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THE POSITIVITY ISSUE
TALKING SHOP
GEMCELL ’ S TRACY BENNETT DISCUSSES THE CHANGING SUPPLY DYNAMICS AFFECTING THE INDUSTRY , AND WHY IT ’ S MORE IMPORTANT THAN EVER BEFORE TO BUY LOCAL .
O ver the past year or so the market has experienced a new level of volatility . Uncertainty at all stages of the supply chain has fed a chain reaction and everyone has a new range of buzzwords – ‘ force majeure ’ is declared more often than we ’ d like and if we ‘ pivot ’ any more we may never stop spinning . Do we adapt or do we hold on to the way things have always been done in the hope that we one day return to ‘ normal ’? Is there a ' new norm ' or are things too unstable to get used anything like a status quo ? Sourcing raw materials and components has been more challenging than ever for manufacturers . There are shortages in copper , PVC , timber and chips . There ’ s a lot going on and yes , a lot of this is linked somehow to the COVID-19 pandemic .
Copper inventories are low and prices reached an all-time high in June . In China many factory workers didn ’ t return after Chinese New Year last year and manufacturing reduced because of the decrease in workforce . Strained political relationships between China and Australia , meanwhile , prompted a reduction in trade .
In the US , residential building increased massively so they ’ re not exporting the same volume of timber , which is used in manufacturing processes . In Texas , the already compromised resin production plants were further impacted by storms . ( Resin is a base material of PVC .) With populations in lock- down all over the world the demand for computer equipment soared both for working from home ( think webcams , monitors , laptops ) and for entertainment ( TVs and game consoles ) – and this contributed to the shortage in chips .
But whatever the reason for the lack of availability , what does a reduction in supply at this level mean ? It ' s simple : Price rise to the manufacturer .
The development of connected , well , everything requires chips , chips and more chips – which makes launching new product ranges rather challenging during a chip shortage .
In other categories , manufacturers are in some cases being forced to consolidate product lines . They simply don ’ t have enough raw material to keep their plant running across their full range . Manufacturers are choosing their supply partners because they can ’ t supply everyone . Some products are being rationed while the backlog is cleared .
Here at Gemcell , we unashamedly stress the importance of relationships and supporting local . It ’ s not just a case of us pushing our values . Those relationships have become essential to getting what ’ s needed to keep the doors open and the shelves stocked .
Manufacturers are also having to consider new transport solutions . The global shortage in shipping containers has caused extreme rises in the cost to ship by sea . Some local manufacturers are revisiting road freight as the quickest and most cost-effective option . International manufacturers are reimagining their pathway to source product not only in relation to where it is physically , but also in relation to which port they can actually get it out of . It sounds like a big logistical headache . Reduced volumes and the compounded increased production costs at manufacturer level have the knock on effect of price rises to our wholesaler members .
The reduction in manufacturing volume and changes to transportation have also contributed to increased lead times for related products . Our independent wholesalers have had to adapt to hold more stock to make sure products are available when you need them . Reports we ’ re hearing are that supply has been secured but prices have risen and cost to serve has increased . Changing COVID-19 control measures around the country require flexibility to work within legal constraints and Government guidelines to service you , the customer . What should you be doing ? We recommend planning ahead whenever you can and working closely with your chosen Gemcell wholesaler to secure the products and service you need . Be prepared for inevitable price rises and communicate with your customers so they ’ re not taken by surprise , and support the current sentiment to back Australia : “ Buy Local !”. n
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