Background Of Covid and Brexit
18 months has now passed since COVID-19 spread worldwide. The initial impact was significantly reduced demand for many products and services in every country in the world. In the UK demand was also hurt by the prolonged uncertainty around Brexit (The UK leaving the EU). Together this combination has led to one of the most difficult business environments in living memory.
Supply Consequences of Covid-19 and Brexit
Recently (predominantly in the last 6 months) demand for many products has increased beyond the capacity of the world economy to supply. This increase in demand has increased the lead-times for most items and for complex finished goods, it has dramatically multiplied the complexity of the supply chain, leading to unprecedented disruption. Welland Power as a global leader in the power generation industry is not immune from these disruptions. We have to a large extent mitigated these issues, predominantly by holding and buying stock, however as the suppliers lead times extended the actions we have taken to mitigate the things in our control have been insufficient and have now had a detrimental impact on our supply and hence our production facilities.
Most noticeably and the biggest factor to this disruption is two of our major suppliers, Perkins and Cummins generator Technologies have extended their lead-times, increased the lead time on orders already placed and failed to deliver even to some of these amended dates. Given these factors it is of course inevitable that we have been impacted on our own products.
Currently for many items, due to lack of accurate supplier information we are unable to confirm some delivery dates and be forced to amend others.
We can only apologise for this situation and are doing everything possible to get improved information from suppliers to allow us to move forwards. Clearly however a backlog in orders is now developing, which means there will be a backlog to clear even when the supply situation improves, which could take several weeks.
At the bottom of this article you can find a letter from both Perkins and Cummins Generator technologies Explaining the situation.
Coupled to this, freight by truck is severely problematic, with containers being cancelled and/or long booking lead times, causing huge delays for goods leaving once completed.
Cost implications covid-19 and Brexit
in addition to the supply disruption, we have seen huge increases in both raw materials and component parts. Some of these increases are listed in the table below.
|Product||2019 Cost||September 2021 Cost|
|Zintec (Zinc Coated Steel Sheet)||£680/Ton||£1940 / Ton|
|Mild Steel, Cold Rolled||£610 / ton||£1290 / Ton|
|Mild Steel, Hot Rolled||£510||£1080 / Ton|
|Copper, LME Price||$2.40||$4.80|
|Plastics, Nylon 66, Index||100||149|
These go some way to explaining the increases applied to customers. We expect further increases on alternators and engines for 2022, leading to a 4-7% increase in the cost of the generators, without any additional commodity impact.