Supply chain disruptions have become a fact of life across all industries. The bad news is that they aren’t going away anytime soon. The good news is that there are ways to mitigate the problem.
By Robert Isler
What’s keeping K&B execs up at night? Increasingly, it’s the supply chain.
In each of the quarterly NKBA/John Burns Kitchen & Bath Market Index (KBMI) surveys, there is a question devoted to top industry challenges and concerns. Members assign a score for each, with 10 being the highest possible concern for each of a dozen or more industry challenges listed. Disruption in the supply chain is by far the #1 concern — and it has been for quite some time. In the Q3 2020 report, supply chain disruptions rose to the top of the list for the first time, and has remained #1 ever since. To underscore the issue, the level of concern keeps growing. In that Q3 report last year, it stood at a 7.2. In the latest release — Q2 of 2021 — it is a worrisome 8.4.
The problem affects each of the four kitchen and bath industry sectors, although obviously in different ways. And respondents suggested a number of ways to alleviate the problems until the crisis ebbs.
Designers
Designers pointed out that customers are increasingly waiting for lead times — as well as pricing — to subside, with 46% saying timelines are still slipping. As a result, over half said cancellations and postponements have increased in Q2. Nearly 9 in 10 have stated that both cabinetry and appliances are difficult to source, and they’re concerned about the ramifications. As one offered, “Four-plus months for fridges and stoves and the inability to schedule a contractor isn’t a great client experience.” Another added, “Order timelines for cabinets are four to six months. Rather than ordering now, clients are pausing projects.”
Retailers
Over half of retailers surveyed reported at least some negative impact due to supply-chain disruptions. More than a quarter of them shared that these disruptions are having a severe negative impact on business and sales. Extended lead times are resulting in customers seeking products elsewhere. As one retailer put it, “Business could be better if we had products in stock.” Another noted that clients are going to custom shops to get the products they need. There is almost a sense of desperation for some. As one said, “Clients are offering to buy slightly damaged floor models rather than wait for appliances to arrive in-store.”
Builders/Remodelers
Three-quarters of those in building and construction share that their backlogs are now three or more months, with 44% saying backlogs extend into spring 2022. In Q1, 30% of respondents pointed out that most of their pipeline was behind schedule. That number ballooned to 45% in Q2. For this sector, labor shortages and price inflation are as serious as supply-chain issues. As one respondent commented, “We have already lost jobs due to the assumption that prices and lead times will shrink.” Added another, “Because of the delays in securing materials, project timelines are too long for my customers. They are waiting until things correct themselves.”
Manufacturers
An overwhelming 85% of manufacturers reported severe capacity restraints in Q2, building on the 78% who said so in the Q1 survey. Despite attempts to add capacity during the first quarter, there remains a struggle to source raw materials. More than 6 in 10 reported unusually high lead times of six weeks or more in Q2, an increase over the Q1 percentage. One manufacturer observed that “Demand hasn’t slowed. Materials are going through production as soon as they arrive.” Another expressed frustration: “We have capacity coming online next year, but that doesn’t help us right now.”
Member Solutions
Although there is no magic fix for supply-chain disruptions that have been steadily increasing for the past year — they must run their course — there are ways to alleviate the harm and fallout.
Communicate Clearly and Frequently
The primary, and in many ways most critical, way to address the inevitable delays is to manage client expectations by communicating early and often. One respondent suggested “Letting customers know up front about extended lead times and delays has become a daily occurrence.” Another stated, “I’m transparent with my clients. That’s all I can do.” A third offered, “We have to initially address lead times and back-orders and remind clients along the way.” One retailer has gone as far as sending clients screenshots of loading dates from the dealer portal so that they are aware of volatility in delivery dates. Although none of this moves the project along any faster, clients do appreciate the candidness.
Offer Clients Options
One respondent stated, “I encourage my clients to use whatever appliance is in stock. Otherwise, they will be waiting for months. Along a similar vein, a retailer noted, “We are being very flexible with clients who need to select alternate materials because of stock issues.” One designer spoke of offering new service options, like e-design software, to better service design-only clients and free up time for full-scale remodels.
Create Unique Alternatives
A number of respondents have creatively addressed supply-chain challenges by adjusting their approaches. One retailer said, “We’ve become supplier-agnostic to give ourselves more options.” Another pointed out, “We order materials as soon as the contract is signed, even if the job is eight to 10 weeks out.”
A third respondent shared, “We are stocking up on common items used in our remodels. Anything to reduce delays.” Similarly, one member wishing to address both the supply-chain and cost-inflation issues observed, “I’m overstocking on lumber and plywood when I can. Storage costs are cheaper than lost business.” A manufacturer, referring to the critical importance for materials to move through production as quickly as possible upon arrival, shared, “I’ve been giving bonuses to my staff for simply showing up. Labor is scarce.”
42% of manufacturing firms report discontinuing product lines to alleviate production constraints, which is more than double the 20% in Q1.
Even that often falls short, though, with many manufacturers taking it a step further. According to the Q2 KBMI report, 42% have begun discontinuing less popular product lines — most temporarily — to maximize production and alleviate restraints. That figure is more than double the 20% who implemented such a solution in Q1.
Clearly, supply-chain challenges will be around for a while longer before they begin to dissipate. Unfortunately, one of the reasons they will become less critical is customers deciding to put projects on hold until wait times and costs normalize. On the positive side, however, the laws of supply and demand eventually do catch up with each other, and with the need for materials, products and their efficient production still strong, there are already signs of a ramping across the supply-chain spectrum that will lead to an equilibrium.