Understanding supply chain issues affecting the trade industry
Understanding the global supply chain disruptions can help small businesses grasp why material prices have skyrocketed and become hard to come by in the past few years. If a trade business cannot maintain a stock inventory or pop to a local builders merchant to pick up some supplies, their company can suffer financially.
In the past decade, we have had some pretty significant events occur which have had a detrimental effect on supply chains. One small chink in the chain can cause disruption and present businesses with challenges. Let's better understand why we are in this situation and how you can safeguard your trade business.
How 2020, 2021 and 2022 affected the global supply chain
The past two-to-three years have proven how vulnerable the world's supply chains are. During COVID, disruption to everyday life was monumental, and supply chains had never experienced anything like it. Practically every corner of the planet saw effects ranging from electrical components in Taiwan to wood production in Canada.
Trade businesses in the UK still feel these effects and are constantly adjusting their prices to meet the price increases caused by supply chain issues. As tradesmen and women rely on goods to work on their jobs and projects, one-off events like COVID can wreak havoc on any business that relies on materials for their work.
Other smaller situations can have a negative effect too. The recent Suez Canal blockage is a prime example where 12% of global trade was held up, costing over $10 million daily.
Dare we mention the 'B' word?
Now, this article isn't aimed at getting all political or starting debates. We are simply here to share how certain events have affected the supply chains to the UK and how they are impacting the prices of materials for tradespeople.
Brexit has added further complications to the already stretched global supply chain. As the UK untangles itself from generations of regulation and legislation, businesses are having to find ways to navigate some choppy waters. Due to new rules and logistical increases, among other areas, exports from the UK to the EU have now dropped.
Add this to the fact that Britain has to create new pathways (via trade deals) for supplies to reach their shores, and a disruptive mix of Brexit and COVID has left the UK in a challenging situation. The slowdown in the production of products around the world with the need for more employees is showing a major challenge to get supplies onto the shelves and ready for your building site.
How the chain may be vulnerable
When we see issues with the supply chains and prices hiking, it's not just down to the reasons above. Often, suppliers are contracted to stock certain products for sale and distribution. More prominent building merchants, for example, may have fixed contracts that require a certain amount of raw materials to be delivered weekly at the current market price - leading to price increases when the demand is high, but the supply is low.
This is a double-edged sword with the fact supply chains are already stressed, and companies with contracts continue to order at the level previous to the issues starting. That, along with material hoarding, is why building material prices skyrocket.
Considering the risk management of your business
Risks are everywhere within the trade industry, but have you considered the unexpected and, quite frankly, intangible risk of the supply chain, rising costs and material shortages?
After the turbulent last decade, businesses need to rethink how they do their traditional risk management planning. Supply chains aren't due to recover for years; some experts believe a whole new system for supply will have to be invented.
Regarding tradespeople, being aware of the risks to your business if supply is low should be paramount. Often, local companies will rely on one single supplier for their products. In other words, all their eggs are in one basket. Another relatively recent development in the supply world is 'just-in-time' delivery. This is handy for tradespeople who plan jobs and want the materials to land on the project when needed.
Making sure your trade business is like a stock market trader's portfolio - being diversified is the way to go. Ensure you have strong local and national supply chain contacts and prepare for the worst. If your local supplier runs out of a product your business needs, have two or three backups ready. If you need a product for a specific job further down the line, plan ahead and don't rely on just-in-time delivery.
This will ultimately better serve your business, customers, and the general supply chain. Having a business continuity plan is the smart way to go as a tradesman or woman. Whether you are an Electrician, Plumber, Gas Fitter or Carpenter, ensuring you manage these risks will help your business be more resilient.
Is your trade business protected?
It's worth remembering that protection is just a part of your risk management. It may not even protect your business from losses incurred by the volatile supply chain. However, with prices high but stabilising, we have a few best practices for pricing your trade accordingly and how to manage risk in your business.
On top of this, having a well-rounded insurance policy can help to shield you financially from risks and hazards pointed towards your trade business. Our insurance products can be taken out for Public Liability Insurance, Employers' Liability Insurance, Contractors' All Risks Insurance, Personal Accident Insurance and many more.
Why choose Rhino Trade Insurance?
And that's all for today, folks. After reading this in-depth post, we hope you plan to take more control over business supplies and efficiently improve your risks and continuity.
The market is amazing for qualified tradespeople right now. Demand is high, and opportunity knocks. But it doesn't take long to realise the price of supplies and issues in the chain are affecting businesses. Your best course of action is exploring your options and having a robust plan for an emergency.
At Rhino Trade Insurance, we provide more than just helpful articles. We also solve your trade insurance needs. Want a transparent, award-winning, five-star rated insurer? Ring our team today at 0116 243 7904 or visit our handy online quote shop here.