Another year down and another year where I can’t believe how quickly it went by. I certainly wish I did more in-person visits to showrooms in 2021 because the ones I was able to see we're doing a great job of adjusting to the demands of the new world. I am confident and optimistic about the success of the independent showrooms and the need for brick-and-mortar.
When asking showrooms what I should be writing about, the overwhelming response is always the same: supply chain-related issues. It is exactly what I would rather not write about since it changes so rapidly, but here are a few of the challenges we are dealing with.
• The backorder dilemma. Some of the suppliers are incredibly busy. What used to take two or three parts shipments to complete an order of 50 different items has turned into 20 or more separate shipments, which overloads the receiving and warehousing departments. This sounds like an exaggeration, but proportionally accurate examples like this have been put in front of me. This is painful for so many reasons.
• Back-office issues. This costs extra time, labor and paperwork, and creates an overload on the back side of the business. Product trickles in, and with each little shipment comes receiving paperwork and a separate invoice, which overloads accounting departments. Sometimes, material arrives with no paperwork, and shipments are invoiced before products arrive.
Then, to make it more fun, the accounting people are trying to navigate terms and discounts on the pile of invoices, so the entire back-end operations of independent showrooms are maxed out if they deal with any volume.
• Long lead times. In the meantime, showrooms still are driving sales at a record pace, with little sign of slowing up. Lead times continue to be a source of pain and frustration. Luckily, customers coming in are much more aware of this than in the past and realize that getting what they really want will take some time. Showrooms have a steady flow of business, and any of the extra profits they are realizing are being eroded from the inefficiency of backorders and excess paperwork.
• Realistic expectations. Showrooms need to up the game on communicating realistic expectations to customers. Generally, they are far too optimistic in lead times, with fear of losing the sale at stake. They can’t shift blame to the supplier when they give the wrong message out to begin with.
Suppliers, in their view, are doing the right thing. They are doing their best to get shipments out as quickly as they get the product, so in their mind, they are doing what they think you would want. The customer service departments and rep agencies are buried with showroom people contacting them to get their “stuff” as quickly as possible.
In my opinion, suppliers are doing the right thing by pushing product out the door at the frantic pace we are all dealing with.
• Suppliers are stressed. High container costs — and if they are dealing with products made in China — power restrictions and outages at many factories are slowing the delivery of products. The docks in China are jammed with labor shortages. Mandatory factory shutdowns are happening; this will be headline news soon. It’s going to create a log jam of products coming into mid-2022.
I expect things to get much worse before they get better regarding lead times and availability. Even if the company doesn’t manufacture in China, chances are something in their supply chain is — whether it is packaging, a display or a simple component — it won’t be available. Then there is the issue of overloaded ports and shipping issues on the U.S. side — all of which are eroding profitability.
Some Thoughtful Suggestions
Throw in labor shortages on the showroom and supplier side, escalating costs on everything from fuel, utilities, etc., and you have a recipe for a nervous breakdown. So, while things are good, maybe even great, they could be so much better. Here are a few food-for-thought suggestions:
This is temporary; it will not last forever. I don’t ever try to be a forecasting specialist, but whichever bow-tie-wearing analyst you trust should be telling you the market can be this active long-term. Eventually, backorders will catch up; let’s shoot for 2023.
And eventually, showroom traffic will slow. Keep in mind that we could be in another Great Recession or Depression; the problems we are facing aren’t the worst my generation has had to deal with. Would you rather be wondering how you are planning on meeting payroll? Or who should you be laying off right now?
While some suppliers have the technology to give showrooms a snapshot of inventory, pending shipments and accounting, we need more suppliers to deliver the same ability. Communication and technology can solve so many of these daily issues. Showrooms need to use that technology and not tie up the phone lines and rep agencies. Those agencies need to help promote, educate and sell — not chase backorders.
On the supplier side, I believe in rationalization in product and showrooms. Sell what works to those who support you. I hope you don’t have shareholders who demand you exist everywhere.
On the showroom side, much of the same. Showrooms need to support the suppliers that carry them through the storm — the suppliers they can depend on, if not for on-time deliveries right now, at least for a good stream of communication and transparency.
For 2022, I would urge showrooms to commit to having more deep and meaningful relationships with the right partners in business. When things turn down in the economy, those with the right partnerships won’t be rationalized themselves.
While I don’t have a crystal ball, 2022 will be another bumpy road. If suppliers and showrooms work hard on communication, retaining their great people and fine-tuning processes, everyone should be better for it.