Brexit, a 10-fold increase in the price of shipping containers and labour shortages have thrown up a plethora of challenges for distribution, Tim Griffin tells CRN
A multitude of separate supply chain issues - from labour shortages to the surging price of shipping containers - have come together to create an "exceptionally challenging" environment for distributors this year, DCC Technology managing director Tim Griffin has told CRN.
In May earlier this year, Griffin predicted that supply issues will pose a bigger threat to the channel than any drop in demand this year amid a global component shortage affecting the IT sector.
Speaking to CRN this week, the managing director said that, although his prediction has proved to be correct, he didn't anticipate the plethora of challenges that the supply chain is now facing.
Griffin said that several factors, ranging from a shortage of labour, a surge in the price of shipping containers and Brexit have compounded to create an "exceptionally challenging" time for the industry.
The DCC Technology boss said that the price of shipping containers has in some cases gone up by 10-fold, and these costs can't always be passed on to the customer.
Ongoing semiconductor shortages, a lack of lorry drivers and warehouse workers and Brexit-related changes have created a host of new obstacles for the services that distribution provides.
DCC Technology, which trades as Exertis, said these supply challenges impacted its UK business the most during the six months ending 30 September 2021.
UK revenues and operating profit declined during the period, which Exertis put down to supply, labour and logistical issues as well as the implementation of a new warehouse management system.
On a group level, revenue grew by 0.8 per cent, or 3.7 per cent in constant currency, while operating profit increased by 6.5 per cent or 19 per cent in constant currency.
"It has been exceptionally challenging. So to come out with these results in those circumstances has been really, really pleasing," said Griffin.
"The shipping container challenge has been pretty interesting for a number of our businesses around the world. Then you get into lorry drivers and Brexit having an impact with drivers going home. You also have the reverse logistics where a driver from the continent would drop off in Glasgow and pick up in Glasgow and then bring it back to London, which they're not allowed to do anymore so you've lost that capacity.
"During Covid 40,000 drivers didn't get their licence which affected the number of new joiners in the industry. So you've had a horrendous supply chain challenge on the labour side from lorry drivers, then you get into the warehouse and warehouse people have been hard to come by as well. So we have faced supply chain challenges, not just the hardware that we distribute but also all the ancillary services that we put around that."
Alongside logistical and labour challenges, Griffin also said that the roll out of an SAP management system in the UK also created a "speed bump" for the business.
The latest roll out was "the final piece of the jigsaw" of a new warehouse management system that Exertis has been implementing for the last 18 months.
The project is linked to a major pick tower in its distribution centre in Burnley.
The roll out will enable Exertis to execute high volume drop-ship requests to both its retail and B2B customers, Griffin said, which will create new growth opportunities for Exertis.
However, the implementation earlier this year created some "downstream challenges" for Exertis' customers, the MD added, which impacted its UK business.
"It is a pretty complex IT and logistics operation and it's the marriage of those two things that sometimes causes you challenges. It is to be expected and it does create downstream challenges for our customers who have been brilliant in terms of working through some of those challenges," he said.
Exertis' UK business was up against tough comparables this year from 2020, when demand for remote working tech led to a boom in device sales for the channel.
While a knee-jerk reaction to buy work from home tech has mainly subsided, Griffin said that he doesn't see the devices market reaching saturation point any time soon.
"Everyone keeps talking about this concept of saturation and I've never really seen it. There's always a refresh cycle coming. If people are returning to work, they're coming in and turning on PCs that haven't been turned on for two years - well, those are going to need refreshing.
"People are starting to think through the consequences of hybrid working and what they need in terms of huddle rooms, and what they need in terms of broadcast capabilities to get to a wider distributed community? So there's a lot of investment going on around those places. I don't think it's going to be a like for like replacement cycle, but I think there's enough going on to make me think it's not saturated yet."