For most people, the story about the container ship blocking the Suez Canal for almost a week 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.
Thankfully, the ships carrying Mila’s latest multi-million pound consignments of stock were either ahead of the beleaguered ship 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 is still creaking under the strain of a market which is somewhere between 10 and 15% up on normal.
I’m proud of how Mila has 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.
At times during 2020, our line OTIF 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 are continuing to spend hundreds of thousands of pounds on airfreight for the most urgent deliveries.
As of today, I’m pleased to report that OTIF has risen to 93% 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 93%+ 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 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 until at least the end of May.
However, there is a light at the end of the tunnel. A report in the FT last week revealed that shipping companies are using some of the profits they are making to order a record volume of new container ships. No less than 72 new ships in March – easily surpassing the previous record of 50 ordered in June 2011. Most of these are similar in size to the now infamous Ever Given, with a total capacity of 866,000 20ft containers, and while they won’t come into service for a few years, it’s obviously a ready sign of confidence in booming global trade.
In the UK, we also read constantly about the £200bn savings mountains which households in work have managed to accrue during the pandemic. 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 customers that Mila is very much on track and will have stock ready for when that time comes.