The outlook for the supply chain in the UK
The building supply chain is immense and diverse that starts in thousands of countries around the world. The importing of products into the island of the UK far out weighs the exporting (BEIS, 2020), with the heavy and dense production of bricks and blocks generally produced in the UK to avoid shipping costs. With the increasing material price index at 1.6% in 2020 and now at a soaring 20.2% (BEIS, 2022) there is pressure all the way down the chain to try and recover costs and stop consumer end prices from having a negative impact on sales. With the coming to an end of 2022 which was tipped to be a recovery year of bounce back growth but actually has seen an accelerated cooling down (Frankland, 2022) there is a worrying time ahead in 2023.
Indicators for growth in the housing sector
The new build housing sector, frequently seen as an indicator for growth in the building supply industry with housing starts worth £27.7bn in 2021 and forecasted to grow to £29.8bn by 2023. With this said the outlook should remain positive, so why are people within the sector preparing for a tough year? Frankland (2022) also reports that the construction market as a whole is expected to rise by 7% in 2023 and by another 2% by 2024.
These factors are linked to house prices and the steady rise of prices is the norm, but it seems that house prices are dropping in late 2022 (BEIS, 2022). Glenigan cited in PBC Today (2022) marks a worrying outlook for 2023 with a decline of 2% and states there is a ‘extremely challenging economic conditions” on the horizon. These conditions are disruptions to material, labour and supply chains, as well as higher taxes, higher utility bills and rising mortgage rates (PBC Today, 2022).
What does this have to do with chocolate?
It is at this point of the year that companies assess the performance of the current year and plan for the forthcoming one. The strategy and outlook for the year will determine the purchasing commitments and more than likely the sales and revenue of that company. Suppliers and manufacturers in the building supply industry will be banking on strong growth strategies to drive demand of their products in the market. These supply chains are part of the challenge for 2023 and this could determine success or failure.
In a recent podcast by Can Marketing Save the Planet (2022), the fair trade chocolatier Tony Chocoloneys’s, MD, Ben Greensmith, suggested that their product itself is the marketing strategy and word of mouth creates the sales. This is supported by the message to the consumer on the packaging and behind the product as a fairly sourced commodity that benefits the producers. This sustainable strategy of procurement, investing in the supply chain and then allowing the consumer to make the choice is an order wining criteria for the brand. The company has decided not to strip out the costs from the supply chain but invest in it to get a better product and also a more reliable supply, with a better fixed cost. This model is reverse engineering the selling cost to add value into the product to pay the suppliers fairly and keep them sustainable in the future.
How can the building supply chain be more resilient?
Chocolate might seem a distant product from building materials but it is a commodity that is susceptible to increased prices to the consumer with static or declining raw material costs, benefiting the people in the middle but not necessarily the producer. The building supply has commodities that are really low margin but high volume in sales. Is this model sustainable or will rising costs in the supply chain create another shock? There is definitely parallels between materials sourced in the building industry mirroring the cocoa production statistics, shocking issues of child labour and modern day slavery. These issues are trying to be tackled by the industry just the same as sustainability issues but as the podcast highlights their is not “transparency across the industry” and there are “empty promises and self-accreditation”. Perhaps this is the opportunity for success in 2023 as building a more sustainable and transparent supply chain can only mean a more resilient one. If all parties within the chain have ‘mutual gain’ then these predicted impacts may be averted. The argument against these actions will be raised in the form of consumer end pricing and that a price increase will not be accepted. This maybe completely irrelevant though if there is no material to sell, which in fact causes more dissatisfaction than a price increase. A resilient sustainable supply chain has been proven to be for successful for all and this could be the advertising and marketing costs that is at the start rather than the end, therein saving money for the distributors and making customers more satisfied in the end.
BEIS (2020) GOV.UK : Monthly statistics of building materials and compounds. Availabale at https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/940723/20-cs12_-_Construction_Building_Materials_- _Commentary_November_2020.pdf Accessed online : December 2022]
BEIS (2022) GOV.UK : Monthly statistics of building materials and compounds. Available at https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/940723/20-cs12_-_Construction_Building_Materials_- _Commentary_November_2020.pdf [Accessed online : December 2022]
Can Marketing Save the Planet (2022) Podcast : The story and impact of an unusual chocolate bar.Available at https://podcasts.apple.com/gb/podcast/can-marketing- save-the-planet/id1552858487?i=1000576478505
Frankland, C. (2022) KBBreview : House building market set to bounce back in 2023. Available at https://www.kbbreview.com/48423/news/house-building-market- set-to-bounce-back-in-2023/ [Accessed online : December 2022]
PBC Today (2022) Glenigan construction forecast shows a weak construction output as UK economy haemorrhages. Available at https://www.pbctoday.co.uk/news/planning-construction-news/glenigan-construction-forecast-weak-construction- output-uk-economy-haemorrhages/117952/ [Accessed online : December 2022]