Unidentified Analyst: It’s Paz on for Mike. So another question on backlog. So how are you thinking about backlog duration at this point versus normal? Obviously, a lot of puts and takes. The backlog levels are elevated. We talked about the numerous puts and takes on the manufacturing and outsourcing side. But then also on the flip side, we talked about an opportunity to normalize backlog levels this year. And then secondarily, based on the answers to Deane’s question, I suspect I know the answer here but I’ll ask anyway. How much if any backlog normalization is assumed in the current guidance?
John Hall: Let me hit the first how I think about it. I probably think about it a little differently than the analysts on the call because I’m keenly interested in knowing where our sector competitors are in their lead times. And I think we’re advantaged in our lead time at gate valves right now. The Chattanooga plant has done a great job of plowing through the backlog there. But I believe we’re disadvantaged in hydrants right now. I think our lead times are too long compared to our competitors. When I think about our specialty valve business, I think we’re near par. But we should — with the investment and we can get the throughput, we should be advantaged, we’re domestic. And we’re not as dependent on that China supply chain as some of the competitors in the specialty valve market.
So I want to see improvement there on what that backlog reduced in terms of days of production because I think it’s an opportunity to take share. So I know you’re asking me and I’m kind of evading the financial answer to your question. But that is how I think about the backlog and I want to be honest with you about that. I don’t think about it in the context of how much price is trapped there, although there’s a considerable amount or what an optimal number is. What I do think normalization looks like though is that what we call the short-cycle business, the smaller gate valves, let’s call them 4 6 8s and the 5.25% Super Centurion or the couple of the wet barrel size hydrants, those have to get inside 2 weeks because that has to be the rapid turn for the channel.
Those are probably the most competitive markets for the channel and therefore, they need to turn that inventory rapidly. They don’t want to be sitting on months of gate valves or sitting on months of hydrants. And so with our channel partners, we have to get that supply chain balanced out which is — continues to be out of balance today. So ideally, we would see that continue to shrink and get back inside of a 30-day backlog by the end of the year for the short-cycle business. The project business, I expect that those lead times will continue to grow. But as IIJA money puts more of these bigger projects out there that we and our competitors will start having more and more, a, engineered valves and b, longer and longer lead times on those engineered valves.
If anybody remembers back when we did the large casting foundry, we put in a 20-foot x 20-foot bed for a 3D printer for tools, so we can make large tools for Build America Buy American products. We expect that our cycle time to engineer will be better than the competition but that our throughput times will be on par. And so we hope to be advantaged there. So, I know that’s a long-winded answer to say expect backlogs to continue to fall and it’s more important, I think, in the market for us to be competitive or advantaged even than to worry too much about where we are in context of days.
