We’ve heard from our clients how supply shortages, escalating prices and difficulties recruiting skilled workers have all created disruption in the building products sector throughout this year. Couple this with the impact both Brexit and the pandemic has had on building and construction and it’s easy to why there are complex difficulties to overcome.
Unfortunately, we’re not out of the woods yet, so we thought it would be pertinent to highlight how the industry has tried to tackle these challenging times to cope with increasing demand.
Supply and demand
All businesses working in building products or commercial interiors have felt the struggles of demand outstripping supply in many essential products as the construction industry plays catch up after delays faced last year. Steel, roof tiles, cement, plasterboard, timber and many components that are fundamental to lots of everyday products have been impacted. With approximately 60% of imported materials used in the UK coming from the EU, the congestion at UK Ports and ongoing HGV driver shortages have also contributed to ongoing delays.
As the year has progressed, price increases have become more frequent. Materials from the Far East and Europe have seen the steepest rises, with timber, for example, leaping as much as 120%. Almost all materials used for building products have had double-digit increases in recent months.
Pressures facing employers with skills shortages
Higher levels of vacancies have made the jobs market very competitive, especially in the building products industry. Traditional advertising methods may not yield the appropriate level or quality of applicants needed, especially to fill key senior positions. That’s where a recruitment specialist like Beaumont Wood has been able to boost the chances of success.
Our tailored, personal approach and over 20 years of experience mean we are best placed to source the right calibre of talent for a building products business. This may include seeking out applicants from an extended pool who have the right skills and experience but may not be actively looking for a new position. We’re specialists in promoting the benefits of the career opportunity, package and long-term goals and this is key to attracting candidates that will add real value to an operation. If you’ve got a senior vacancy you’re struggling to fill, please get in touch.
An alternative route for employers is to upskill and retrain your existing employees to cope with the ever-changing requirements of the business. Our blog on filling the skills gap in your team has useful tips and advice on developing your existing team.
The cumulative effects
This example from one of our clients highlights just how disruptive the knock-on effects of industry challenges can be for a business.
Their order books are buoyant, and shipments are ready for dispatch, but a driver shortage is affecting how quickly these can be distributed. The resultant delays impact monthly sales, cash flow and recruitment of other staff as the business is hindered by the inability to fulfil their waiting clients.
How can you mitigate issues?
We’ve noticed that the trade is responding in several ways to try and mitigate and respond to the challenging situations they’re facing:
Assessing all elements of the business model
Undertaking a full assessment of the business to monitor risks and improve readiness for different outcomes. Recognising the need for business plans need to be agile to react quickly to changing circumstances.
Monitoring sales pipeline
Reassessing work and sales pipelines. Understanding how changes could impact current or future projects. Monitoring quoting, profit margins, procurement funnels and team training/internal communication.
Diversifying the supply chain
Reviewing the supplier pool and diversifying to build new relationships, ensuring supply chains are managed with effective communication. Understanding the viability of contract terms and renegotiating when required.
Gathering data to create a supplier dashboard of UK suppliers and imported materials. Regularly reviewing potential disruption and its associated risk, to assess how project controls and processes can adapt swiftly to changing suppliers.
Reviewing vulnerabilities in a supply chain and how they might affect the business financially and legally. Looking at areas such as cash flow, loan repayments, terms and contracts. Working in partnership with suppliers to agree fair payment terms to futureproof.
In general terms, the overarching response from the sector has been to:
- Think ahead – get orders in early
- Allow for longer lead times
- Scenario plan to cope with changing circumstances
What’s the outlook for 2022?
It’s likely that there’ll be further price rises in the industry before costs regain some stability. Businesses who are reliant on global imports face higher administration and import costs so will also have to tackle this ongoing pressure on operating profits. There is hope on the horizon, however, as businesses who diversify their supply chain and use the opportunity to improve processes, team structures and efficiencies, could reap the benefits of sustained demand in the years ahead.