The current analysis during the program was a discussion about what is happening in and around the industry, trade and about the ideas for efficiency enhancement. The discussion is to upgrade you, helping in to take business decisions to move forward successfully. The program was supported by Dorby Mica - who has evolved in the laminate industry with futuristic designs that are a blend of functionality and aesthetics.
I n the whole one and half years what has happened and what has changed? These are our thinking process, working pattern, market perception, buying behavior, selling behavior, etc and even the products behavior have changed. Although a large number of people in our trade do not believe that change has happened, a few smart ones are observing it and making decisions for future prospects.
The first change is the change in thinking pattern. Many of you must have been thinking that payment behavior has changed drastically. But, I don’t think it is a change, in fact it is just a correction in business dealings. The change in thinking pattern is to have process efficiency, across categories, be it plywood, laminate, particle board, MDF, furniture, or any product you take, a lot of efficiency is coming in. Today a wise entrepreneur or industrialist is making efforts to have better process efficiency utilization. On the other hand all those who do not understand the change must be ready to face the challenges for the coming in danger.
If the efficiency is not being used … for example a player has 8 presses and the unit is running at 2 presses due to tighter payment schedule, norms, or raw material crisis, is it viable for him? A unit running below 80% to the installed capacity, is it viable for that? Definitely Not! But the same is happening in the industry today.
Retailers ask, what are for us other than costing? First of all I would like to say that we are actually taking retailers as a priority sector to ‘focus on’ as a part of our service offering. We join the product to consumers and support the retailers on a priority basis. We are with retailers actually and trying to say that we must adopt the change that has happened in the last one and half years.
A retailer needs to focus on ‘how the efficiency can be improved?’ Do the retailers have the same sales or the products on sale what was happening two years before? The retailers do not have to lose much more, but they are bigger share partners of profit for their spaces where the product is displayed and sold on retail. The percentage of profit margin in the supply chain is inversely proportional to the turnover. In this way the manufacturers’ turnover is higher but the profit percent is much lesser than the retailers.
The industry efficiency remains high with retailers’ efficiency (the finance cost and movement cost included into the price). If your costing has not been calculated with all these expenses, you are failing before the time teaches you.
In today’s market the efficiency will come with your constructive efforts, a strong sales team adding you to the consumers and efficient accounts that take care of your backend calculations. Unfortunately, in our industry there is less emphasis on improving the efficiency of the sales team by educating them. They are being given targets without tools. After one and half years of covid, you have to be efficient, focusing on encouraging your sales’ team and equipping them with the latest tools are very important.
I observed that the plywood industry is in pain due to raw materials unavailability. It was under pressure earlier also due to payment issues and raw material costs. If we see the input cost in plywood industry like timber again has gone over Rs 1000; Phenol Rs 100 to Rs 140, Melamine Rs 130 to 350; formaldehyde from Rs 18 to Rs 30 due to methanol touching to Rs 40.
The freight cost has also impacted much more as it has increased by 7 to 8 times from 2000 to 18000. This is a global phenomenon, to which neither the Indian Government can do anything nor the public. This is like a tragedy that is happening with the people of the entire world.
“The price increase is not the real solution without increasing efficiency, like if plant efficiency does not increase by opting calculated energy consumption, the impregnator is tearing up low quality papers, and resin is being stuck in the cattle, there is no use of mixing urea if the sheet is observing several breakages, what is the used of collecting catalogue which have not been opened for years, etc. And for the retailers, I would like to say that what is the benefit of opening a shop, if there are no customers and you do not make efforts bringing them to your shop.
Today you have to be efficient to connect with the customers by approaching them for a better and bigger deal. For a retail shop 30% customers must be fixed, next 30% should be project driven and 30% should be walk-in customers. The division of the market in 30% factor will save you from ups and downs. Leave apart the walk in customers but for the rest 60 percent market share you have to have an efficient team having trained salesmen. Your dependency on the company support team will not go long as the competition is much more and your next door shopkeepers have to make efforts with their own team.
Similarly, if an industrialist thinks that rate escalation is the only solution, you are making a mistake! As, the rate of a product depends on supply and demand scenario, and if your cost is going up the rate will definitely go up. Take the example of liner grade, which was no takers even at Rs 250/- six months ago. Today it is not available at almost double to its cost at Rs 400+. This is demand and supply that affect the price along with personal dealing behavior and payment cycle with the parties.
So, today’s business is being led with efficiency enhancement. The quality matters and the rationalization of pricing with proper education of the sales team and equipping them with proper tools are the only ways, else the operational sustainability is at stake whether it is manufacturing, wholesaling or retailing. On the other hand the fund management whether it is your own or taken from banks, if you are not efficiently managing it, you have to face lots of trouble.
PRODUCT WISE ANALYSIS
Plywood: Timber & the raw material pricing and what is coming-in are labor charges, are adding up the input cost in manufacturing. The labour charges are being pushed up corresponding to the rising scale of inflation or dearness coming in with rising finished goods prices by 30 to 40% in a year. So, in a month or two the salary and wages are going to be a problem. The cost escalation of goods is a global phenomena and the government can do nothing with it. It is posing a challenge, so the next 6 to 8 months are very tough times ahead; we may see more fluctuation and more rising prices, uncertainty in the market, and volatility on different levels. But, the efficient ones and people with cordial business relations will definitely go forward.
From October 1 almost all plywood companies have started to increase the price by 4 to 5%, because there is no other option. In the last episode of the market update I had conveyed that 125 factories based at North were not running properly and on the verge of closing, the figure is going up and has reached to 150 now.
In the next six month you may hear a few names in this list that you may not believe that it may happen with them. It will happen because there is testing time for us. In this situation without supporting one another, survival is very difficult. Just being co-operative for one or two years without curtailing or blaming others will be a great support to the industry.
The payment scenario should not be changed as the raw material suppliers do not give credit for even a day. Similarly, phenol, decorative papers etc were available for 3 or 6 months credits are not willing to give today more than 15 to 30 days. Their supply stops just after crossing the deadline. So, credibility lies with the timely payment, improving efficiency, supporting one another, equipping with tools and sales support.
In MDF the price rise is imminent and very likely inevitable. In laminate in 1mm be ready to have Rs 60 to 70 price rise from 1 October. In 0.8mm it is 30 to 50 depending on company, thickness and brand presence, range, behavior, sales, secondary support system and its acceptance in the market.
If the efficiency will be there in the laminate industry with timely payment and sales improvement capability, no substitute will affect you. Many of the industry segments have increased the price of their products and the next price is about to come, because they cannot hold it for long and passing the increasing input cost to the customers is necessary in the present situation.
PVC board industry is moving with turmoil. This is a product having numerous qualities that proved a wonderful product earlier in the last 4 years. But, today the board which was considered as good quality at Rs 80/ a board has reached to Rs 130 to 140. Still, the availability is not there in the market. But, the good quality buyers who like to have PVC boards are still using it at double the price. Those who wish to remain protected from termite and borers, use these boards on priority basis, still the number of buyers have reduced.
The price escalation is inevitable and no one can stop it. What we can do is to have capacity to buy and make marketing efforts to sell it efficiently. Everyone has something special in him like one speaks well,communicates well, speaks, or criticizes. Some of them develop PR efficiently.
So, be alert for improving efficiency and do not blame others for price escalation. It is the global scenario who is the actual culprit. The next culprit may be China, as our industry is so good that a cartel is not possible here. Plywood, Laminate, PVC boards and other segments are so fragmented that cartelization is not possible in this industry segment. So, everything happens with demand and supply.
The retailers have greater responsibility for improvement in the industry scenario in the country. They are the only in the chain that can make the payment scenario faster by improving their sales efficiently. In this process they will be benefited more. The retailers are requested to support the industry by holding their investment to other areas rather than the industry. If the customers are in trouble you can make a way forward by convincing them
I believe that you will make it possible by making the chain stronger, by convincing the customers with greater efforts and save the industry in this time of crisis where the product is going to be a substitute. Help others and save the product to become a substitute. If it happens we have to face difficulty in the long run. So, we have to keep our eyes wide open so that our product does not become a substitute in the times to come.
CONCLUSION
Be efficient, efficient with your plant, sales and retailing, payment, manufacturing and every process, where you can be. Secondly, you must train your sales team at every level of industry activities. Understand the value of the sales team that is going to improve in coming times. Third, the retailers are convinced to move forward without getting fired. And fourth, be ready for the coming up of dearness and hold hands of others in support.