Like many companies, Brown Deer-based water meter maker Badger Meter has been facing supply chain challenges this year and chief executive officer Ken Bockhorst said Tuesday he expects the issues to continue into 2022.
“Our supply chain team continues to work tirelessly at playing whack-a-mole with the varied electronic and other component shortages,” Bockhorst said on the company's earnings call.
He acknowledged suppliers are making progress in addressing the challenges.
“However, the rate of recovery is fluid and will continue to be uneven until inventory levels are able to fully meet demand,” Bockhorst said.
“I think it’s possible that it’s going to carry over into next year,” Bockhorst added, noting larger companies like General Motors are having to shut down production for stretches because of supply issues. “I’d like to be more optimistic, but I think I’m being more realistic in saying that it’s likely to drag into next year."
Asked if there is one particular area of the supply chain that is a pain point, Bockhorst said “it can depend on the day.”
“This isn’t one specific supply chain or logistics challenge, it’s pretty wide ranging,” he said, noting that COVID-19 issues around the world can pop up and delay components or interfere with logistics and events like the deep freeze in Texas hurt supply of resins.
Bob Wrocklage, chief financial officer of Badger Meter, said the situation is similar to when the company was exiting the first quarter in March. At the time, the company discussed how supply shortages were limiting its ability to turn record orders into sales. Badger Meter was still reporting a record backlog coming out of the second quarter.
The situation leaves the company with the challenge of both trying to control rising costs from addressing the shortages and the possibility of leaving sales on the table with rising demand from customers.
“I would put the priority on navigating the supply chain challenges that are evolving by the day,” Wrocklage said. “If you asked me do I feel more comfortable sitting here in the middle of July than when we talked in April, I think so, but that is literally evolving by the day and week.”
Badger Meter is also seeing the supply chain challenges and inflationary pressure push its inventories higher, from $81.6 million at the end of 2020 to $90.8 million at the end of June.
Part of the increase comes from rising prices, as the price of copper goes up, so too does its value in the company’s inventory, but the supply chain challenges are adding to the volume of work in progress.
“If you have one component holding up other things, that doesn’t mean you stop buying the other things,” Wrocklage said.