NFA MAGAZINE - MAY

OPEN LETTER: SUPPLY CHAINS & PRICE INCREASES

Mike Parczuk, Managing Director of Sternfenster, discusses.

We have done our best to absorb those hits and to give our customers notice but it’s vital now that they, like every other customer of every other fabricator, review their pricing structures and build more margin into their models, so that they remain profitable going forward. I’ve commented on the importance of this before. If we’re profitable as a fabricator we can invest, in machinery, in our service and support offer - those are things that directly benefit our customers. And I get it – systems, glass, hardware, and steel companies have to be profitable too, so that they can do the same. The success of everyone in achieving that, in investing in being better, is ultimately carried by our customers as the touchpoint for the whole industry with the end-user – installers also need to be profitable. At its simplest, that is reliant on three things: the price they sell at, less what they buy product for from their suppliers and less their operational overheads. I can tell you for definite that one of those is changing, so either installers need to operate at reduced overhead, or increase prices, or their margins are going to go down. Given the pressure on labour, the demand for fitting teams, I’d suggest that the latter represents the least line of resistance. Price increases are never going to be popular. But I’d argue the price installers pay for product from fabricators should be less of a factor on their bottom

I speak to our installers every day. ‘Exhausted’, ‘stretched’, ‘frazzled’, probably describe how they feel best. We’re in a boom but that’s come with a unique set of challenges, so to be talking now about price increases and disruption to the supply chain - we recognise it’s the last thing they want to hear about. As a business Sternfenster has already seen a series of price increases and surcharges - the communication of some of those increases, handled better than others. Each, however, ultimately brings us back to the same place - we’re paying more for components. Glass, PVC-U, hardware, steel have gone up, that puts pressure on our suppliers, they’ve passed those costs onto us and ultimately, we will pass those costs onto our customers. What concerns me is that things are very messy at the moment. We’re not getting one increase to communicate out to our customers, we’re getting several and then surcharges on top, which are variable and come in with very limited notice. I understand the necessity but combined, it creates a challenge for everyone because the limited notice that we’re getting impacts on margin throughout the onward supply chain because we can’t plan effectively for them.

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