Since the beginning of the year, many companies face significant supply issues. Jean-Michel Laidin, partner Walter France, gives some ideas for limiting the impact on the 2021 accounts.
The shortage of raw materials is becoming problematic in several sectors. The wood, steel, copper for example, for electricians, are difficult to find. What follows is a sometimes spectacular surge in prices. Production capacity declines. Steelworks, which had been in overproduction, especially in 2019 when the price of steel fell, had to readjust to lower production. They work in tight flow : everything produced is immediately sold and taken out of the factory ; they no longer have stock in reserve. And this is just one example among others. The same goes for copper.. Production is struggling to return to its normal pace while demand is strong, particularly for electric vehicle batteries and semiconductors. Prices are rising. The price of copper therefore increases sharply. According to some analysts, it could reach double its current price in 2025. This shortage of materials goes far beyond our borders and is inexorably driving up prices.. The Chinese need more and more steel, the Americans have caused the price of wood to soar, turning towards Europe, and buy it at any price.
Consequences on the execution of construction sites
Construction companies in particular are bearing the brunt of the combined consequences of this shortage of materials and rising prices.. Construction sites slow down. Margins are falling. Between drawing up a quote and carrying out a project, several weeks, or even several months may pass ; companies hesitated, during the first semester, to pass on the price increase. In 2020, turnover may have fallen due to the pandemic and lockdowns, but the aid came to compensate for the loss of profitability. On the other hand, in 2021, turnover is starting to fall due to construction site delays, and the margins, are going, as for them, decrease due to soaring material costs.
WHAT MEASURES TO TAKE ?
To limit the impacts of this situation, construction companies can implement four measures.
Stocker, if they have the financial means. The rise in prices is not about to stop, “Investing” in purchasing inventory can be a wise strategy.
Indexer quotes from construction sites on raw material indices. Future increases in materials are thus passed on to the customer. It is essential in this case not to just mention it on the quote, but to spend time explaining the current situation to your client and to prepare them “psychologically” !
Choose your suppliers wisely and establish a relationship of trust with them. The business manager has every interest in consolidating a relationship of trust with a few reliable and financially healthy suppliers., rather than multiplying the number of interlocutors and systematically selecting the best bidder.
Gain agility and adapt its schedules according to supply.
