IE
There’s a joint letter from several large fabricators appearing in the trade mags and online at the moment. It’s calling on suppliers to do more to halt the current round of price increases – rather than pushing them down the supply chain when the cost-of-living crisis is starting to dampen consumer demand.
I’m hugely sympathetic to that position of course and applaud the efforts that so many fabricators have already made to absorb the price rises they’ve faced over past 18 months, either by reducing their margins or improving efficiencies – or both.
However, I would point out that the vast majority of suppliers, like Mila, have actually been doing exactly the same. We spent more than £1.1m on air freight last year alone to keep customers supplied during the boom – and we didn’t pass any of that on. Since the start of Covid we’ve absorbed numerous increases in raw material costs and experienced losses in the value of the £ against the USD, which mean our own margins have been eroded considerably.
Like most importers, we had to impose a surcharge on orders last year as our freight costs rocketed, but we were completely transparent about that, kept it as low as we could and reduced it as soon as costs started to fall.
For Mila, and I’m sure for the vast majority of suppliers, imposing any kind of price rise or surcharge is always going to be very much a last resort. None of us wants to lose business, make our customers less competitive or undermine relationships that we’ve built up over many years.
However, for this industry to be able to respond to the challenges it faces in both the short and medium term, I am convinced that suppliers at the top of the market have to be in a strong enough position to be able to invest in the kinds of products and process innovations which will stimulate demand and help those at the sharp end win new business.
It’s easy to assume that suppliers can just shoulder the full burden of rising costs, but we are all so interdependent now that that’s simply not realistic. Whatever point you’re at in the supply chain, you need a stable, financially secure supplier who won’t let you down.
It’s probably worth pointing out that we do have annual supply agreements in place with a small number of very large customers. These carry with them guarantees on how rising costs and savings on currency fluctuations will be shared between us – for the benefit of both parties. They involve a level of commitment that, until now, many fabricators have been reluctant to make. But, if after the turmoil of recent years, you feel that you would like to discuss moving in this direction, please do get in touch.
Richard
