VIEWPOINT


CHALLENGES IN 2021 David Jennings, CEO of door hardware company, UAP Limited, on the importance of supply chain resilience.


ONE OF THE biggest frustrations for builders’ merchants and their customers over the past year has been supply chain issues. Covid-19 restrictions in the UK and beyond led to reduced manufacturing capacity and logistics challenges, both of which affected lead times and product availability.


Meanwhile, building site closures followed by greater clarity surrounding whether construction activity could continue during the pandemic, lead to plummeting sales, followed by spikes in demand. This exacerbated the issues, making it difficult for each layer of the supply chain to manage cash flow and order products and materials in line with customer requirements. The result was often tradespeople and contractors who were desperate to get hold of products in order to progress their projects. Brexit and the uncertainty about a deal complicated matters still further towards the end of 2020. For many companies, stockpiling was the answer to safeguard against potential delays from a no deal outcome, but this resulted in further logistics issues, including hold-ups at ports and problems with warehousing capacity.


PREVENTING SUPPLY CHAIN


As we begin 2021, the outlook is more optimistic, but the challenges remain significant. Covid-19 is having a continuing impact on both logistics and manufacturing capacity at home and abroad, making product availability unpredictable and resulting in extended lead times for products produced by manufacturers that have not planned sufficiently for continuing disruption. The additional paperwork for imports following the UK’s exit from the EU Customs Area means that delays and backlogs at ports remain an issue, and a number of shipping lines have been avoiding consignments to the UK as a result of logistics issues. Meanwhile, the potential for an outbreak of COVID infections amongst customs officials or logistics operators remains a threat to goods entering the country efficiently.


All of these factors have combined to create a perfect storm for builders’ merchants at a time when offering customers an efficient service is critical to recovery and cash flow. However, with planning, investment and an agile approach, manufacturers can ensure that builders’ merchants can offer the product availability and short leads times their customers want.


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Planning for Disruption


At UAP Limited our products are designed, developed and tested by us in the UK but manufactured to our exacting quality assurance standards by Chinese factories. We know every year that we need to plan around the disruption of Chinese New Year because, every year, workers who have travelled to the cities to work in factories travel home, often spending a month away from work. Each year, a proportion of them opts to stay in the provinces after the celebrations and the need to replace those workers can cause further production delays and reduced capacity. That understanding of our supply chain vulnerabilities means that we have known for months that the fall-out from Chinese New Year is likely to be even greater than usual this year because Chinese factories are anticipating a longer hiatus and an increased worker drop off after last year’s restrictions. That’s why we’ve planned for those challenges in advance.


We began the pandemic in a position of strength, with established manufacturing partnerships in place and a good understanding of how the Chinese market operates. Indeed, our relationships in China meant


that we were faster than most in recognising how severely it was likely to affect the UK market. Because of those insights, we were able to implement a strategy for maintaining stock levels and mitigating the risk of delays. Product development and investment continued and we looked at where we needed to add more warehousing capacity. As a result, we started 2021 with an additional 25,000 sq ft of warehousing space, with a further 35,000 sq ft planned for this year. Our stockholding currently sits at £7 million, and will increase to £8m by the end of 2021. Because we anticipated delays and production capacity issues in China during February and March 2021, we ordered our products months in advance and ensured that consignments for Q1-2 were either received or en route by the end of 2020. Products for Q2-3 are already on order and we will continue to build the likelihood of extended lead times and shipping delays into our production planning.


Capitalising on Potential


It’s been a tough year for the building trade sector, but with a strong housebuilding sector and consumers spending their holiday budgets on home improvements instead, the potential for a strong recovery is very promising. But recovery can only happen if the products needed are available to respond to demand, so supply chain resilience is central to builders’ merchants’ ability to serve their customers. That’s why UAP has been so focused on planning ahead with high stock levels and advance orders, not only to underpin our own business continuity but to ensure builders’ merchants can rely on consistent service levels and short lead times. BMJ


www.buildersmerchantsjournal.net March 2021


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