No more boom and bust?
Remember that brave “no more boom and bust” declaration? In 2007 the government was telling us that the boom could go on for ever. Then 2008 happened and, for a while, it looked as if the bust could go on for ever. It’s been an interesting decade so far – particularly so for manufacturers.
The large housebuilders, whose activities largely dictate demand for manufacturers of products like aircrete, can flex with the times. They can stop and start relatively easily however. It’s less easy for the rest of the supply chain and sudden shocks to the market can produce a hiatus in supply that affects everyone. It can take years to recover to a more normal supply situation.
Between 2007 and 2009 the number of new house completions more or less halved: the impact on the manufacturing and distribution industries was unprecedented. A factory can’t be turned off overnight and excess capacity led to suppressed prices for years.
That excess stock also meant that the traditional discipline of consistent supply, pre-ordering and planned allocation were put to one side, creating difficulty for manufacturers whose plants can’t necessarily accommodate huge shifts in demand immediately.
In 2013 we saw the result of five years of weak demand. Manufacturers had responded to recession by withdrawing capacity. Factories had closed, output had been reduced, investment in existing facilities had all but stopped.
H+H responded to the upturn as quickly as we could. We increased the output volume from all our factories and within months were running them at full capacity. We honoured our commitments to existing trading partners, prioritising existing agreements over potentially more lucrative new contracts. Significantly, we also regularly and honestly communicated the position on aircrete supplies with our customers and worked with them to manage the situation.
As the market has continued to be positive, a degree of normality has returned and with it, the need for supply and demand to be balanced by informed stock control. Anticipating demand and scheduling purchases is a challenge certainly but one that is well worth the investment. Manufacturers like H+H value predictable sales and will direct our effort and focus to customers with whom we work in partnership, recognising the fact that we depend upon each other for success throughout the business cycle.
H+H in the UK is completely committed to a long-term future of manufacturing aircrete for housebuilding. In 2016, when the Brexit vote led to many organisations hesitating on investment decisions in the UK, H+H committed to a long-overdue upgrade to one of our three manufacturing plants.
We have spent the last twelve months preparing for the upgrade process. Working closely with our partner customers and keeping them informed every step of the way, we have managed supply of product into the market, allowing us to build unprecedented stock levels to ensure we can continue to meet our supply agreements during and indeed following, our rebuilding project.
When the project is completed in the spring of 2018 our three factories will together have increased their output by some 30% over five years. While current market conditions prevail – and we anticipate that demand will continue to be strong throughout 2018 – manufacturing and sales need to be planned in tandem. Investing while the market is good, continuing to build trusted relationships and focusing on the core business of delivering high quality product to the market is the best insurance against future headwinds.