Increased competition and panic is pushing some fabricators into an unsustainable pricing model, according to Ryan Johnson, Group Managing Director, Emplas. He argues that that isn’t good for anyone’s business.
There’s a sense in our industry that ‘profit’, is somehow a dirty word. It’s particularly acute at fabricator level. There’s a fear factor that if you let installers know that you’re making money out of them, then they’ll jump ship and buy from someone else.
In the commercial sector it’s different but the premise is the same. It’s about volume. Fabricators become blinded by the volume that goes with big framework agreements and headline turnover figures, even if the figures don’t add up.
In either scenario, prices are pushed south to win business and sustainable growth is compromised.
We’re also about competition. We want your business. We’ve invested in our operation to control our overheads, and that means that our pricing structure has always been – and will remain competitive.
Competition is good. It drives innovation and service and a good deal for installers, housebuilders and ultimately homeowners.
There is, however, a line. If you’re not making profit on a job, whether you’re an installer or a fabricator, you shouldn’t be doing it. If you don’t make money you can’t invest, if you don’t invest, your business isn’t sustainable.
This may sound obvious, but the direction of travel of pricing in our industry suggests that those basic principles of business are being ignored. That isn’t good for fabricators – or installers, or housebuilders.
Any business wants stability from its supply chain. If your suppliers aren’t profitable, they aren’t sustainable and that leads to disruption and cost in the short term and undermines innovation brand and reputation in the long term.
Emplas is investment led. In last two years we’ve not only invested in a second site but restructured our operation top to bottom to drive efficiencies, control production costs and improve quality.
This has been underpinned by our decision to embraceIndustry 4.0 by integrating cutting-edge IT and automation systems into our manufacturing processes including real-time quality control.
We’re also levering AI to deliver improved and more effective modelling, lower transportation costs, and to improve customer service.
As well as the factory, we’re also investing in new digital tools to help customers run their businesses more profitably and ultimately deliver a better experience to their own customers.
I’m immensely proud of what we’ve achieved. I genuinely don’t believe that there is a fabricator who is investing more for the long term, and that in doing so, we are creating future opportunities for our customers.
There are, however, prices, that we still can’t match.
That’s despite the automation optimisation we have in our factory. The fact that we are running some of the most advanced PVC-U lines in the UK; the investment that we have made in renewable energy; the efficiency of our fleet and advanced cost modelling of our transport strategy.
That tells me that the prices that are being offered by some fabricators are not sustainable.
If you are an installer or a housebuilder buying from them, then at some point in the next six, 12 or 18-months, you will be looking for a new supplier. Manufacturers guarantees will be worthless, that you’re going to have weeks of hassle trying to source new supply partners, headaches that most of us could do without.
And more importantly, if you are one of those fabricators, then you will not be in business because your pricing model simply does not stack up. We know it. You know it. I don’t want to see it happen – but it’s going to happen.
And Emplas will be waiting. We’ll be waiting to offer jobs to good people, being chewed up and spat out by badly run businesses and to win new customers and contracts.
The constant disappointment is that the industry still can’t get its act together to set sustainable pricing strategies that recognise innovation, quality and the investment that goes into quality product manufacture and supply.
I remain hopeful that one day it might.
