Global Supply Chain Disruption 2020
At the bottom of this article is a YouTube video and transcript from Dr. Rubana Haq, President, BGMEA. This is not a flooring company, but a leader in the global garments sector, and she is from Bangladesh. Her statements apply to all industries. The economic impact of what is currently occurring is making a global impact. Lives are being dramatically impacted. Stick around till the bottom of this post to see what she has to say… but first, a brief prediction of what could happen in BC Flooring industry. Regardless is you live in Greater Vancouver, Vancouver Island, Fraser Valley, Interior or up in Northern BC. The British Columbia flooring industry will absolutely be affected by this virus situation for months and months to come.
For us at Word of Mouth Floors (Richmond, BC), as of April 2020, we actually have more containers on order and being shipped from overseas, than at any time in our history. We are fortunate enough to have factory support to enable us to double down on inbound supply, not cancelling orders. This is only because our factory relationships are so strong and built over 20 years that they have been able to financially support us at this time. But we are sensitive to the facts that many of us are hurting economically.
Our inbound containers, this is not the BC flooring industry norm. I have heard from friends that are buyers and I have heard from factory Executives themselves… orders are being cancelled in large amounts. The impact of this will be felt for months and months. Play this out whenever this virus situation is in control and when we return to ‘normal’ (whatever the new normal will look like). Here are how things could play out. Let’s list some things I am seeing and I believe to be true:
· Current flooring suppliers in BC, business is reducing. Some by a little, some by a massive amount. Most (all?) have reduced hours, some are closed.
· Flooring Distributors, ones that stock inventory in warehouses, are sitting on mountains of flooring stock.
· Top sellers are still selling. They always seem to sell. We will call this the 80/20 rule… so top selling 20% represent all the current sales. But top flooring products skus are going out of stock.
· Flooring warehouses will sit full, over capacity, but, filled to the rafters with old products. The ‘not so popular styles’ always seem to be in stock, the must have colors are long gone.
· Container orders are cancelled. Because revenues are down, so no cash flow is occurring. Or worse, orders were placed and accounts payable remain unpaid. Bad debts go up, flooring suppliers get hurt. Remember 2008-2009? Huge spike in bankruptcies across North America during the Global Credit crisis, which triggered a housing industry collapse in America. We survived that time with much less pain than our American neighbours… but there was still pain.
Hoboken Floors of Wayne, N.J., recently filed for Chapter 7 bankruptcy at the U.S. Bankruptcy Court in Wilmington, Del. Unlike Chapter 11, which would require that the company file a plan of reorganization, Chapter 7 indicates that Hoboken will liquidate all of its assets. The 77-year-old company was until recently the top independent hard surface flooring distributor in the country, with more than 20 branches and 600 employees at its peak.
· Customers – some are completely price driven, so deals will be available. Clearance items, discontinued colours, all because of an abundance of stock for the slow moving items
· But anyone that doesn’t want to settle, they want a popular colour, an on-trend product, or anything that is in demand… they will be out of luck. They will have to delay their purchase. But for how long?? No new container orders are coming. New orders won’t happen in mass until after the virus impact is addressed AND all the stacked up inventory is sold off.
· But stacked up inventory is real money. Distribution can’t give it away, and they can’t take a huge loss after losing for months and months during the slow down. So they will be slow to re-order. Waiting for old stock to turn. I have seen flooring apllets sit for 10 years and not sell. It happens all the time. Again, this is real money and many BC flooring distributors / sellers face serious financial hardship, economic pain because of this anchor which is slow moving flooring inventory. In a high volume low margin industry, it potentially puts people out of business.
· When these companies can economically afford to re-order, everyone who survived will be re-orders at the same time. From all over the world. Canada, USA, Europe… we all buy from the same factories. Factories are receiving too many orders. Remember: Factories just lost money for months and months. China was ravaged by Coronavirus and they were already in difficult economic situation before Western businesses cancelled orders. They WILL increase prices and they WILL have production delays.
· Global logistics (ocean and trucking) will be strained. They will increase their pricing to move products.
· Oh, and by then, the Russians and Saudis will probably have figured out their oil dispute, oil prices will go way up, and fuel surcharges will kick in, adding in more costs.
· Remember… we are not America or Europe, but, we get our flooring from the same factories. So we compete for the same production. The same raw materials. If they pay more, we pay more. If they have production delays, we feel exactly the same thing.
If this plays out as the above points suggest it may play out, I predict you will wait for huge periods of time for the colour / product you love, to be back in stock. You will pay more for it. Maybe a lot more. Oh, and every installation contractor that was sitting at home not working for months during this crisis will be soooooooo busy that they will not be able to install for you any time soon. And when they can, they will charge more. Ouch and double ouch!
Sorry, that is a downer of a rant. Not meant to do anything than share what I am seeing, and share what I went through owning a company that sold and delivered flooring during the 2008-2009 global credit crisis.
Ok, so how about this: Find what you want from someone today. Hopefully us at Word of Mouth Floors. Find someone that has beautiful floors that you love, available today. Buy it now! Popular, hot, on trend colours are arriving every week for us. Buy now, from somebody. It doesn’t need to be from our Richmond BC showroom, or from our online ecommerce store. But find a supplier you trust and buy from them now. If this plays out like it did in 2008-2009-2010 you will avoid huge delays in your project by being prudent and getting ahead of this. You won’t regret purchasing early.
My two cents worth. Word of Mouth Floors would love your business, but really, as a consumer, buy from who you feel most comfortable with. This suggestion applies to all of BC flooring suppliers.
I mentioned a heartfelt video from Dr. Rubana Haq, President of BGMEA. Here is the video and text transcript. She is an impressive speaker that lays out the reality of the impact of the supply chain, order cancellations, on the real lives of workers that it impacts. People will go hungry based on order cancellations.
Appeal of BGMEA to the world for the shake of the 4.1 million of workers in the garments sector of Bangladesh
Dear partners we’ve been in this for long long time 2013 happens you are all by our sides. We’ve gone through ups and downs throughout our business lives but this is a time where we all come to a halt your stores are closed, you are closing, our factories are about to close, we will have no business most of all we will have 4.1 million workers literally going hungry if you don’t step up to our commitment to the welfare of the workers. I think this is one call that we all promise to take long time ago, and I think while we are try to change our labor narrative while we try to engage with all of you one thing was very very clear and that is our fore most responsibilities towards the workers. We are manufacturing country our reality and your reality are totally different but it is not a time to point differences, it’s a time through which we need to work together, and there is no alternative to that. I am not going to question you on your decisions. All I am going to do is appeal to your good senses so, that you kindly take your current goods which are under production and which are ready. Please take them under normal payment terms and then if you have any uncut fabric, uncut anything kindly allow us to also go ahead and if not give us the CM portion so that we can at least compensate our workers salaries with that when the production times come otherwise if we don’t have that support for the nest three months we will be having 4.1 million workers literally out in the streets and this is a social chaos we cannot afford neither do you want your reputation to be at stake nor do we want to be facing such anarchy at our end and while we are talk about unused fabrics and everything you can pay us later. You can differ your payment and we can also keep goods in our storage but as soon as we finish producing, as soon as the goods are out of our factories, we must consider it shipped. This is something that we need to work on. Please don’t give up on us please do not cancel any ready goods than you will have to kindly compensate on 100% FOB and three months support to the sector whose basically been of service to you for so long. We’ve been partner for so long should not matter much it’s not a huge amount of money for you. You know we are the most competitive nation therefore; I appeal to your good senses not to let us down at this point of time our workers lives are at stake your credibility, your reputation will be at stake and we are under full fire. Kindly do not let go off our hands. This is a disaster that neither commerce nor humanistic afford. Let us work together, let us collaborate, let’s not do finger pointing I am not going to be blaming you for all this but we have must graduate to the next level of progress. We must come out of this whole journey together much stronger. You know to our we are bleak and we don’t see anything. The only thing we have is hope, trust and the spirit of collaboration. We must trust each other. Let us not got excited at this point of time. Let us not engage in rhetoric. Let us all merge and all are interest together and protect each other. And I’m sure and confident that will get through this all. I encourage you all to make calls to me, I’ll happy to be take your calls my phone number is +8801711563978, write to me and I will be happy to engage with you and discuss with you but do not give us up at this point of time. We need your support, your financial support your basically your confidence at this point otherwise we don’t want the sector to have no hope, god bless you all, stay safe and stay connected. Thank you. Dr. Rubana Haq, President, BGMEA