Hardware stocks are finally returning to normal says Richard Gyde, Managing Director at Mila
For most people, last month’s story about a 400m long ship being blown off course and blocking the Suez Canal was probably nothing more than an interesting news piece. But for those of us in the industry who rely heavily on that Asia – European supply route, it was yet another stressful low in a year of extreme highs and lows.
While they struggled to free the ship, it was a relief to hear that the ships carrying Mila’s latest multi-million pound consignments of stock were either ahead of the beleaguered Ever Given or so far behind it as to not be delayed.
You don’t need to be MD of a UK hardware business to know that this sector of the market has faced immense challenges to keep up with demand since the return to work last May. In fact, the entire supply chain has been creaking under the strain of a market which is still somewhere between 10 and 15% up on normal.
I’m proud of how Mila responded and certainly, the fact that we had sufficient resources within our group to be able to place massive bulk orders with our suppliers in late summer meant that we have fared much better than many in terms of keeping hardware flowing; but we are not entirely out of the woods just yet.
I believed from the start that the best strategy was to be 100% open and honest about stock availability, so that Mila customers could factor this into their production plans. We certainly made it our mission to maintain supply to as many loyal customers as we could during 2020 and to offer alternative solutions wherever possible to keep people up and running; but we were also very clear about where shortages and delays were unavoidable.
Looking back now, the response to that was really good, with these words from Vista Frames being fairly typical: “Our Mila rep has gone above and beyond to help us source and find products. He always seems to go beyond the call of duty and, best of all, he always keeps us in the loop and fully informed.”
At times during 2020, our line OTIF, which is stock available in our warehouse ready for next day delivery, fell to around 80%, which is at least 18% below our usual levels, despite the fact that our supply chain team was working round the clock to bring in extra stock and we were spending hundreds of thousands of pounds on airfreight for the most urgent deliveries.
At the time of writing, I’m pleased to report that OTIF has risen to 94% and we are holding more stock in our warehouse than we have ever done before at this critical post-Chinese New Year point when our suppliers are just getting back to work after their extended break.
I know that puts us ahead of many of our competitors, because we are getting calls every day from potential new customers asking us to start supplying them but, as you would expect from Mila, we are continuing to prioritise existing customers.
Even at 94% though, our OTIF is still below normal and, in reality, I don’t expect us to get back to our usual 98-99% until around June, by which time further orders will have arrived in our warehouse and our optimum stock levels will be restored.
In the meantime of course, the whole industry is still struggling with freight shipping costs which are at five times usual levels because of the scale of global demand for Asian manufactured goods; and it looks likely that the freight surcharges which have resulted from that will be a fact of life for some time yet.
However, there is very much a light at the end of the tunnel. We read constantly about the £250bn savings mountains which households in work have managed to accrue during the pandemic and, with foreign holidays still off the agenda for many this summer, it seems likely that much of that will be spent on home improvement. I can reassure the market that Mila will have the stock ready for when that time comes.