How European retailers and suppliers are coping with the next crisis.
Thierry Coeman shares with us more than three decades of experience in the international Home Improvement Sector. He was the chairman of the Belgian DIY Association, a unique organisation which brought together retailers, independents and manufacturers much like Hardware Association Ireland. He works with a network of European and Worldwide Stakeholders to share best practice while seeking innovation in the art of facilitating the common interest focussing on customers’ needs. He is the author of the essay ‘Hammertime’, a provocative vision on the future of the Home Improvement store.
As the pandemic barely seems to be behind us, a new crisis already has appeared and unfortunately it cannot be solved with any type of vaccination. The major supply shortages, everywhere in Europe, are jeopardising the entire supply chain, both in the DIY / Home Improvement industry and in the Trade Sector. What are the causes that have led to this paralysing situation? Thierry Coeman has spoken to several of his European colleagues who are also confronted with these unforseen problems, and they have shared their experiences to date, and their outlook for the future.
“Not everybody can solve this crisis by hiring its own containership” says Bart Bouwen, chief purchasing manager for Hubo Group in Belgium. “We cannot be compared to Home Depot, but the fact is that we soon will be facing a situation where we won’t have everything under control anymore and that is unheard of in our history: we must and we will seek solutions because our very first concern and duty remains to satisfy our customers’ needs. In particular supplies of steel, glass and timber are becoming crucial as our customers are undertaking major renovation projects in their kitchens and bathrooms. We must make sure not to disappoint them or, in a worse case scenario, to guide them to alternatives”. To be honest, this situation is quite frustrating because no one has come up with a rapid or tailor made solution. The price structure of a product or product line for instance, cannot only be related to raw materials, as steel for example may only represent one component of the products composition. So, I expect more transparency in the negotiation with suppliers in order to better understand and master the complexity of the problem”. We are looking forward in the future to operating a totally reshaped partnership model with our suppliers based on a mutual understanding and analysis of the products composition and its price structure. That type of transparency sounds like a revolution, but it is my belief a new business culture with this unique vision is essential”.
Innovation and collaboration to overcome the shortages
“To understand why these shortages have occurred, one needs to realise some of what is going on in China. The Government is encouraging the local population to build sustainable houses, equipped with solar panels which are tremendously subsidised. As a result of this situation, supplies of glass for example, are under pressure affecting the manufacturing of shower cubicle units”, argues Thierry Lelong, CEO of LG Industries, with headquarters in the North of France, who supplies Adeo (Leroy Merlin, Bricoman) and Kingfisher (Castorama).
“In that complex situation, we had no other option than to drastically modify our sourcing: we worked out a partnership plan with a couple of fellow manufacturers located in Southern Europe, who previously actually were competitors, and managed to offer our key clients and customers an
adapted solution. As a result, together with these three other manufacturers we managed to create new synergies in order to meet our supply shortage demands with the six million units which were originally sourced out of the Shanghai area”.
Dries Bauwens, CEO of Asamco, a Belgian Buying Alliance for more than 65 independent stores and trading businesses says “The shortage of raw materials has totally modified our modus operandi in purchasing as we now are obliged to ‘book’ our production needs instead of forecasting our sales expectations”.
“The same situation is occuring regarding the shortage of timber. Disruption in supplies from the USA combined with the impact of Brexit, has led to pressure on imports from the Nordics. Now it’s a free-for-all: just imagine that the price of OSB and MDF has more than doubled within less than 15 months”.
Jeroen Lauwers, CEO of Deli-Home, market leader in timber supply in The Netherlands and Belgium comments that timber is a strategic pillar for retailers, independents and traders.
The supply chain is empty, there is no more buffer stock. So, to survive we need to reinvent ourselves. We developed a complete new strategy to become the ‘digital carpenter’ where the focus is now orientated on the end consumer at home who orders either online or instore. Today, our service agreement with retailers extends the store to where we provide home installations and services, combining B2C and B2B”, concludes Jeroen.
Investments in tough times
“As a matter of fact, we discovered quite soon what was going on and anticipated the immense shortage of raw materials”, says Edwin Lips, managing director of Garden Trade International, Benelux market leader in fencing supplies with the well known Giardino brand. “We bought huge amounts of stock previous to the first lockdown and managed to maintain our high standards of service and delivery levels.
We invested in a broad omnichannel strategy in order to supply online customers. Indeed, we embraced both business models and surprisingly now can share this expertise with our retail partners”.
Is Europe the Utopia?
No one has a crystal ball, but one thing remains obvious: this crisis cannot be solved within months as all the business lines need to be re-opened. This will require at least one year.
Meanwhile, numerous retailers and suppliers have shifted their sourcing back to Europe. Is that the better option in a world that demands more sustainability in the supply chain? Is the footprint of a truck, driving from the East of Turkey all the way to Flanders comparable to the footprint of one of these containers on a cargo ship, even when stuck in the Suez Canal?
The best will survive and players already engaging in a new transparent supply chain process will show others what may happen on the horizon. Will it be an image of the future or a mirage?