This article was written by Simon Smith for September 17 issue of Roofing Today.
The term “the squeezed middle” has become political shorthand to describe great swathes of people in the UK who have been hit hard by rising prices and relative declines in real wages. Simon Smith says the term is equally apt for roofing contractors.
It’s no exaggeration to say that the UK roofing industry is still feeling the effects of the last recession, which started nearly ten years ago. Whilst the economy has since recovered, the knock-on effects have been much longer lasting.
Don’t get me wrong – it’s not all doom and gloom. Businesses like us have had to roll with the punches, and it’s made us up our game because we’re caught squarely in the middle between suppliers and customers – who have applied real pressure from both ends.
Let’s start with materials. The supply of some materials has been the worst it’s been in my 20-something years in this industry. Whilst the availability of some core products such as timber roofing batten has remained largely unaffected, the availability of materials such as concrete roof tiles has been severely stretched, with supply lead times of up to six MONTHS in the worst cases!
I’ll confess to a degree of sympathy, as the issues facing manufacturers have been well documented, and it is encouraging to see tile manufacturers investing in new production lines, curing systems, extrusion mouldings and so on. But the fact remains that this is an untenable situation for a core product that, even a year ago, we could get “off the shelf” in as little as seven days in most cases.
It’s not just availability – rising cost is another big concern. Through gritted teeth, we understand that costs have risen over the last 12 months, due largely to the pound taking a nosedive against other currencies in the wake of the Brexit vote. Praise where praise is due to suppliers because at a time when they could have taken real advantage of the market forces of supply and demand and hiked their prices, most have behaved relatively responsibly. I’d like to think this is partly due to the maturity of the relationships within the industry, and there is a level of camaraderie where we’re trying to look after one another.
There are some macro factors we can’t escape, such as deteriorating exchange rates, one-off raw material shortages (as seen with products like lead) and certain insulation products incurring significant price increases over the past year.
At this point, it’s also worth mentioning that the construction industry lost a lot of skilled workers during the recession, who are yet to be sufficiently replaced – and roofing is no different. We’re lucky as a mature business with a mature supply chain that we can retain a skilled workforce, but despite improving employment across many sectors, it’s not easy to attract the next generation into the industry, who are required to address growing demand in the future.
So, at the one end, we can’t get materials fast enough and they’re costing us more. At the other end, we’re under a similar amount of pressure from our customers to increase capacity and minimise price increases.
The issue with the availability of materials is a classic “bullwhip” effect in the supply chain – where customer demand increases faster than the capacity to supply. The further from the whip handle you are in the supply chain, the more the “bullwhip” stings. As the middleman, we are working very hard with our customers to “cushion the sting” – and if I say so myself, we’re doing a good job of it.
The main thing that has come out of being “the squeezed middle” is that the lines of communication among us, suppliers and customers have markedly improved.
There was a time when the procurement of materials accounted for less than 5% of our time and resources. It’s now anything between 10% and 25% because of the near-constant dialogue with suppliers in relation to their production schedules and allocating slots for the materials we need. And, of course, this can change in an instant when build schedules move or suppliers produce less than forecast, meaning significant additional work for our operations team to ensure we get the right material on site at the right quantity level in anything like the right timescale.
It’s also meant that we are making commitments to buy materials at a much earlier stage in a project build programme than we’re used to – which, of course, has its own financial impacts.
These are extraordinary times, and we are taking extraordinary measures to ensure a good service is provided to existing contracts and in laying the groundwork for securing new ones! Thankfully, at Bracknell Roofing, we have a very strong and committed team, which has enabled us to make a good job of dealing with all of these exceptional challenges.