoln’s total for 2021 was slightly higher than Omaha’s building permit total of $1.15 billion. You figure that might happen when Lincoln has a record year and Omaha has a down year, but that’s not what happened.

In fact, according to the city of Omaha’s annual Building and Development Summary, not only was it not a down year for building permits in Omaha in 2021, it was a very good year. So good, in fact, that Omaha also set an all-time record for building permit value.

Think about that. Lincoln, with less than 300,000 people, actually had a higher value of construction projects last year than Omaha, which has about 200,000 more residents.

It’s a good sign for the state’s economy that both cities set records, but the fact that Lincoln’s record was higher than Omaha’s is incredible, in my opinion.

Listing the lists

Regular readers of this column know I like to end it with a rundown of recent rankings of Lincoln and/or Nebraska in national reports. The latest:

* Fifth-best city for an affordable wedding (SmartAsset)

Best of the Buzz:

Excerpts from recent Biz Buzz posts:

* It appears Lincoln will be getting its first Crumbl Cookies location later this year.

A building permit filed last month for a space at 6005 O St. indicates it’s for the Utah-based cookie bakery.

The location is in a strip mall next door to the Lincoln Public Schools headquarters building.

Officials from Crumbl did not respond to an email seeking comment, so no other details are available.

Crumbl, which is known for fresh-baked cookies and a menu of options that changes weekly, opened its first Nebraska location in April at the Lakeside Village shopping center in Omaha.

Reach the writer at 402-473-2647 or [email protected].

On Twitter @LincolnBizBuzz.

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