IE
If some commentators in this industry are to be believed, Brexit was just a blip which can be brushed aside as everyone ‘keeps calm and carries on’. I wish it were that simple.
In the hardware sector where so many products are manufactured overseas, the real implications of the Brexit vote are only now really starting to be felt, as the impact of the fall in the value of the pound filters through to the prices being charged to fabricators, and in turn to installers and eventually consumers.
Certainly, Mila had the financial resource to be able to hedge against currency falls in advance of the vote. But, with the pound still at a very low level against both the dollar and the euro, we have found ourselves facing the same cost pressures as the rest of the market.
As a result, we have very reluctantly had to introduce surcharges across both Mila branded and third party products. I understand entirely that surcharges are never welcome, but the whole finance and supply chain team at Mila have worked hard to develop a new approach which I believe is fair and honest, and which balances our responsibilities as a high quality supplier with the interests of our customers in a competitive market.
Mila has introduced a transparent banding structure for all of our own branded products which links the % level of our surcharge directly to the average exchange rate over the previous quarter, and we are guaranteeing that, once determined, the level of that surcharge will be held until the beginning of the next quarter.
We have already sent details of the banding structure to every customer, along with a full breakdown of what the actual cost impact is to us while the dollar or the euro sits within each of the bands. Even more importantly, we have included a clear analysis of what proportion of that cost will be absorbed every time by Mila – up to half of it on our own branded products, ensuring that we share the burden with our customers.
Virtually the whole of the hardware industry faces precisely the same issues of course and certainly we are having to pass on similar surcharges from all of our other third party suppliers.
The reality is though that we all face challenging times in 2017 and, while I am sure there will be disappointment in the face of widespread price rises, there does need to be a broader realisation that this will be the nature of the market moving forward.
Unfortunately, there is something of a perfect storm facing manufacturers because, even taking out the exchange rate issues, commodity prices are also on the increase.
The monthly price of zinc hit an 8 year high in December, aluminium is at a 4 year high and copper spiked by 20% in a single month, alongside similar price rises in steel and of course brass. This has simply not been widely reported in the trade press but has wide implications for the market.
Mila is already being notified of material price rises from our suppliers in the Far East of anything between 5 and 11% for orders placed now for deliveries in the Spring.
For some time to come then, I think the industry will need to accept that these prices will be the new norm and, however hard we try, no amount of production efficiency or value engineering will be able to mitigate them entirely.
If suppliers like Mila are still going to be able to invest in developing new products and in introducing the service initiatives which we know our customers value, then it has to be possible for us to pass on price rises which are legitimate and fair.
We have taken the decision to communicate clearly and honestly with our customers so that there are no nasty surprises in terms of what cost increases they can expect and to give them time to consider how best to pass these on to their customers.
Communicating the value of high quality, high security hardware is obviously key and our award winning marketing team continue to provide a whole range of sales and marketing support materials to help fabricators and installers promote the benefits of choosing Mila’s innovative, high quality range. Our sales managers can put customers directly in touch with the team to discuss what they need.
