Built Environment 16.12.21

Supply Chains - The Effects of Brexit and the Pandemic on the Furniture Industry

Unforeseen, unprecedented and unpredictable are all words that can be used to describe the past year and a half. In the wake of Brexit, the UK experienced its most profound challenge yet. Almost every human being in the country, and on the planet, has been affected by the consequences of Covid-19. The long term economic effects of nationwide lockdowns and the closing of hospitality and entertainment industries over the past 18 months is yet to be seen.

Unforeseen, unprecedented and unpredictable are all words that can be used to describe the past year and a half. In the wake of Brexit, the UK experienced its most profound challenge yet. Almost every human being in the country, and on the planet, has been affected by the consequences of Covid-19. The long term economic effects of nationwide lockdowns and the closing of hospitality and entertainment industries over the past 18 months is yet to be seen.

Yet, back before anyone had even heard of ‘Covid-19’, when ‘Corona’ was just the name of a refreshing beer, British industries were already facing the effects of increased tariff charges due to the 2016 Brexit vote. But no industry has felt the effects of both Brexit and the pandemic more than the furniture industry. As materials and goods are often sourced from outside the UK, production and distribution within this sector has been affected tremendously over the past 5 years.

Bringing to light the importance of knowledgeable Supply Chain and Operations professionals, we take a closer look at how global supply chains within this industry have been affected by both Brexit and the global pandemic. With the idea in mind that knowledgeable Supply Chain professionals can not only contribute to, but cause the furniture industry to thrive.

Brexit

The 23rd of June 2016 marked the UK's decision to leave the EU. What may seem like a distant memory now, is still a bitter reality for those in the furniture industry. This industry relies heavily on being able to source materials and products from outside the UK. Brexit made this incredibly challenging as expensive import and export tariffs and custom charges between the UK and other countries was introduced.

Yet, some businesses within the furniture industry were able to thrive during Brexit. Companies with a strong Head of Supply Chain planned for the potential negative effects of leaving the EU on importing and exporting. In preparation for Brexit, many Supply Chain professionals began sourcing from local and non-EU suppliers long before the referendum.

There are numerous benefits in making the shift to UK suppliers. It stops the need to rely on expensive shipping, it’s better for the environment and it supports local businesses and helps boost our economy. Within the industry, sourcing within the UK has grown immensely since Brexit, and we are likely to see a growth in the demand for domestic goods as a result of the pandemic.

The Global Pandemic

As if the problems that arose due to Brexit weren’t enough for the furniture industry, along came the global pandemic. Once again, the supply chains within the furniture sector faced strain, and this time it was impossible to prepare for. Unlike Brexit, the pandemic prohibited design agencies and furniture companies to showcase their work in showrooms.

In addition, at the beginning of the pandemic it was unclear to anyone how Covid-19 was spread between individuals. Many questioned whether it could be transmitted through the shipping of goods across the world. This sparked an initial reservation to buy goods from overseas, this fear being one of the first fragments in the global supply chain. By the time medical professionals confirmed the virus could not be transmitted this way there was already a big impact on the supply chain further down the line.

One of the main supply chain issues has been a shortage of shipping containers in China. Desperate businesses have paid ridiculously high rates to receive their goods, causing global shipping prices to rise by an astounding 400%. To illustrate the magnitude of this increase, a shipping container once priced between £2000 and £4000 pre-pandemic, is now a staggering £14,000. This posed a major issue for furniture companies as they were faced with the paradox of an increase in demand, and yet no products to ship to consumers. Similarly to the times of Brexit, this forced furniture businesses to source materials within the UK.

Once delivered and carefully composed, it is undeniable a well staged room full of furniture is considered beautiful, perhaps even artistic. However in transition, large, obscure furniture is considered ‘ugly’ freight, as it is unable to be shipped in a standard courier service. Shipping this type of furniture has been particularly challenging during the pandemic. Due to a rise in demand, large furniture items which need a special courier service were unable to be delivered to the end customer.

In addition to increased lead times, architectural projects have been delayed by 12-18 months due to the impacts of Covid-19. For example, if a project started in December 2019 and was due to complete by October 2022; they would now be at the stage where we would be looking to furnish. This will have been delayed and in turn knocked back the project for the interior. Although this momentarily may have impacted workload and jobs for these sectors, there is due to be another influx in demand for furniture and interior goods. We hope by this time, the importation challenges we have faced in 2020 and 2021 will be resolved and companies with a strong Supply Chain team will be leading on this.

As we have already clarified; the furniture sector relies heavily on obtaining components for pieces from all over the world. Even if one bolt is missing from a sofa because it’s stuck in transition, this disrupts the assembly of the entire sofa and it is unable to be shipped to paying consumers. Therefore fragmenting the supply chain and in turn payment on completion. This illustrates the importance of a tight supply chain and knowledgeable Supply Chain professionals.

Despite the downfalls caused by the pandemic, the furniture industry adapted well. Many furniture companies began creating Covid-friendly, anti-touch furniture which fits well to its surroundings, whilst being attractive and easy to clean. The furniture industry clearly has the ability to adjust to and capitalise on the current climate we find ourselves in.

The Importance of Supply Chain Professionals

Despite the loss of jobs within this sector seen during the pandemic, the issues mentioned above have created new Operations and Supply Chain roles. Indeed, what is crucial to the flourishing of this industry, is a strong Supply Chain team to prepare for a post-covid world.

Companies are recognising that a promising supply chain lead will be a multi-dimensional individual, who can understand complex information and make strategic plans to optimise costs, maximise profits and make processes more efficient.

An individual working in this sector, will be someone who understands the current global climate and how the industry has been affected by both Brexit and the pandemic. They will be able to negotiate the best price on goods and shipping with current suppliers and be able to reduce lead times as well as having the ability to forecast and plan strategically, contributing to the growth of the industry post-covid.

In sum, it’s clear that the architecture and furniture industry has faced a harsh few years. The results of the Brexit referendum triggered unforeseen price hikes on importing and exporting, forcing many architecture and furniture businesses to source materials locally. Unfortunately, even this couldn’t prepare the industry for the effects of the pandemic and a storm of demand in goods, against an inability to produce and ship goods.

Even though the past two years have been a rollercoaster ride of emotions for the industry, one thing remains clear - professionals who intricately understand Supply Chains within the industry will be the root cause of the success of this sector post-covid. In fact, without these professionals there wouldn’t have been a move away from global to local sourcing of materials, and the industry may not have been able to survive the demands of the pandemic. It is undoubtable that Supply Chain professionals are imperative to the industry.

If you are interested in discussing potential supply chain and operations hires in your team, feel free to reach us on charlotte@harmonicfinance.com

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