The price of progress: rising supply chain costs could mean corporate casualties

In addition to severe competition at the front end, the industry is currently experiencing an unprecedented rise in raw material costs. Since the beginning of 2003, the price of PVC-U resin alone has rocketed by more than 50%. Other cost increases are adding to the squeeze in the supply chain and creating unsustainable pressure. Every month has seen another rise, rather than the previous cycle of ups and downs that could be more easily managed over the medium term.

As a result, we’ve seen one well-established systems company close its doors after 25 years. Another big retail name has also ceased trading. And I believe that unless it proves possible to pass these increases right through to the consumer, then there will surely be more corporate casualties.

Adding value

But passing price rises down the line to the homeowner can only be achieved successfully if the installer can demonstrate that they have the products capable of adding value to properties or even lifestyles. In order to accomplish this, we have to shift a mindset that we ourselves have created – namely the long term benefits of PVC-U.

Replacing the replacements that were fitted at the beginning of the boom in the early eighties is, from a product perspective, relatively easy. Locks and hardware have improved with a resultant increase in security. Sealed units now incorporate Low-E glass which reduces heat loss and therefore can reduce heating bills. Even the profiles look better as sight lines have reduced.

A new approach

Replacing windows that are perhaps just 10 years old or less is, however, a completely different challenge. A new approach is required to stimulate the desire in the householder’s mind. The style of a window can have a huge impact on the look of a property from the inside as well as the outside. Featured or sculptured profiles help frames to look increasingly like their timber forebears, especially when they are finished in woodgrain or coloured foils. Mock horn detailing and realistic Georgian bars combine further to replicate the look of traditional sliding sashes.

Conservatory Boom

Since the beginning of 2003, the price of PVC-U resin alone has rocketed by more than 50%

One market sector that has grown rapidly over the past few years is conservatories, mainly as they’ve been seen as an economical alternative to a traditionally built extension. However, even this sector is beginning to mature and fragment as new channels open up such as garden centres and the major DIY retailers. These latter companies are presenting consumers with massive choice across a huge range of products, and conservatories are now competing against other major improvement items such as kitchens and bathrooms.

When faced with front-end pressures such as these, many installers are forced to use price as their main bargaining tool in the vain hope that a full order book will generate profits. Sadly that is not the case.

The key to unlocking this conundrum lies in harnessing the skills at each level of the supply chain. Systems companies and fabricators must work together to operate at maximum efficiency to reduce the unit cost of a frame. Deliveries have to be as close to complete and on time as possible (stock ties up working capital not to mention space!). However, both parties can only react to an order once it is generated by the installer. It is these companies that have the greatest challenge: if they don’t sell an installation, then there will be no frames to manufacture and no profile to extrude.

Everything we do at our end of the supply chain is aligned with the goal of providing the installer with a product that he can be confident in and that the householder will want to have in their home. But the actual product is only part of the story. Presentation packs, literature, technical specifications, promotional fliers and point of sale information all have to build on the same image to enable the salesperson to underpin the overall quality of the offering, and reinforce the price point this represents.

Price rises inevitable

The one thing these opposing pressures at either end of the supply chain have in common is that they will only be survived by companies who are able to invest in the long term future of their businesses.

Of course, price increases are never popular, but in times such as these, where outside influences such as escalating raw material costs are beyond our control, they are essential to ensure companies can continue to provide the quality products, service and support that their customers quite rightly expect. It’s not about boosting profits or dividends for shareholders, it’s about investing in the future, for the sustainability of the industry as a whole. And that’s where all those involved throughout the supply chain have to work together to maintain demand and deliver the goods.