Air Handling Unit

The Future of the Custom AHU Industry

Jan. 14, 2022
Digital transformation is coming—are you ready?

A wave of digital transformation is coming to the custom AHU industry, driven by new market needs and evolving technology. Manufacturers may not realize it yet, but the way they’ve been doing business for the last 20 years will have to change if they want to keep up with the increased demands and pricing pressures these new competitive factors will introduce. On the other hand, early adopters of digital transformation stand to gain a significant competitive advantage in the race to capitalize on this new demand.

The custom AHU industry is stuck in the early 2000s. While other sectors have taken the route of digital transformation, custom AHU manufacturers have carried on designing, selling and manufacturing AHUs as they have done for two decades. The current process is fragmented and siloed. Each step of the process is handled by separate team members using different tools and often redoing work already covered in a previous phase. It works—but slowly and inefficiently, and it generates significant risk of human error.

The advent of selection software in the early 2000s gave engineers a powerful new tool to work with. Still, as fragmented as it is, that tool doesn’t extend beyond the design/submittal phase, which means that sales, purchasing, accounting and manufacturing teams often have to recreate the work done in the submittal phase. This workflow is painfully outdated. The key to improving efficiency is unifying all these processes, and making them available online, to optimize workflow, improve collaboration and eliminate roadblocks to productivity.

Why Custom AHU Manufacturing Remained Resistant to Digital Transformation

It’s easy to understand why custom AHU design has resisted digital transformation. It’s a complex and iterative process that requires in-depth understanding of the needs of the application, as well as the requirements defined and constantly updated by the owner, the consulting engineer and the installing contractor at every step of the process. For many, the concept of a single, unified platform where engineering, sales, project cost accounting, purchasing, manufacturing, shipping, service and management team members could collaborate seems like an impossible challenge.

The other factor holding back digital transformation was market reality. The market did not need more AHUs or need them faster. The types of commercial and public projects that require large-scale custom AHUs take a long time, and needs often evolve over the course of the project—meaning manufacturers had plenty of lead time and wanted to maintain the flexibility to respond to changes in the application requirements. And, since the playing field was level for all manufacturers, the cost of these inefficiencies was already baked into the pricing, so why invest in getting faster and more efficient?

Today, two major factors are affecting the competitive landscape, and these factors are set to change the game for custom AHU manufacturers. First, there’s dramatically increased demand for AHUs due to net-zero requirements and new indoor air quality regulations. Second, the recent availability of collaborative platforms will allow some manufacturers to speed up production, increase capacity and drive down overall cost.

Net Zero and COVID Are Driving Demand

New Net Zero regulations are going to create a spike in demand for custom AHUs, both for new builds and retrofits, and that spike is likely to turn into a new normal of higher demand for the industry. Also, across the country and the world, we are seeing new, more stringent air quality regulations driven by what was learned during the COVID pandemic. This means HVAC systems in existing buildings will have to be replaced or at the very least, retrofitted to improve circulation and filtration. In combination, these factors will drive demand for custom AHUs to historically high levels. And with all the retrofits required, production cycle time will need to shorten to meet this new demand.

This heightened demand is going to create winners and losers. Those who can meet the demand will get the contracts. But at what cost? That brings us to our next competitive factor: digital transformation.

Digital Transformation Will Drive Efficiency and Provide Competitive Advantage

Some manufacturers may choose to meet this new demand by adding both human and manufacturing capacity to their existing processes. But those who re-engineer their processes to work smarter instead of harder will ultimately win the competitive battle.

In the past 15 years, smartphone platforms have made cloud-based, instantly synchronized information and collaboration a must-have reality, without which we wouldn’t dream of surviving today. The same type of cloud-based technology is now entering the custom air handling unit manufacturer’s world; those manufacturers who seize the moment and adopt the technology early on will come out on top.

Creating a cloud-driven unified collaborative workflow is the key. Eliminating silos, rework and constant hand-offs between departments will cut down on person-hours, reduce risks from human error and accelerate response time. We are starting to see the first of these collaborative platforms appearing for AHUs on the market today. And for early adopters, although there will be a learning curve and growing pains involved in changing tried-and-tested methodologies, the competitive benefits will be significant. 

The Time for Digital Transformation is Now

Within a few years, digital transformation will be an accepted reality in the custom AHU industry. Re-engineering the entire process to eliminate inefficiencies, improve collaboration and streamline operations will simply be the cost of staying in the game. If done right, the industry will emerge from this digital transformation with increased capacity, improved velocity, reduced cost and higher profit margins—as well as happier engineers, employees, partners and customers.

And for early adopters, the advantage of getting in on the coming wave of increased AHU demand is a serious draw. Digital transformation will be one of the biggest factors deciding who wins the battle to capitalize on the surge of Net Zero and COVID-driven demand over the next five years.

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About the Author

Vicken Arabian | CTO at Kinetix Air AHU Selection Software

Vicken Arabian is a Mechanical Engineer (Cal Poly Pomona) and project manager (UC Berkeley) with over 30 years of experience working in the custom AHU industry. As the Subject Matter Expert (SME), Vicken is quite literally the brains behind Kinetix Air. His vision of bringing enabling, unifying collaborative technologies to the siloed world of custom Air Handling Unit manufacturing is the driving force behind the platform’s development.