Re-Tales #11: Business as Unusual

As the pandemic abates and reopening progresses, times are still uncertain. Industries worldwide continue to be obstructed. Parts and materials costs have risen sharply. Shipping rates, and shipping demand, have spiked. The recent Suez Canal blockage didn't help. All this has led to widespread supply-chain difficulties.

The audio business is not immune. Disruption and delays have troubled manufacturers, distributors, dealers, and customers for several months.

I spoke with audio manufacturers and distributors recently about how these late-pandemic/postpandemic issues are impacting their businesses. The consensus: They're affecting most companies, some more than others. Meanwhile, customer demand remains high.

"It's a profoundly weird place," Jason Stoddard, co-founder/co-owner of Schiit Audio, told me in a phone interview from Corpus Christie, Texas, where Schiit has expanded its manufacturing operations. "I thought it couldn't get busier. Eighty percent of our products are on back order. We're still struggling with demand."

Supply chain–wise, Schiit may not have been hit as hard as other companies. "Luckily, we're extremely paranoid and we plan very, very far out," Stoddard said. The Valencia, California, plant, where Schiit's larger products are made, is running at high capacity.

Like many makers of amplifiers and DACs, Schiit sources most of their electronic parts overseas, and some have become harder to get. Hardly a day goes by when Stoddard isn't asked to approve an alternative part—a substitute for a particular electrolytic capacitor, for instance. Sometimes minor substitutions work. "Parts have to meet or exceed our stated specs," Stoddard said. That requires additional testing, for basic functionality within the existing design and for sonic consistency.

As reported in the January issue's Industry Update, the AKM factory fire in Japan impacted many companies. Schiit had been using AKM DACs, but newer products are switching to ESS Sabre DACs.

Schiit's Sol turntable is "on hiatus" due to parts unavailability. The fabricator needs to make the tool to machine a particular part, but that's not their top priority. Steel prices have increased four times in as many years, Stoddard said, which doesn't help. For now, the Sol still appears on Schiit's site; its future is uncertain.

European manufacturers have had fewer issues with shortages, but they have other concerns. Bluebird Music imports products from several European manufacturers, including AVM of Germany, which sources most of its parts from nearby suppliers. Those pipelines have not been affected, Jay Rein, Bluebird's president, told me in an interview. (Bluebird also imports Canton of Germany, SME from the UK, and Vienna Acoustics from Austria, among other European brands.) Norm Steinke, president of Rutherford Audio, says that's also true of companies he represents. One exception is a plastic used in turntable dust covers, which is also used to make face shields, according to Steinke. Rutherford's European brands include Acoustic Signature and Tidal (Germany), Gold Note (Italy), and Vertere (France).

Both Rein and Steinke decided to increase their inventory about a year ago, but their efforts were complicated by pandemic-related lockdowns. "Companies are still shut down," Rein said. "Things aren't getting built." Yet, customer demand remains high. Dealers need product to sell.

Distributors have adapted. Bluebird has added an online "Yes, It's in Stock" program for dealers, with a "Quick Ship" designation for items that are in stock and ready to ship. They've also added a portal for dealers to access searchable, real-time information: what's on order, expected delivery dates, dealer and retail prices, etc. "The day after it went live, I asked myself why I didn't do this five years ago," Rein said.

Shipping and logistics continue to be challenging. There are fewer flights. For air shipment, a guaranteed spot on a flight costs a premium; without it, the shipment can get bumped, like flying standby. The cycle repeats, and delays and frustration ensue.

Many companies are now shipping by sea instead of air, which of course is much slower. With steel shortages, even shipping containers are scarce. Prices are higher now, too. Walter Swanbon, owner of dealer/distributor Fidelis AV, said "It's costing at least twice as much and taking three times as long. That's the plight of the importer now."

Routes for air and ground shipping have become more circuitous. Steinke and Swanbon both described extreme situations. Steinke takes possession of the product in, say, Germany and then must handle shipment to the US. One shipment went Berlin–Frankfurt–Paris–Dallas–Chicago–Denver, the last leg via truck. It took 4½ weeks. Normally the shipment takes a few days to get to Denver, by air.

Even if products ship on time, they could end up stuck in a freight yard with no drivers. When Steinke called a ground logistics company, a woman told him she had 86 trailers in her yard and 23 drivers. It would be a week before a truck would hit the road.

"Now we're in the financing and logistics business," Steinke said, "and occasionally we talk hi-fi."

"Unpredictability is the worst part," Steinke said. "It's hard for a lot of the sales guys who are having to talk to the customer more and more."

"People will often just go to the next thing," Swanbon added.

Some believe the worst is over. Others think recovery will take longer, maybe until later this year. Meanwhile, strong demand for good audio gear is a good problem to have.

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